Economics

Krugman and the Housing Bubble: A Love Story

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For those following the "Did Krugman advocate a housing bubble?" debate, first ably blogged here by Big Tim Cavanaugh last week, a skilled summation, and I think a pretty definite settling of the question (answer: yes!) from the Mises blog:

….did Krugman support pumping up a housing bubble or not? Given that, even in his recent blog defending himself, he explicitly stated his belief that "the only way the Fed could get traction would be if it could inflate a housing bubble," there are only two possibilities:

  1. He did not support inducing a housing bubble, and wanted the Fed to not fight the recession.
  2. He did support inducing a housing bubble.

Anyone even somewhat familiar with Krugman's attitude toward Fed activism should know that proposition #1, that Krugman supported a do-nothing policy, is preposterous. So, especially after bringing back in the quotes gathered by Mark Thornton, the case for proposition #2 is overwhelming.

And what about his strawman protests that he didn't cause the housing bubble, much less the Enron scandal or Kennedy's assassination? The man is willfully missing the point. What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven't fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then.

The Thornton collection of Krugman's bubblicious quotes.

NEXT: McCain's Iranian Game of Chicken

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  1. “Krugman and the Housing Bubble: A Love Story”

    I look forward to Welch reworking this with a McCain angle.

  2. My favorite comment on Krugman was back in 2007.

    “Krugman has successfully predicted six of the last zero recessions.”

    Of course, Kurgman was eventually correct in the same fashion as a stopped clocked.

    Krugman is a Keynsian because Keynsian policies require people like Krugman to tell the government how to spend money. That kind of power attracts a lot of people.

  3. From the LoneWacko’s link:

    The superintendent of the Tanque Verde Unified School District has been arrested on federal charges related to the sexual exploitation of children.

    On Friday in Yuma, Immigration and Customs Enforcement agents arrested 51-year-old Albert Thomas Rogers, known as “Tom Rogers,” a press release from the federal agency says. Rogers had arrived in Yuma for a tour that was set to include sexual exploitation of 13- to 14-year-old boys in Mexico, the release says.
    ——-

    Now more than ever, we need to build that wall. Gotta keep pedophiles away from those poor kids down in Mexico.

  4. You have to admit the dude brings up some pretty good ideas!

    RT
    http://www.anon-tools.tk

  5. On Oct 7 ’01 Krugman noted: ” … it seems inevitable that there will also be a fiscal stimulus package.” How ’bout *that* for expertise?

  6. My own Krugman Pwn from last week:

  7. Krugman is still a tard. Check. Got it.

    He’s a hack, has always been a hack, and has been dreaming of this day all his life.

  8. I still think it’s too bad we don’t do for “experts” what we do for sports celebrities, i.e. keep statistics. Krugman’s earned prognostication average would be really interesting.

  9. Thought experiment.

    You are stranded on a desert island. One day, a container washes ashore containing a rifle and one cartridge. A short time later, another, far more sinister, raft washes ashore. This one contains a disheveled Paul Krugman and a gibbering Chris Kelly aka Lonewacko aka Orange Line Special aka 24AheadDotCom.

    Question: who do you kill, and how?

  10. Oh yes, and neither Krugman nor Lonewacko will shut the fuck up. It’s just like real life.

  11. Question: who do you kill, and how?

    Myself.

  12. Liberals are dumb.

    Krugman is really dumb.

  13. Question: who do you kill, and how?

    Trick question. Neither.

    You convince lonewacko that Krugman is a Mexican. A completely stunned Lonewacko will demand that he “go back to where he came from”, and so committed in this outcome, Lonewacko will sail back off the Island to return Krugman to his ‘homeland’. Before they leave, you stick a note in Krugman’s pocket. The note reads something like the following:

    Dear President Obama:

    Paul Krugman left his yet-unprinted New York Times article, titled “How to manage an economy” on my desert island. Also, I am in possession of an illegal firearm.

    You’ll be picked up in 72 hours by a marine helicopter.

    Done, done and…done.

  14. Who do you kill, and how?

    I shoot lonewacko in the head, and beat krugman to death with the empty rifle.

  15. Thought Experiment:

    The evil Paul Krugman kidnaps Lone Wacko in the middle of the night. When LW comes to, he finds himself in a basement with Krugman giving him an evil smile while waving a gun.
    To his horror, Lone Wacko sees his parents tied up, nekad and with their asses in the air.

    Krugman says: “We are going to play a game, you Nazi fuck*. You are going to fuck one of your parents, but the one you don’t choose will get a bullet in the head. If you choose neither, they both die!”

    Question: What does Lone Wacko do?

    Answer: He jumps up, unties both parents. Just like old times, he then gets between the two, sucking off his dad while fucking his mother, thus, heroically saving both parents.

    * beth’s summary of LW’s news item gives me the impression LW may be Underzog. If that is the case, make that ‘self hating Nazi fuck’.

  16. Krugman will always have a bit of love for the whole “quasi-murderer” thing. That should be taught in Rhetoric 101.

    But the negatives far outweigh the positives.

  17. who do you kill, and how?

    Is this a trick question?

    Seems like the obvious answer is to off them both by shoving Krugman down Lonewhacko’s throat.

    Or, you could just evacuate the area, and let their combined density collapse into a black hole.

    -jcr

  18. You are stranded on a desert island. One day, a container washes ashore containing a rifle and one cartridge. A short time later, another, far more sinister, raft washes ashore. This one contains a disheveled Paul Krugman and a gibbering Chris Kelly aka Lonewacko aka Orange Line Special aka 24AheadDotCom.

    Question: who do you kill, and how?

