From The Battle of Maldon, the words of Byrhtwold:
Hige sceal þe heardra,/heorte þe cenre,
mod sceal þe mare,/þe ure mægen lytlað
What Profit Hath A Man Of All His Labor?: I’m in a weird mood as the markets tumble. It will pass, but right now I feel like the preacher in "Ecclesiastes", wondering about the point of it all.
Here’s the point: back around 1998 I was among those who looked at the crisis in Asia and realized what it implied — namely, that the problems that caused the Great Depression had not been solved, and that it could happen again. The speculative attacks on smaller nations, the liquidity trap in Japan, were omens for all of us. In 1999 I wrote a book, The Return of Depression Economics, saying all that.
When the 2008 crisis struck, it was immediately clear that this was what we had been afraid of. And it was desperately important that policy makers realize that we were in a world where the usual rules no longer applied.
But they didn’t. The banks were rescued — but as soon as that happened, the moralizers and deficit worriers, the people who see hyperinflation lurking under every bed, took over. Warnings that we were repeating not just the mistakes of Japan but the mistakes of Hoover and Bruening were waved away as the squeaking of people of no consequence, never mind the fact that some of us had pretty fancy credentials.
And now we are exactly where I feared we’d be, repeating all the old mistakes and experiencing all the old consequences.
As I said, I’ll get over it. But grant me a moment to look on the past three years, and despair.
Now I do feel guilty: four years ago I should have started screaming that the banks had lost control of their derivatives books and that we needed to nationalize housing finance immediately, and kept on screaming. I did not.
But, IMHO at least, Krugman has nothing to feel guilty for. I believe that he has been one of the world's great benefactors over the past four years.