Krugman:
The problem with private debt is that we have good reason to believe that in very wide-open financial systems people get irrationally exuberant, lending and borrowing to an extent that they eventually realize was excessive — and that there are huge negative externalities when everyone tries to deleverage at once.
So people get irrationally exuberant, huh? It has nothing to do with incomes failing to keep up with costs, nothing like that?
More to the point, has it nothing to do with policies that lead to increased use of credit, and the complete absence of policies which, by accelerating the repayment of debt, could prevent the increased use of credit from creating an accumulation of debt that sooner or later becomes unsustainable?
No? It's only the foolishness of over-exuberance?
Professor Krugman, your explanation is shallow and empty,
1 comment:
Yes it is irritating to hear Krugman, whom I think is mostly on the "good guy" team (you know, the one you and I are on Art!!), continue in this manner.
Thing is he has been vocal in the past on criticizing the right on its expectation fairy nonsense yet he doesn't see how his whole story here fits right in with the magical thinking cadre.
Irrational exuberance is just placing the blame for borrowing too much completely on the individual borrower and doesn't even begin to question the whole edifice of our credit driven system.
Of courser Krugman doesn't want to question the basis of our money system, it pays him too well!
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