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July 28, 2008
The Great Unravelling, Part MMMCCLXIII
This morning Krugman fires off another salvo in his campaign to return us to the Seventies. I'm partly kidding of course: I actually agree with many of his criticisms of the Fed in the past 10 years. The Fed's policy blunders really are the root of all evil at the moment.
That said, I'm going to go out on a limb and say it: should we bailing out those facing foreclosure? Most of these people bought far beyond their means, betting that house prices would rise further still. Is bailing them out fair or reasonable to those who kept their heads about them during the bubble? Won't it encourage moral hazard (i.e. by bailing people out and attenuating the consequences of reckless consumer behavior, won't we be encouraging more of it in the future)?
Finally, while digging through posts from my old blog, I found"The sub-prime mess, in 45 easy steps". Of course, its missing about 10 slides about the Federal Reserve failing to regulate any of this and, worse still, tossing gasoline on the fire with overly-loose monetary policy.
Posted by dag at July 28, 2008 8:19 AM