[yummyfajitas]

The point of that editorial is that business investment won't end the recession, so the only hope is housing.

"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. "

Krugman is just repeating the same "insufficient demand" theory of recessions that Keynesian economists are using today.

[anigbrowl]

Yes, but once the economy was humming again he expressed worries about government spending, debt financing, and inflation too, but lots of libertarians told him to stop being such an old lady: we were spending because there was a war on, China buying US debt was proof that market economics the key to growth, and inflation of property prices didn't matter because they're not building more land.

I appreciate that Austrian economists dislike the idea of stimulating demand through looser monetary or fiscal policy, but they're not exactly famous for demanding greater restraint during good times, are they? I don't recall any of them screaming in horror when the Dow was at 14k.

[jbooth]

And he was right. 7 years from 2001 to 2008 he was saying this and everyone dismissed his concerns by calling him a partisan bush-hater. Maybe so, but he was still right.

Keynesian economics brought us out of the great depression and the lack of their application led to deflation and the lost decade for Japan.

Supply-side economics, on the other hand, have been tried twice in the last 30 years and both times they ended with massive government deficit and collapsed asset bubbles.

Before casting aspersions on someone by virtue of their -isms, I'd check the record of the -isms in question.

[yummyfajitas]

I didn't cast aspersions on anyone. I simply summarized Krugmans column: to increase consumer demand, the fed should create a housing bubble, but even that is unlikely to work.

[jbooth]

I don't think that's what he was intending to say. I remember a whole bunch of cautionary columns of his from that time period, some of which were very partisan and accused Greenspan of keeping interest rates low for political reasons.