Wednesday, June 17, 2009

Wow Indeed

In all of its glory:

Wow. Just . . . wow.

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. 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.

As Arnold Kling says, there's a paragraph I'm sure glad I didn't write.
Title of her post "Paul Krugman's Prophetic Prescience." The quoted paragraph is from a 2002 Krugman article.

By the way, murder happens in America. I say that because, obviously, I totally endorse murder like all the fucking time.

If only Kruggles had found that recession around here somewhere.


Anonymous said...


You should save your excellent comments on Megan's inane post, because I would think a ban might be coming your way on the message board.

you can't show her up like that for long I bet.

Ken Houghton said...

I'll take that bet. How far back do this blog's archives go?

I'm confused: why would she be glad she didn't write a paragraph that (1) was true at the time, (2) got echoed by many over the next several years, and (3) remains true now?

Given the choice I personally prefer to write the truth; it's easier to remember. Why is McMegan different?

Dillon said...

By criticizing Krugman, did McArdle just indirectly admit that Greenspan was a complete fucking disaster?

No, she couldn't have done that - Greenspan is her hero. I must have misunderstood her, yet again.

Dhalgren said...

Doesn't she understand that Krugman didn't write "we need to create a housing bubble".....he wrote, "Alan Greenspan needs to create a housing bubble" in the FED. He was dead-on correct, even if he he didn't chime-in his opinion that a housing bubble is bound cause another recession down the road.

So yeah, she's really criticizing Uncle Alan.

Anonymous said...

Krugman's point is dubious, since creating a housing bubble is something like saying you're going to help the economy by having everyone taking out giant mortgages and paying a huge percentage of their income to lenders/investors over the next 15-30 years in exchange for a short-term stimulative effect. It also has the secondary effect of raising rents and putting pressure on the lower and middle class at a time when you want them to save and invest, reducing the amount they have to spend in other sectors of the economy. If it was an intentional plan, ugh.

But Megan calling out other people for bad predictions? Uncool. Stones, glass houses, tossing said stones. Terrible.

ChicagoEd said...

Reading comprehension has never been one of McArdle's strong suits. But this is funny. She really thinks an economist like Krugman was advocating a housing bubble. Every economist knows that bubbles, by definition, are bad--they're distortions; they collapse. Except for Megan.

Anonymous said...

It's true. After reading the original column, I see that Krugman wasn't advocating it. Just describing what Greenspan was trying to do.

Susan of Texas said...

She really can just say anything, no matter how wrong or stupid. All those times we've hauled her stupidity out of her archives, yet she thinks she's going to "gotcha" Krugman?