> One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy. I was personally responsible for the demise of Enron; my nonexistent son worked for Hillary; etc.. The latest seems to be that I called for the creation of a housing bubble — in fact, the bubble is my fault! The claim seems to be based on this piece.
> Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.
http://krugman.blogs.nytimes.com/2009/06/17/and-i-was-on-the...
Aside from that, Krugman does not, in fact, prescribe increasing the government's share of economic growth in all circumstances, so you're wrong anyway.
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip...
The theme of that article seems to be, "we're screwed, and here's why." In that context, the quote in question seems to be saying, "the only way out would be to create a housing bubble, that's how screwed we are."
I think it's ironic to complain about "treated as the word of god" in a comments section absolutely flooded with criticism of him.
I wish we could discuss the ideas rather than the author, in any case.
He does indeed say that lowering rates to inflate asset prices would be our easiest way out of the situation.
He goes back only to say that it is unlikely that we will cut rates enough so it porbably won't work (ie this will fail because our attempt to create bubbles will be too half assed to work.)
He's pretty clearly serious that lowering rates to encourage investment is our ticket out of the problem.
Somehow every op-ed this guy writes gets treated as the word of god. It is important to remember that while he does have a Nobel prize, he has also said a lot of profoundly dumb stuff.
I am not saying that Austerity is inherently good or inherently bad. The truth, like for everything else, lies in the grey and is situation dependent. Krugman however is absolutely religious about fiscal stimulus and demand side economics, and is going to claim that the solution to EVERY problem is increased government spending.
These situations are nuanced and unfortunately what you are hearing from Krugman is something more akin to proselytizing his religous views on the graces of Government spending(a view which no facts or events would every sway him from) opposed to thinking critically about a difficult problem.