30 January 2010

What Krugman Said

So says the Shrill One, and so say we all:
Put it this way: if our financial system is so high-strung, so manic-depressive, that low rates for a few years can inflate a monstrous bubble, while a few discouraging words from high officials can send them into a tailspin, this doesn’t make the case that policy must walk on eggshells, forgoing any attempt to fight prolonged unemployment. Instead, it makes the case for much, much stronger financial regulation.
I would only add that one of the metrics that should be used in financial regulation is proportion of GDP. There must be a conscious effort by regulators to keep the financial industry from becoming the tail that wags the dog of our economy.

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