Tuesday, June 16, 2009

Quote - Paul Krugman

“To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
Paul Krugman, NY Times, 2002

9 comments:

bjlee said...

German Interview, undated

http://www.pkarchive.org/global/welt.html


“During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?”


July 18, 2001

http://www.pkarchive.org/economy/ML071801.html

“KRUGMAN: I think frankly it's got to be -- business investment is not going to be the driving force in this recovery. It has to come from things like housing, things that have not been (UNINTELLIGIBLE).
DOBBS: We see, Paul, housing at near record levels, we see automobile purchases near record levels. The consumer is still very much in this economy. Can he or she -- or I should say he and she, can they bring back this economy?
KRUGMAN: Well, as far as the arithmetic goes, yes, it is possible. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don't know.


August 8th 2001

http://www.pkarchive.org/economy/ML082201.html

“KRUGMAN: I'm a little depressed. You know, inventories, probably that's over, the inventory slump. But you look at the things that could drive a recovery, business investment, nothing happening. Housing, long-term rates haven't fallen enough to produce a boom there. The trade balance is going to get worst before it gets better because the dollar is still very strong. It's not a happy picture.”


August 14, 2001

http://www.pkarchive.org/column/81401.html

“Consumers, who already have low savings and high debt, probably can't contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery…. But there has been a peculiar disconnect between Fed policy and the financial variables that affect housing and trade. Housing demand depends on long-term rather than short-term interest rates — and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was on Jan. 1…. Sooner or later, of course, investors will realize that 2001 isn't 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place.

October 7, 2001

http://www.pkarchive.org/economy/ML071801.html
“Post-terror nerves aside, what mainly ails the U.S. economy is too much of a good thing. During the bubble years businesses overspent on capital equipment; the resulting overhang of excess capacity is a drag on investment, and hence a drag on the economy as a whole.
In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. But it seems inevitable that there will also be a fiscal stimulus package.


Dec 28, 2001

http://www.pkarchive.org/column/122801.html

“The good news about the U.S. economy is that it fell into recession, but it didn't fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed's dramatic interest rate cuts helped keep housing strong even as business investment plunged.”

Josh said...

He really did deserve his Nobel Peace prize...thanks for the quotes!

Christopher said...

So right now the conditions for a recovery are in place.

Josh said...

Yes, the US is seeing an increase in new housing starts as abandoned houses are being bulldozed and tent cities are spawning all over the country. Sounds like a healthy, undistorted, recovering economy to me.

Christopher said...

Yeah, any bottoming out is the setting for recovery, lol! But wait! What is different now? Oh yeah, all the jobs have moved or are moving to China or Mexico to pay slave wages! Weeeeee, Krugman is correct in relation to an economy with jobs! But now that there are no jobs! Weeeeee...

Josh said...

Krugman is a moron.

Chris said...

Nope. It is pretty clear that when jobs are allowed to move to China and Mexico that you need "bubbles" to keep the economy rolling.

Chris said...

That, or you succumb to your ideological paymasters and accept 7000 PPP per year. What a wonderful world that will be, Josh!

Josh said...

"Nope. It is pretty clear that when jobs are allowed to move to China and Mexico that you need "bubbles" to keep the economy rolling."

Probably, but bubbles are just prolonging the inevitable and that's why Krugman is a moron.

Its funny how capital, jobs, and gold are all moving to the same part of the world.

If the US government understood gold was money and properly capitalized their banks, jobs would come back.

"That, or you succumb to your ideological paymasters and accept 7000 PPP per year. What a wonderful world that will be, Josh!"

Yes, because 7000 ppp is a static number that has never and will never change. You're such a moron.