I Will Do Anything To Bash Krugman (But I Won't Do That)

C'mon - calling for lower interest rates to stimulate the housing market and mitigate the recession of 2000/2001 is hardly the same as imploring Fannie, Freddie and the Fed to rip up all all known lending standards and take the global financial system to the abyss.  Thumping Krugman for calling for a crazed housing bubble is a bash too far.

In 2001 Krugman had the very broad-based view that lower interest rates could keep the consumer moving forward until business investment picked up the baton.  This view of the economy is described in the 2005 Times:

But a wide variety of indicators now suggest that the economy is in a sweet spot: business investment is soaring; inflation appears more moderate than a few months ago; employment is climbing, even if real wages are not.

...

Hints of a handoff from consumer-led growth to business-led growth are apparent at Siemens Energy and Automation of Alpharetta, Ga.

At the company, a unit of Siemens of Germany, electrical equipment sales to industrial customers plunged by a third after 2001. Sales of equipment to the residential housing market picked up part of the slack, as the Federal Reserve's low interest rates prompted a home-building boom that continued through last year.

But Harry Volande, chief financial officer at Siemens Energy and Automation, said industrial sales of electrical equipment and automation systems would expand by double digits, even as sales to the residential housing market flatten with the cooling of the housing market and a tapering off of construction activity.

Ex post, the Fed clearly let the housing market expansion go on for too long.  One might argue that Greenspan's entire economic strategy, which amounted to believing that a recession tomorrow is better than a recession today, was flawed, since the result was to lead us from one bubble to the next.  But the management of the economic cycle is a pretty mainstream goal, which Krugman held and still holds.

In any case, by 2005/2006 it was clear to Krugman that something needed to be done, maybe - I still love his classic prognostication from May 2006:

As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China.

Now that game seems to be coming to an end. We're going to have to find other ways to make a living — in particular, we're going to have to start selling goods and services, not just I.O.U.'s, to the rest of the world, and/or replace imports with domestic production. And adjusting to that new way of making a living will take time.

Will we have that time? Ben Bernanke, the chairman of the Federal Reserve, contends that what's happening in the housing market is "a very orderly and moderate kind of cooling." Maybe he's right. But if he isn't, the stock market drop of the last two days will be remembered as the start of a serious economic slowdown.

Maybe the housing bubble will end badly, unless it doesn't!  A more clarion call has not been sounded.

Ahh, well - has it been four years since this compilation of Krugman-bashes?  We've all passed a lot of water since then.

Comments

[steve sturm]

Meatloaf?

[Semanticleo]

Imagine if the Gubmint had followed the wrong-headedness of conservatives (aka libertarians)
and let the Financial services industry fail.

Now that Morgan Stanley et al have repaid TARP funds, the way is cleared for nervous lenders to loosen their belated anal retentiveness and approve some loans. Lower interest rates won't be enough.

[Parking Lot]

((Ben Bernanke, the chairman of the Federal Reserve, contends that what's happening in the housing market is "a very orderly and moderate kind of cooling." ))

Was Bernanke stupid or lying?

[clarice]

HEH "We've all passed a lot of water since then" The Metaphore king mambos on.

[sylvia]

"One might argue that Greenspan's entire economic strategy, which amounted to believing that a recession tomorrow is better than a recession today"

Yup that pretty much seemed the strategy. They should have raised mortgage interest rates about 5 years ago to prevent the housing price increases, instead they lowered them. Now it's too late and we have to keep them lower until prices come down a little.

That one (the crisis) was not even hard to predict, but if you had watched all the business shows back then you would have seen all the real estate experts telling you there was no limit. That's why never listen to experts.

[Rick Ballard]

"Was Bernanke stupid or lying?"

Neither, IMO. He was working from a model as Krugman works from a model as DeLong works from a model as Greenspan works from a model as the developers of ABS products worked from models as the developers of CDS products worked from models - every damned one of them backed by very nice equations with solid foundations constructed by very close attention to the rear view mirror.

It's just that you never see the brick wall the pols have constructed one foot from the front bumper if your eyes are locked on the rear view mirror. Uncle Ben's QE equations don't have a space in which to place the $800 billion Dem vote purchase act either.

