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No, the financial crisis was created by private financial institutions securitizing sub-prime mortgages, without considering that failures can be highly correla

No, the financial crisis was created by private financial institutions securitizing sub-prime mortgages, without considering that failures can be highly correlated, which is what happened when the bubble burst and prices fell across the board at the same time. The main contribution of government to the crisis was that they didn't do anything to pop the bubble at an earlier time, when it would have caused less damage. I can't read the Krugman opinion article you linked because it's paywalled, but I found that Dean Baker wrote about claims like yours about exactly this article, and he titled his article "When Someone Says Paul Krugman Called for Greenspan to Create a Housing Bubble Back in 2002, They are Trying to Say That They are Either a Fool or a Liar". http://www.cepr.net/index.php/blogs/beat-the-press/when-someone-says-paul-krugman-called-for-greenspan-to-create-a-housing-bubble-back-in-2002-they-are-trying-to-say-that-they-are-either-a-fool-or-a-liar http://www.cepr.net/index.php/blogs/beat-the-press/when-some... > The same applies to the harm caused by public sector unions. It is due to self-serving people working in government. > And the damage from the former has very few limits due to the state's monopoly on violence. It depends... I don't see an issue with say teacher's unions, but police unions can be highly problematic and often work to protect police officers who deliberately broke the law from consequences.

ETH_start 3y ago
You can see the Krugman take for yourself: https://archive.is/Vqw6x https://archive.is/Vqw6x There is no honest take that can conclude that he wasn't endorsing the creation of a bubble: 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. What Krugman endorsed is exactly what the Federal Reserve ended up doing: The Federal Reserved lowered interest rates and created a housing bubble. And what followed is a vast network of unionized academics and journalists engaging in historical revisionism to deny what actually happened, and falsely accuse the private sector of creating the systemic conditions that led to the bubble so as to further vilify the private sector that at every turn they look to exploit through government coercion. >It depends... I don't see an issue with say teacher's unions, but police unions can be highly problematic and often work to protect police officers who deliberately broke the law from consequences. That's the standard take of the coalition of unions. Justice is what they want to see undermined, since their grift depends on the normalization of injustice and the demoralization of private citizens, so they point out the harms of police unions so that police can be vilified more, but then they overlook the harm caused by all other types of unions.
- deleted 3y ago
  [deleted]
- the_why_of_y 3y ago
  Thanks, so it's clear from the article that Krugman didn't endorse any bubbles here. The sentence you quote is obviously sarcastic in context; particularly the second to last paragraph, which blames the stock market bubble that had just popped partially on Alan Greenspan (chairman of the Fed): Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble. Just 2 weeks later, Krugman wrote: https://web.archive.org/web/20230607222048/http://www.nytimes.com/2002/08/16/opinion/mind-the-gap.html?pagewanted=2 https://web.archive.org/web/20230607222048/http://www.nytime... Back when I first got professionally obsessed with Japan's problems, around four years ago, I made myself a mental checklist of reasons that Japan's decade of stagnation could not happen to the United States. It went like this: ... 4. We may have a stock bubble, but we don't have a real estate bubble. I've now had to strike the first three items off my list, and I'm getting worried about the fourth. More and more people are using the B-word about the housing market. A recent analysis by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000. If we do have a housing bubble, and it bursts, we'll be looking a lot too Japanese for comfort. This does not sound like an endorsement to me; quite the opposite. The Baker analysis is here: https://web.archive.org/web/20150703032256/http://cepr.net/documents/publications/housing_2002_08.pdf https://web.archive.org/web/20150703032256/http://cepr.net/d... The important point to note here is that the housing bubble already existed in 2002, it was not created during the period of 2002-2004 when the Fed set low interest rates. See also "Understanding Recent Trends in House Prices and Homeownership", Robert J. Shiller, from 2007: https://web.archive.org/web/20101125115655/http://www.kansascityfed.org/publicat/sympos/2007/PDF/Shiller_0415.pdf https://web.archive.org/web/20101125115655/http://www.kansas... While home price booms have been known for centuries, the recent boom is unique in its pervasiveness. Dramatic home price booms since the late 1990s have been in evidence in Australia, Canada, China, France, India, Ireland, Italy, Korea, Russia, Spain, the United Kingdom, and the United States, among other countries.1 There ap- pears to be no prior example of such dramatic booms occurring in so many places at the same time. ... Conclusion The view developed here of the boom in home prices since the late 1990s has it operating as a classic speculative bubble, driven largely by extravagant expectations for future price increases. As such, the situation may well result in substantial declines in real home prices eventually. ... Monetary policy does not come out as central in the case studies examined here. Monetary policy is in an important sense concen- trated on the extreme short-term. The fundamental target variable in the U.S. is the federal funds rate, an overnight rate. And yet, eco- nomic decision makers are focused on a lifetime decision problem.

