Last September, in an entry called “Bubble Memories,” Paul Krugman took pleasure in recalling that in 2005, when he predicted that the housing bubble was going to burst, John Hinderaker saw “little reason to fear a catastrophic collapse in housing prices.” Krugman concluded his piece as follows: “Memories, memories.”
But Arnold Kling recalls that in 2002, Krugman advocated the creation of a housing bubble:
To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Whatever the quality of Krugman’s predictions, I’d certainly beware of his prescriptions.
Via Mark Hemmingway.