[Original MikeS]

They should have raised mortgage interest rates about 5 years ago to prevent the housing price increases

A better idea would have been to enforce the laws against fraudulently applying for or granting mortgages.

[Thomas Jackson]

We are going to see cap and trade passed shortly. As long as America engages in suicidal behavior such as this aren't we beating a dead horse when we talk about interest rates?

National healthcare-ditto.

For those who voted for Obama I hope your children bless you for what you have done.

I'm sure your grandchildren will.

[Ignatz]

--Thumping Krugman for calling for a crazed housing bubble is a bash too far.--

Indeed it would be if anyone had. However I didn't see the term "crazed" in the links. I saw quotes, from Krugman, explicitly stating that the Fed needed to lower interest rates to induce spending, especially on housing. I saw Krugman state in 2002 that Greenspan should induce a housing bubble and saw him again reiterate his belief last week in his own defense. If you follow the link to Mises.org you see that he was in fact making a policy prescription NOT, as he now claims, merely stating that it was Greenspan's only choice. His stupidity arises from this idea:

--But the management of the economic cycle is a pretty mainstream goal, which Krugman held and still holds.--

It is indeed a mainstream goal. It is also a very stupid and destructive one which gave us the stagflation of the seventies and the bubbles of the 90's and this decade.
Perhaps if the Fed went back to giving us a stable currency, which it at least has some small ability to effect, instead of a stable economic cycle, which it clearly only exacerbates we wouldn't be wondering what caused the last bubble and how can we inflate our way out of the latest disaster with a new one.

[matt]

Barney Frank called for relaxed lending standards again today, and Goldman Sachs, the true center of power in this country, declared record profits again.

Just another day for the oligarchy.

[glasater]

I don't think the Carp and Trade legislation is a given, TC. There is an encouraging article from RCP telling us that Australia--of all places is not going along with the program.

As a side note, Becky Quick(sp?) just interviewed Warren Buffett on CNBC and he would like to see a slower approach in congress on Cap and Trade plus healthcare.

[Thomas Collins]

I haven't mentioned cap and trade on this thread, glasater. Perhaps you were referring to Thomas Jackson (TJ?).

However, now that you mention it, see LUN for how tough the cap and trade bill is on China and India. Looks as if we are going to tell on them if they fart too much. See LUN.:-))

I'm sure Manmohan Singh and Wen Jiabao are shaking in their power plants!!! :-))

[Thomas Collins]

Let's hope that Waxman and Markey don't adopt the approach described in the LUN to reducing their greenhouse gas emissions.

Seriously, though, that Democrats could even be considering this type of legislation while the economy totters shows they don't give a second class rat's petudie about common folk. The Gores and Clintons and Obamas and Kennedys will still have their money and their perks, and it will be hard working folks who bear the brunt of the Democrats further burdening the economy (and by hard working I don't mean Babs "I worked hard for the title Senator" Boxer).

[glasater]

Whoops!! Sorry TC--it was Mr. Jackson.

In the Buffett interview he really sang hosannas for Bernanke. Doesn't want a change at the Fed. Will Zero listen?

[Thomas Collins]

No problem, glasater. I was looking for an excuse to post the "tattle on China and India" and the, er, "bare bones" approach to lowering greenhouse gas emissions.

[Rick Ballard]

TC,

I tend to think of Air Taxes as another stupidity test. The electorate passed the last stupidity test with 52% and Waxman and Markey are counting on that percentage holding through the imposition of yet another regressive immiseration measure. I'm not at all sure that they are wrong in their assumption.

IMO, the Ogabe Regime still has a few more months before the stench of their corruption triggers a real response from the muddle.

[clarice]

I hope Buffett is really suffering--he allowed himself to be used by The Won ("tax me more please") thinking it wouldn't cost him a penny..

[Fresh Air]

IMO, the Ogabe Regime still has a few more months before the stench of their corruption triggers a real response from the muddle.

I don't think corruption will really do it. Illinois is swimming in it and keeps electing Mediacrats. As long as it's a victimless crime, the Muddle just shrugs. But a bleak Christmas followed by another round of bankruptcies, and the election themes will be in place long before the Vote Purchase Act will wreak whatever minimal effect it will have.

