Krugman: Germany Needs a Bubble To Save the Euro

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Remember when Paul Krugman called for Alan Greenspan to create a housing bubble to replace the collapsed NASDAQ bubble? While he has since backtracked from that and last year said that the U.S. Government effectively can fight this depression by preparing to fight off an invasion by imaginary “space aliens,” he has a new plan to save the euro: create a bubble in Germany. He writes in response to the current troubles of Europe:

What could turn this dangerous situation around? The answer is fairly clear: policy makers would have to (a) do something to bring southern Europe’s borrowing costs down and (b) give Europe’s debtors the same kind of opportunity to export their way out of trouble that Germany received during the good years — that is, create a boom in Germany that mirrors the boom in southern Europe between 1999 and 2007. (And yes, that would mean a temporary rise in German inflation.)

Never mind that the boom was based upon an unsustainable bubble. In effect, he is demanding yet more bubbles and when they collapse, he will blame private enterprise, as he always does. I deal with his statements here.

8:24 am on July 30, 2012