Sunday, October 29, 2006

Poetic Economic Justice

The Krug Man discusses the bursting housing bubble, how bad it may get, and the possible political implications for the midterm elections.

Bursting Bubble Blues
By Paul Krugman
The New York Times
Here are the five stages of housing grief:

1. Housing bubble? What housing bubble? “A national severe price distortion [in housing] seems most unlikely in the United States.” (Alan Greenspan, October 2004)

2. “There’s a little froth in this market,” but “we don’t perceive that there is a national bubble.” (Alan Greenspan, May 2005)

3. Housing is slumping, but “despite what you hear from some of the Eeyores in the analytical community, a recession is not visible on the horizon.” (Richard Fisher, president of the Federal Reserve Bank of Dallas, August 2006)

4. Well, that was a lousy quarter, but “I feel good about the U.S. economy, I really do.” (Henry Paulson, the Treasury secretary, last Friday)

5. Insert expletive here.

We’ve now reached stage 4. Will we move on to stage 5?


Photo credit: Paul Krugman. (The New York Times)
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