Remarkably, these idiots keep doubling their bets, like a "system" roulette player who is certain the number 17 will come up if only they bet on it.

In the short term, we are all screwed. But in the long-term, the commies and socialists now running the government are going to be lucky to escape the lamp posts.

[clarice]

I coulda sworn the original header was (Bit I won't do that)

[Parking Lot]

((I hope Buffett is really suffering--he allowed himself to be used by The Won ("tax me more please") thinking it wouldn't cost him a penny..))

the billions he just made on GS shares he bought in January might be easing his pain

[Extraneus]

Me, too. And if I'm not mistaken he blamed the women in his life, who wouldn't allow a cross word about The One in their presence.

Warren Buffett to headline $28,500-per-person "private dinner" for Obama at finance chair Penny Prizker home; senior advisor Valerie Jarrett a host.

A week ago today, Sen.-elect Barack Obama (D-Ill.) chartered an airplane and flew to Omaha, Neb., to lunch with billionaire Warren Buffett and his daughter Susan, who donated $1,000 to Obama last August.

[Thomas Collins]

The Stupid Index is still high, Rick, but I am somewhat heartened by many of the comments to the article on the "au naturale" way to combat greenhouse gas emissions (see LUN). Many comments are contemptuous not only of the article, but also of the whole green movement. And this is a NY Times website.

[Thomas Collins]

Correction-It's not a NY Times web page, but a blog that has a NY Times article. But I still think the comments give some hope that the Sanity Index is starting to creep up ever so slowly.

[daddy]

Governor Sanford on TV apologizing to his family this instant. Hasn't yet said why he's apologizing, but it looks bad. Ughhh.

[clarice]

That leaves only The Huntress..unless the Reps can find a Republican Governor who's been gelded.

[Sue]

OMG. Sanford admits to an affair with woman in Argentina. Republicans should tar and feather this fool.

[Extraneus]

Idiot.

[Sue]

Ex,

I'm so mad at him right now I could bite his head off, chew it up and spit it out right back at him. To make himself the center of republicans knowing, knowing, let me repeat, knowing, this was lurking out there...grrrr....the anger I have at him right now is so great I might need therapy. ::grin::

[clarice]

Look at the bright side--neither he nor Ensign had their wives at their sides when they made the confessions--progress. One small step for mankind.

[Thomas Collins]

She came all the way from Argentina to hike the Appalachian Trail with him? He must be some stud!

PUK, I have to admit, no matter how hard we try here across the water, we can't top Profumo and Keeler!!! :-))

[bad]

The lack of wives in front of the cameras at the pressers is encouraging, Clarice.

[bad]

So who paid the Argentinian lady to get tight wit' im?

[Extraneus]

Guess she isn't the wisest of Latinas, either, huh?

[bad]

The focus on Sanford will chase relevent issues from the news. FOX is all Sanford all the time, at the moment.

[daddy]

Well look on the bright side---It could'a been worse. At least she's a girl, and it wasn't a closet in Bangkok or a public toilet in Minneapolis.

[Sue]

I don't see a bright side. Sanford has been polling for the republican nominee for president in 2012. A republican John Edwards. Grrrrr.....his girlfriend has a husband.

[pagar]

"That leaves only The Huntress"

Has anyone seen the latest Democrat attack on Palin?

http://www.conservatives4palin.com/2009/06/how-celtic-diva-treats-trig-palin.html

[Extraneus]

"I don't know how this thing got blown out of proportion," Sanford said.

[MayBee]

Reagan, Rudy, John McCain, Eisenhower...all had affairs. Do we really want it to be disqualifying?

[Sue]

MayBee,

It would be nice if they could manage to be faithful to their spouses, but disqualifying? Depends on the circumstances for me. Sanford is through because he lied about where he was to his staff. Then either instructed or allowed his staff to lie for him. He is through because of that, if not the affair.

[bio mom]

ABC will be upset. This will cause their Obama love fest and infomercial to the back burner.