    You kill the stronger one with the bullet, and then club the survivor to death with the rifle butt.

    If they are both equally strong, you shoot Krugman, since then you won’t have to listen to him any more. Lonewhacko is easier to ignore.

  19. reason and mises.org… brought together by P.Krugman!

  20. I add Krugman to my island incif filter, then I dont have to worry about either.

  21. robc,

    I just had a disturbing vision of a grayed-out “Krugman” tag arguing with a coconut tree about fiscal policy.

  22. He also advocated bursting the bubble in 2004, long before anyone else recognized the problem.

    This “there are only two possibilities” stuff is ridiculous absolutism.

  23. I don’t kill either of them.

    I tell Lonewacko that Obama’s “real” birth certificate is hidden under a rock a mile out to sea.

    I then tell Krugman that we’re instituting a Keynesian economy on the island. I point the still-loaded-with-one-bullet gun at him and demand that he collect coconuts and fruit and build me a shelter as part of the island’s “stimulus package”.

  24. He also advocated bursting the bubble in 2004, long before anyone else recognized the problem.

    Site? If this is true, then why wasn’t _that_ his defense instead of “if you thought I said something stupid in 2002, you must also think I killed Kennedy”?

  25. Question: who do you kill, and how?

    Trick question. LoneWacko never leaves his mom’s basement — how would he end up on a boat?

  26. “Krugman is a Keynsian because Keynsian policies require people like Krugman to tell the government how to spend money.”

    Bingo.

    Krugman is an authoritarian asshole. There is no actual proof that Keynesean economics has ever actually accomplished anything.

    But that doesn’t matter. The only intellectual exercise necessary for his ilk is to shop for a theory that fits his predetermined desire to tell everybody else what to do.

  27. I’m still waiting for that site from Fluffy.

  28. What site?

  29. jsh, i think you mean chroma, not Fluffy.

  30. The site supporting chroma’s claim @ 8:27 am. C’mon, Fluffy, hop to!

  31. I agree guys… today is the day to end Fluffy’s long-standing refusal to provide evidence for arguments he disagrees made by other posters. He’s freeloaded on our goodwill long enough.

  32. Yes, chroma, he advocated doing what he admitted wouldn’t happen back when he advocated inflating the bubble.

  33. Sorry Fluffy, my bad. I shall paddle myself w/ my hardback copy of Atlas Shrugged as punishment.

  34. chroma, these are ’05 and ’06, and you claimed ’04. That, and the “credit-where-credit-is-due” link totally undercuts Krug’s earlier defense that he was saying they could inflate a bubble but shouldn’t, as he (writing in 2006), called those actions in 2002 a good idea at the time.

  35. He also advocated bursting the bubble in 2004, long before anyone else recognized the problem.

    Except the Austrians. And Ron Paul.

    RP proposed a bubble busting bill in 2003 (and 2002 IIRC). His methodology was to remove the government guarantees for Fannie and Freddie. His reason, amongst many, was to prevent the housing bubble that was looming. Deflate it before it got too big.

    Of course, that went against the whole “ownership society” concept.

  36. Something from 2004, though it’s not clear whether it’s prescriptive or descriptive:
    http://www.nytimes.com/2004/04/20/opinion/questions-of-interest.html

    Here’s a question not often raised around here: since economists don’t know shit about macroeconomics, why should we listen to Friedman and von Mises?

  37. Here’s a question not often raised around here: since economists don’t know shit about macroeconomics, why should we listen to Friedman and von Mises?

    If you don’t want to listen to any of them (Krug, Friedman, or von Mises), go ahead. Just don’t throw Krug’s Nobel in our faces and ignore the other two recipients mentioned.

    I don’t see anything in your 2004 quote that’s particularly relevant.

  38. Here’s a question not often raised around here: since economists Krug don’t know shit about macroeconomics, why should we listen to Friedman and von Mises?

  39. “Here’s a question not often raised around here: since economists don’t know shit about macroeconomics, why should we listen to Friedman and von Mises?”

    Since there is no actual ennumerated power delegated to the federal government in the text of the Constitution that authorizes it to attempt to manage the economy in the first place, it shouldn’t matter what any of them say.

  40. Gilbert, the Constitution was written by people who had no idea that humanity would Progress morally and intellectually to the point where we would collectively spawn a Krug. Constitutional limits on power don’t apply to a Krug. The Founders would have made Krug Immunity explicit in the Constitution if they had any inkling such a wonderful gift to humanity was possible.

  41. “such a wonderful gift to humanity was possible.”

    Oh yeah, he’s a peach.

  42. I love watching George Will deliver a smackdown to Paul Krugman weekly on CBS. It’s therapeutic.

  43. If you don’t want to listen to any of them (Krug, Friedman, or von Mises), go ahead. Just don’t throw Krug’s Nobel in our faces and ignore the other two recipients mentioned.

    I won’t, and haven’t.

    I don’t see anything in your 2004 quote that’s particularly relevant.
    You’re not looking closely:

    Just two months ago, Mr. Greenspan went out of his way to emphasize the financial benefits of adjustable-rate, as opposed to fixed-rate, mortgages. Let’s hope that not too many families regarded that as useful advice.

    Also:

    My calculations keep leading me to a 10-year bond rate of 7 percent, and a mortgage rate of 8.5 percent — with a substantial possibility that the numbers will be even higher.

    Krugman’s main talent appears to be saying nothing, so he can’t be proven wrong. They should move his column right next to the astrology section. “You will meet with high interest rates in the near future. Now that the world is flat, it is the time to take that trip you’ve been thinking of.”

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