CronoDAS comments on Broken window fallacy and economic illiteracy. - Less Wrong

7 Post author: Desrtopa 01 December 2010 04:48AM

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Comment author: CronoDAS 01 December 2010 06:28:20PM *  -1 points [-]

Within the next year the US is going to see inflation coming back

Based on what I've been reading, I disagree with this. Want to make a bet? ;)

"What I've been reading", incidentally, is the blog of that arch-Keynesian Paul Krugman, who did, in fact, see the housing market collapse coming. And you disagree with Paul Krugman at your peril.

and that ass Bernanke is actually going to think it's a good thing!

It would be, considering that we're in a liquidity trap right now: the Federal Reserve can't lower nominal interest rates any more because they're basically zero. The only way they can lower real interest rates is to push them negative by promising that there will be more inflation in the future.

(And yes, hyperinflation is bad, but we're in no danger of that.)

Comment author: Aurini 01 December 2010 08:28:37PM 2 points [-]

I would love to make a bet, but all I can offer up is a pint of blood. Nonetheless, thanks for the link.

Comment author: knb 02 December 2010 08:00:12AM *  1 point [-]

"What I've been reading", incidentally, is the blog of that arch-Keynesian Paul Krugman, who did, in fact, see the housing market collapse coming.

He didn't just see it coming, he spent the years of 2001-2003 calling for the record low interest rates with the goal of causing the housing bubble!

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.

God willing, our intrepid macroeconomists will soon create another bubble to save us from the last bubble (which they created to save us from the bubble before that, etc.

That's how a sane economy works.

Comment author: CronoDAS 02 December 2010 08:57:20PM *  1 point [-]

And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Krugman's comments on the quote

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