I believe this guy has 4 small boys based on a family picture shown on Fox. If it isn't an old shot then this guy is a creep beyond words and I agree with Michelle Malkin today. The only saving grace is that he didn't drag the poor wife on stage with him like these guys usually do. Women should run the country. Men are always doing this crud.

[clarice]

Who do you think he was having an affair with? Women do it, too.

O'm with MayBee and Jane.

[Ignatz]

--OMG. Sanford admits to an affair with woman in Argentina.--

Sorry, but I'm ROFLMAO.
Another Rep with his pants down; time for a Dem with his hand in someone's wallet. Tick, tock, like clockwork.
Are there any of these fools who is not a brazen idiot of one sort or another, either sexually or financially? They just seem to get stupider and stupider about it.
I mean to say, he thought he could fly to Argentina for a few days and nobody would notice?
Should the affair disqualify him? Who knows. The utter idiocy of his behavior should.

[clarice]

Well, now, there i agree, Ignatz..

[Neo]

"In this movie, exactly one real-life politician is named: "President Obama." They went out of their way to make sure they named the craven, obstructionist president as Obama."

Executive Producer Steven Speilberg really does know his audience.

[PaulL]

I see no reason that cap and trade can't be undone in the future as easily as it is done now.

[Danube of Thought]

I think it dooms the guy, which is OK by me. It's not simply the affair, it's the four days incommunicado and some fibbing by his staff on his behalf. He's a joke.

[daddy]

I don't know if we want it to be disqualifying but the sad fact is that it is disqualifying. It diminishes him, the Party, the message etc, and fair or not, it turns the image of Republican politicians into hypocrites who don't give a damn about honesty or integrity or family values. At a time when we desperately need intelligent, principled adult Conservative leadership to stand up and be responsible opponents of the madness going on in Washington, we wind up destroying our ability to offer that principled leadership and opposition through self-inflicted idiocy like this.

On a National scale this relegates Governor Sanford to John Edwards status. With Ensign and Sanford, the DNC campaign manager's for 2010 have just had 2 plum opportunities dropped in their laps to paint us to the muddle as lying, dishonest hypocrites. Like Sue I am angry as can be at the stupidity of this guy. Yeah, a 4 day hike on the Appalachian Trail, 1 week of Ensign's mia culpa. Idiot.

[matt]

It's Obanopticons, Neo...he's transformed them. They are actually all around us; Republican senators from Nevada, governors from South Carolina, friends of Angelo, and barney Frank...that is the only frickin explanation. The whole political world either has its hand out or pants down. They are all actually robots from the planet Zar. Obama is simply the puppet master.

[RichatUF]

Wow, that was quick, didn't think Gov. Sanford would kneecap himself, but there you go. Gov. Jindal and Gov. Palin to go and build up a media acceptible GOP candidate (I'm thinking Sen. Graham, someone really easy to knock down)-not even 6 months into Obama's first term.

[daddy]

"1 week after Ensign's mia culpa"

[matt]

I say we build 50 nuclear power plants and close down 30 coal fired plants. We then arbitrage the cap and trade market with the savings from coal fired plants that Obama would have shut down anyway so the Euros and Chinese end up holding an empty bag.

Thus we reduce our greenhouse gases to belowthe Kyoto limits while increasing the available power for the grid, torpedoing the windmill industry, and making Teddy Kennedy beholden to the Republicans. Al Gore's head will then explode, reducing greenhouse gases further.

[Porchlight]

I don't think Sanford was really in it for a presidential run. He didn't appear to want the job and I can't say as I blame him. It sucks for SC and for his fellow Republicans, though.

[Fresh Air]

National political figures who had affairs since 1990:

Clinton
Gingrich
Livingston
Hart
Edwards
Corzine
Spitzer
Sanford
Vitter
Guiliani
Villaraigosa

...and that's just off the top of my head.

[daddy]

Pager,

Concerning that doctored photo of Sarah and Trig. I believe the face that has been stuck on Trig is Eddie Burke, a local Conservative Talk Show Host who is the only really gung ho, 100% Sarah supporter in the Media up here. He hates this Celtic Diva slob for her continual attacks on the Governor, and frequently clobbers her over the airwaves.

