Asset bubbles have happened even without not-so-easy money. And, in a depressed economy, where alternative uses of money are not great, people are going to bid up the prices of profitable corporations and stuff like that.
Paul KrugmanMost work in macroeconomics in the past 30 years has been useless at best and harmful at worst.
Paul KrugmanGovernments do not necessarily act in the national interest, especially when making detailed microeconomic interventions. Instead, they are influenced by interest group pressures. The kinds of interventions that new trade theory suggests can raise national income will typically raise the welfare of small, fortunate groups by large amounts, while imposing costs on larger, more diffuse groups.
Paul KrugmanWe should try to create the society each of us would want if we didn't know in advance who we'd be.
Paul KrugmanI've always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly - that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum.
Paul Krugman