ETH_start 3y ago

You can see the Krugman take for yourself: https://archive.is/Vqw6x https://archive.is/Vqw6x There is no honest take that can conclude that he wasn't endorsing the creation of a bubble: 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. What Krugman endorsed is exactly what the Federal Reserve ended up doing: The Federal Reserved lowered interest rates and created a housing bubble. And what followed is a vast network of unionized academics and journalists engaging in historical revisionism to deny what actually happened, and falsely accuse the private sector of creating the systemic conditions that led to the bubble so as to further vilify the private sector that at every turn they look to exploit through government coercion. >It depends... I don't see an issue with say teacher's unions, but police unions can be highly problematic and often work to protect police officers who deliberately broke the law from consequences. That's the standard take of the coalition of unions. Justice is what they want to see undermined, since their grift depends on the normalization of injustice and the demoralization of private citizens, so they point out the harms of police unions so that police can be vilified more, but then they overlook the harm caused by all other types of unions.

deleted 3y ago
[deleted]
the_why_of_y 3y ago
Thanks, so it's clear from the article that Krugman didn't endorse any bubbles here. The sentence you quote is obviously sarcastic in context; particularly the second to last paragraph, which blames the stock market bubble that had just popped partially on Alan Greenspan (chairman of the Fed): Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble. Just 2 weeks later, Krugman wrote: https://web.archive.org/web/20230607222048/http://www.nytimes.com/2002/08/16/opinion/mind-the-gap.html?pagewanted=2 https://web.archive.org/web/20230607222048/http://www.nytime... Back when I first got professionally obsessed with Japan's problems, around four years ago, I made myself a mental checklist of reasons that Japan's decade of stagnation could not happen to the United States. It went like this: ... 4. We may have a stock bubble, but we don't have a real estate bubble. I've now had to strike the first three items off my list, and I'm getting worried about the fourth. More and more people are using the B-word about the housing market. A recent analysis by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000. If we do have a housing bubble, and it bursts, we'll be looking a lot too Japanese for comfort. This does not sound like an endorsement to me; quite the opposite. The Baker analysis is here: https://web.archive.org/web/20150703032256/http://cepr.net/documents/publications/housing_2002_08.pdf https://web.archive.org/web/20150703032256/http://cepr.net/d... The important point to note here is that the housing bubble already existed in 2002, it was not created during the period of 2002-2004 when the Fed set low interest rates. See also "Understanding Recent Trends in House Prices and Homeownership", Robert J. Shiller, from 2007: https://web.archive.org/web/20101125115655/http://www.kansascityfed.org/publicat/sympos/2007/PDF/Shiller_0415.pdf https://web.archive.org/web/20101125115655/http://www.kansas... While home price booms have been known for centuries, the recent boom is unique in its pervasiveness. Dramatic home price booms since the late 1990s have been in evidence in Australia, Canada, China, France, India, Ireland, Italy, Korea, Russia, Spain, the United Kingdom, and the United States, among other countries.1 There ap- pears to be no prior example of such dramatic booms occurring in so many places at the same time. ... Conclusion The view developed here of the boom in home prices since the late 1990s has it operating as a classic speculative bubble, driven largely by extravagant expectations for future price increases. As such, the situation may well result in substantial declines in real home prices eventually. ... Monetary policy does not come out as central in the case studies examined here. Monetary policy is in an important sense concen- trated on the extreme short-term. The fundamental target variable in the U.S. is the federal funds rate, an overnight rate. And yet, eco- nomic decision makers are focused on a lifetime decision problem.