As a regular follower of your blog, I'm happy to see that you covered Paul Krugman's debacle in Madrid. I wanted to share with you a Q&A exchange I had with him, questioning his repeated calls for the FED to create a "housing bubble" (which he claims was just a joke) and his stance that Fannie & Freddie had nothing to do with the on-going economic downturn (which he said was the "biggest lie of this crisis")
It should be noted that Diego at his blog has responded to Krugman's claim that he was "joking", in a post called "Krugman the Joker". The blog is written in Spanish, but here is a Google translation:
On the evening of yesterday I had the opportunity to question the Nobel Prize in Economics Paul Krugman in his debate with Professor Peter Schwartz. The chronicle of the event and is available in Free Market , so I just want to take this opportunity to expand on an issue capital raised in Princeton yesterday. I speak of the repeated occasions when asked the U.S. Federal Reserve that would create a "housing bubble" in order to "stimulate" the economy.Read the rest here.
Peter Schwartz, who had an intensive discussion, and reminded him to New York Times columnist some of its catastrophic "recipes" to exit the recession. Now it was talking about monetary policy, so Krugman asked for a statement he made in 2002: "To combat the recession (...) Alan Greenspan has to create a housing bubble to replace the Nasdaq bubble."
Krugman sought to sidestep the issue by writing that "he was joking." At other times they simply said "I was reflecting on the limits of the powers of the Federal Reserve." However, the archive is treacherous to those who change their approach, so it is worth remembering that Krugman repeated this request on countless occasions.
- In an interview with German publication Die Zeit, wondered "why we are not going to lower interest rates?" After posing that such actions might help "because it generates an increase in housing activity and, It expands the construction sector. "
- In a speech to CNN said the credit to the construction "is not enough even cheaper to produce a" boom "in the industry."
- In a column for The New York Times wrote that the housing sector "could help lead the recovery."
- In an interview with Lou Dobbs stated that "low interest rates to promote real estate spending is the main solution" to encourage investment .
- On his personal blog, quoted Paul McCulley (PIMCO) to argue that "Greenspan needed to create a housing bubble to replace the technology, that is, within limits, would have done the right thing."
Ten years of that and Krugman is very willing to make self-criticism. Indeed, it has come to proclaim himself "the only voice of truth in a sea of corruption." A phrase and shows that it lacks confidence in itself, but it looks like it has more faith even in the "magic wand" of central bankers, because in his conference yesterday and in his recent speeches has repeatedly called for the ECB monetize public debt massively. Worse, bet Krugman actively create more inflation in Europe and denies that this may have some negative consequences.
The second question I asked him the Nobel Prize was about the housing crisis. Since many of the mortgages "subprime" were mediated by two semi-public entities, Fannie Mae and Freddie Mac, questioned the Nobel Prize on the need to limit the state's presence in this area. In that vein, I remembered that also in Spain have experienced a similar phenomenon, with the savings banks as a transmitter excessive flow of credit to the sector.