[Fresh Air]

Oops. Hart's affair was 1984, IIRC. Monkey Business and all that.

[Jane]

ABC will be upset. This will cause their Obama love fest and infomercial to the back burner.

Cool.

And it's good for Mitt too.

[pagar]

"I see no reason that cap and trade can't be undone in the future as easily as it is done now."

The biggest reason I see is that no one is going to have any money, except the Democrats in charge. In their unwavering attempt to bankrupt the country, they are willing to wipe out their own supporters as will as the very sizable part of the population that did not vote for them.

Six months after crap and trade goes into effect, I expect the entire country will be bankrupt.

[daddy]

Yeah Jane, I see this as removing a rival for Mitt.

Also thought it interesting that Huckabee was on FOX immediately commenting even while the Sanford Press Conference was ongoing, and now 1 hour later Rudy Guiliani is own with Neal Cavuto discussing the same thing. Seems they're coming out of the woodworks today to show there are still some responsible folks in the party with their pants on.

[glasater]

OK folks--please don't retch.....

I think it's gonna be Huckabee in 2012. He's positioning himself with the TV show and is a pretty quick wit. That's what the muddle wants--showmanship.
Any debate with Zero and Huckabee could shine.

But I will not be out beating the bushes for the guy. Just saying........

[daddy]

Geez---I hope you are wrong glasater. Ughh.

[Sue]

glasater,

Retch. Barf. Gag.

You're right though, his intent is to make another run for president.

[Neo]

EPA caught putting politics and ‘wornout dogmas’ ahead of science.

[Jane]

I'm not sure I can vote for Huckabee, so we really need to change that.

[glasater]

I know Jane. It could be that Huckabee looks pretty good to all of us by 2011. Unless St Jane's gets going:)

One thing I've been contemplating is how recently the audio on Zero has him sounding much more crisp, etc. Especially in the one on one interviews. Every word is distinct and each breath heard.
I don't know anything about how audio is enhanced but it just seems that something is going on in that department also.

[pagar]

I can easily vote for whoever is on the ballot for the Republicans, because I am going to vote if I am allowed to and I am not going to vote for Obama or any other Democrat.

But the one I am going to work for and donate to is Gov Palin.

[Jack is Back!]

Easy does it, folks. Its too early to throw in the towel. There are other experienced, conservative young executive experienced politicos out there, even with military credentials. I give you Matt Blunt, ex-governor of Missouri and son of Roy Blunt. He is a graduate of the US Naval Academy and served in Iraq. He took a state with a huge budget deficit and left his successor with a surplus. I've actually met him while both of our families were in Key Biscayne for a long weekend and he did duty at the swimming pool as baby-sitter and life guard for our two boys. He is a down to earth real person - a male equivalent of the Alaskan Pit Bull and comes from a critical state.

[narciso]

I take a little time off, Sanford turns out to have 'cracked' riots in Bahristan Square,
Romney congratulates Obama for his forceful statement on Iraq, what ranks below epic fail: Ditto, Pagar, on the Akhanitsa, but you kind of already knew that.

[Melinda Romanoff]

OT- Geithner sent an email to BofA saying they couldn't back out of the deal. It wasn't Bernanke, it was Geithner holding the gun to their heads. (LUN)

[RichatUF]

Why am I not surprised.

[You gotta know right now!]

"I would do anything...."

[bad]

TM, "Bat Out of Hell" is coming to mind but there are too many candidates to choose just one.

[bad]

Geithner sucks

[glasater]

Melinda~

Thanks for the Geithner link. That was a big deal on CNBC today what with Issa calling this a coverup.

LUN

[pagar]

"with Issa calling this a coverup"

Personally, I think everything that the left comes up with is a cover-up. The only thing I can imagine about the whole affair is that BOfA had to have been pressured in buying Merrill. The deal makes no sense otherwise.

[That means 'Good One Glasater'.]

Nice link. GOG.

[Melinda Romanoff]

glasater-

Now the question for me is, what did Geithner tell Bernanke and how did it differ from what he e-mailed? These Open Society types are really anyning but....

[glasater]

Well--all I know is that Issa is an "R".

And I'm really taken with the GOG moniker:)