As I was making my rounds this morning I found this fascinating quote from one of Paul Krugman’s columns back in August 2002:
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.
He must hate it when people follow his advice. I trust he’s not cursing Alan Greenspan now. Oh, dear. Here’s Paul Krugman from March 2008:
Oh, and the man who failed to see the housing bubble and refused to do anything about subprime — and has yet to admit to making any mistakes — ends by reaffirming his laissez-faire faith
As Ralph Waldo Emerson said, a foolish consistency is the hobgoblin of little minds.