[davetufts]

While that 2002 is probably Krugman's most blatant call for a housing "bubble". Mises.org just compiled a list of 7 other pre-2002 Krugman calls for lowering interest to stimulate home buying: http://blog.mises.org/archives/010153.asp

Like another commenter on this page states, Krugman didn't think a housing bubble was a good idea...but it was necessary to avoid a recession. Still, why not just deal with the consequences of the dot-com bubble then? Inflating another market just kicked the recession down the road and made it worse.

Unfortunately, Krugman and most politicians think we can fix the housing bubble by creating a currency bubble. Instead of focusing on a single market like housing, the current plan is to, yet again, kick the recession down the road. This time, however, we're promoting spending across all government-controlled and regulated markets with massive stimulus. Obviously, creates a bubble of dollars. When the dollar bubble deflates, there won't be anything left to blow up.

[DenisM]

Wicked. So, can we predict the future (policy actions) based on his current words then?

[grandalf]

I keep wondering what bubble they will create next to offset the burst of the housing bubble... any guesses? I am thinking it will either be another housing bubble (housing starts are already up 17% this quarter) or maybe a green energy bubble?

[DenisM]

Certainly the alt-energy bubble. Read this, it's old from 01/2008 but still relevant:

http://seattlest.com/2008/01/17/the_next_market.php

[grandalf]

not sure why this was modded down. The bubble was due to perverse incentives to invest in housing debt (massive mortgage interest deductions, implicit underwriting of fannie/freddie, etc.)

Based on many quotes that are starting to surface from Paul Krugman, there were a lot of serious economists who thought that creating massive incentives for investment in the housing sector was a good idea:

http://blog.mises.org/archives/010153.asp