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Comment by mwattsun | Hacker News Reader

This is a long read but worth it. I don't like to only complain but praise too, so good on the writer Christopher Leonard. The part about low interest rates causing a farm land bubble in Kansas was enlightening. I lived through the extreme interest rates of the late 70's and subsequent crash caused by the policies of Paul Volcker and it wasn't pretty, but then I was able to buy a house in the mid 80's at a decent interest rate.

Edit: Volcker

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Agree. It had an unusually clear explanation of how different types of bubbles are tied to Fed policies. Pointing out the effect of shifting of assets from poorer to richer segments of society was another interesting point in the article.

Hoenig's arguments are quite different from the "deficits don't matter" spiel of Krugman and others. Krugman's argument that we don't see ill effects of current policies could be just as much a failure of imagination as lack of data.

Krugman is nothing but an idiotic hack. He has been so consistently out of touch and wrong about everything that I almost consider him to be malicious. He just blatantly is a spinster for the democratic party, but hides behind his pedigree and pretends like his opinion is obviously correct. It's that classic snooty elitism, the grandstanding, the self-righteousness - the same things that alienate moderates from the democratic party.

I get that Krugman can be shrill. But no one who wins a nobel prize in economics is an idiot.

Agree. Krugman is really good on pure economic questions like trade theory. Unfortunately he is a lot less trustworthy on issues where economics and current politics intersect, e.g., NYT opinion pieces. I read those with a fair degree of skepticism though he has produced a few that were economic gems.

Never underestimate the career trajectory of a well connected idiot in a soft science with a reproducibility problems.

There is no actual nobel prize in economics, so there is that.

Yes there is. It's not an original, but it's basically the same thing.

https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom...

Volcker is pretty much believed to have ended the periods of high inflation, so what makes you blame him for a "crash"?

Well according to the article it destroyed a lot of banks when asset prices stopped rising.

> “You could see that no one anticipated that adjustment, even after Volcker began to address inflation. They didn’t think it would happen to them,” Hoenig recalled. Overall, more than 1,600 banks failed between 1980 and 1994, the worst failure rate since Depression.

I had not personally made that connection to S&L failures but getting out of a bubble has to impose costs to somebody.

This glosses over the outright fraud within the banking industry that was at the heart of the S&L crisis. Without the fraud there would have been enough assets and financial incentive to consolidate instead of liquidations. The Fed policies only had the effect of forcing the industry to account for the rot within.

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