Recently, Gene Epstein of Barron’s made a fascinating observation about Paul Krugman, the New York Times’ darling of economics. On December 18th in the NYTimes, Krugman wrote about the film, “The Big Short”, which was about the “housing bubbles and retold lies.” In his article, Krugman stated that the housing bubble “was largely inflated via opaque financial schemes that in many cases amounted to outfight fraud.”
Unfortunately for Krugman, some folks like Gene Epstein have long memories and short tolerance. Epstein noted that, “This causal analysis is directly contradicted by an alternative view previously expressed in the New York Times: that the housing bubble was largely inflated by policies of the Federal Reserve.
First, Epstein went back to August 2, 2002, when a columnist in the pages of the New York Times, wrote that, “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.”
Nearly seven years later on June 17, 2009, a few months after the crisis of 2008, the same columnist wrote for the New York Times that “What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.”
Can anyone guess who this columnist is? Gene Epstein knew: Paul Krugman.
Of course, Krugman is counting on his readers to be either a) financial morons like he is; b) short on memory; or c) both. This kind of incompetency from Mr. Krugman is a consummate example of why he should not be the time of day on economic matters.