Krugman jumps the shart

[opebo]

I do agree with you that the housing market is dragging along too slowly and we need a bolder plan to move sales along more quickly and get the inventory cleared out.

It would be so easy if we just used the fed funny money to buy up houses instead of just treasuries, etc.

Just buy up about half the outstanding housing stock at pre-crash values and knock it down. Puts construction people back to work gets money flowing again, and really makes an impression.  Kaa-booom!

[opebo]

I didn't have time to read all of this, but there has obviously been moral hazard within banks and financial institutions. There has been a number of problems in recent decades regarding the fact that the firm is not a single agent, but made up of several agents. This is fairly standard micro theory and there are plenty of instances where a firm will not end up acting in a way that maximizes its profit.

Actually the problem is never with moral hazard but with the opposite - restraint of demand and production due to too much of this 'morality'.  We need to make the taking on of debt free and easy, so that if the debt 'goes bad' it is simply inflated away upon a sea of fiat currency - thus eliminating the huge incentive towards deflation and depression inherent in capitalism and competition.