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Published On: Sat, Jun 5th, 2010

Tom Woods destroying Paul Krugman on Housing

Remember when we were taught that our leaders were the “Best and the Brightest” when they are the most connected, easily corruptible and usually a lawyer.

Tom Woods embodies the group that should be running the country by learning from history and steering the ship to avoid icebergs without regard to political damage.

So a year ago, while the “experts” were all perpetuating falsehoods over the real estate collapse, Woods was dismantling the left’s favorite economist Paul Krugman.

Woods:

So the New York Times’ Paul Krugman called the housing bubble, or so he tells us. I could have called the housing bubble, too, if like Krugman I advocated the very policies that led to it. Yesterday, for instance, I predicted that the Pepsi I put in the refrigerator would be cold when I took it out that night. I’m pretty good at this.

These days it’s not particularly controversial to argue that artificially low interest rates, fostered by the Federal Reserve System since 2001, gave rise to the housing bubble and set the economy on an unsustainable path. And guess who was clamoring for those low interest rates around 2001?

Citing Krugman’s own words from this German Interview

During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn’t you lower interest rates? – Krugman, May 2, 2001

“Economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.” – Krugman October 2001

“The good news about the U.S. economy is that it fell into recession, but it didn’t fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed’s dramatic interest rate cuts helped keep housing strong even as business investment plunged.” – Krugman December 2001

Woods perfectly articulates the dangers of the government intervention:

That, of course, was the problem: by keeping housing “strong” instead of allowing the economy to correct itself, the Fed encouraged people to continue along an unsustainable path, thereby making the eventual and inevitable bust all the more severe when it finally arrived. Oops!

Oops indeed.

DOB’s own Robert Herriman pointed how Paul Krugman is clueless to libertarian ideals and free market principles (Read here). Krugman and the left are too eager to blindly blame the wrong institutions and perpetuate the government as a “savior” while portraying the private sector as a faceless, selfish, greedy entity that needs to be corralled.

Woods’ book “Meltdown” discusses causes, results and solutions. Instead of finger pointing, Woods integrates humor with an assessment of the free market capitalism while leaving a wake of Krugmans behind. (More info on “Meltdown”: thomasewoods.com)

We could create a similar timeline of Barney Frank or Chris Dodd comments and suggestions but that would be too easy of a target.

I think it’s important to examine history, especially recent information to know who was correct and who to trust moving forward.

 

 

“Krugman Failure, Not Market Failure”, June 19 , 2009  http://www.lewrockwell.com/woods/woods116.html

Thomas E. Woods, Jr., is the New York Times bestselling author of nine books. A senior fellow at the Ludwig von Mises Institute, Woods holds a bachelor’s degree in history from Harvard and his master’s, M.Phil., and Ph.D. from Columbia University. (Photo: ThomasEWoods.com)

Pre-order Woods’ next book “Nullification: How to Resist Federal Tyranny in the 21st Century” – preorder “Nullification” from Amazon

 

About the Author

- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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