Arnold Kling and Megan McArdle have pulled a funny and embarrassing quote from Paul Krugman, published in a 2002 NYT column:
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.
Read more: http://articles.businessinsider.com/2009-06-17/wall_street/30100530_1_housing-bubble-slump-fed#ixzz1ZeqBC600
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