Harsh, but possibly fair.
More fair than harsh,but only if you think housing bubbles are a bad thing.Most of the British electorate want to live in a society in which house prices rise for ever and not a few commentators on this site share this dumb, going on, insane viewpoint.
Sure but the whole point of a bubble is that it bursts.
well he was wrong – but wrong in that he didn’t know that when the housing bubble burst, the banks would have gotten themselves into a position that a decline in house prices would destroy them. Should he have known then that the banks would take highly leveraged bets on house prices?
Why should n’t he have known:he’s the Nobel Prize winner for Economics and this is supposed to be a predictive science ?Practically every dumbarsed Georgist commentator predicted it;Fred Harrison predicted the Crash to within a month but no prizes for him.
Minor point LE, but it wasn’t house prices falling that caused the problem, it was when they stopped rising and those on special deals couldn’t remortgage every two years or so. See The Greatest Trade Ever.
Sorry but surely housing prices *are* going to rise forever. As we get richer, we can and will spend more on our homes. We will want bigger homes too. Land, especially good land, is scarce. Even ignoring rising immigration.
We may get a bubble on top of that, but housing prices should keep increasing.
The effect of your belief and that of the millions of others is that the land underneath people’s houses costs 100k even before you lay any bricks, and ftb’s are now 37 before they get onto the housing ladder (=treadmill).
The effect of this bizarre mass delusion ,worthy of “The Madness of Crowds”(tulip mania was eminently sensible by comparison) has caused the entire country to look to their houses as a source of unearned income,reconciling them to low wages and poor pensions because “The house is my pension.” The Global economy nearly collapsed because of the American property market’s effects on the banking system but the response is Bring on more bubbles,pretty bubbles in the air.
Basically, Krugman was right. He didn’t forsee the eventual financial crisis that arose from the housing bubble 5 years down the line, but, you know, WFT? Falkenstein has him confused with Hari Seldon.
Incidentally, I love the way “Keynesian” is the libertarian blogoshpere’s “neoliberal”. I’m going to start cursing “Keynesians, Jews and speculators” every time I leave the house without my brolly.
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