Krugman's response, though correct, fails to mention his own support for juicing the housing market during the '01 recession. This clip was just uploaded by the New York Times on July 7th, so it was likely filmed after the public row between bloggers and Krugman about this exact topic. Which means PK was counting on the audience not being readers of economic blogs. But in failing to consider the impact of youtube, PK made a tactical mistake.
I'm not saying Krugman caused the bubble, far from it. Just pointing out that it's disingenuous of PK not to mention that he publicly supported the creation of a housing bubble in '02 to lift us from the dot-com recession.
It's just like a Keynesian to advocate a bubble to avoid a recession (as they always do) and then blame the bigger, louder Keynesian down the street when the bubble goes kaboom. Yes, Greenspan caused it with excessively cheap money, but Krugman played some role in helping it along its way with his less than subtle encouragement.
I'll take the opportunity to say it again and I hope the Keynesians are listening. Recessions are not a bad thing. After our near 20-year credit binge, some could even make the case that a major recession was needed and is in fact healthy. Stop trying to smooth every landing and re-inflate every bubble.
