Krugman’s posts always worry me. For those who do not know him, he has won the Nobel Prize for economics, is one of the 50 most cited economists of all time, writes for the New York Times, and his blog is considered one of the most influential in the world.
Furthermore, he is traditionally always spot on when it comes to predicting the future of the economy. Take this talk he gave at Google in 2007 and decide for yourself how accurately he described our current state today. It is like he went back from the future.
Unfortunately, he is predicting even further financial catastrophe since he feels the government isn’t being aggressive enough. He feels strongly we need to nationalize the banks and the money the government is investing has got to be even bigger to stop this beast. Read his current post about how he feels the current program won’t be enough. Here’s his recipe for success:
As economic historians can tell you, this is an old story, not that different from dozens of similar crises over the centuries. And there’s a time-honored procedure for dealing with the aftermath of widespread financial failure. It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.
That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.
But the Obama administration, like the Bush administration, apparently wants an easier way out.
Now, I know some readers will jump on the anti-government intervention/anti-nationalization ideology, blah, blah blah, but here’s a fact: Krugman usually always gets the economy right, and that scares me. (That also means more to me than ideology.)