Paul Krugman circa 2002

This is an interesting timewarp back to 2002.  Then, as now, economists brought to the table 'solutions' to the economic distress the country was facing.  Then, as now, Paul Krugman was one of the most clairvoyant, and vocal, voices.

Personally, I think Krugman is incredibly intelligent, and one of the preeminent economists of the current generation.  Though I hold tremendous respect for his economic prowess, I don't necessarily share many of his opinions.  In this article, Krugman presents his solution of the recession back then...

...the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession... Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Pretty clairvoyant no?  That's exactly what happened.  Why do I admire Krugman?  He absolutely nails the situation perfectly!  Then, as now, the recession is not the 'typical' post-WW2 recession... this is a post-bubble depression that has only two solutions:

1) take the medicine, and suffer through the lean years, or
2) create another asset bubble to fuel spending

As we know, the Fed followed Krugman's advice (or agreed with it in practice).  In hindsight, Fed policies fueled the housing bubble, which led to roughly 7 subsequent years of gluttony.  And now, here we are...

Allow me to propose a heretical idea - Though we can replace a bubble-popped with much hot-air, easy-money, and bubbles-anew, perhaps such a course of action may lead to future discomfort on a grander scale... dare I suggest, it is best not to create replacement asset-bubbles (through government intervention), and to let markets play out as fate/providence/nature desires... perhaps we should grudgingly accept the consequences of capitalism, just as greedily as we embrace the benefits!

Since I'm in a mean mood, check out the OpEd's claim that Greenspan urged Congress to cut taxes to head off the risk of excessive budget surpluses...  What the heck does that mean?  What is risky about a surplus??  What bizaro-person/institution would consider a surplus risky (implying that a deficit is safe)?

*sigh*