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August 28, 2007


Per Kurowski

Our current financial crisis might not be the best example to discuss about whether we really need to keep “that perfectly good productive capacity be left idle?” as the real world seems fairly OK, except for a growing stock of unsold houses; and the crisis is mainly related to the virtual world of investments that now with all their slicing and trenching and AAA rating just seem to have been an extraordinary sophisticated pyramid scheme that will slice a piece of the wealth of those that fell for it.

But what does Paul Krugman really want to say with his common sense sounding view of trying to avoid recession at any cost since a recession can only bring us suffering. Is he running for some elections?

I for myself would love to see that house price index fall as fast as it has to, so that those in their houses with their mortgages will then suddenly be able to afford a renegotiated mortgage; or that those many that needed a house can begin to afford it again; and so that the overhang can be cleaned up fast and builders start building again… instead of seeing the whole thing drag out over years with house prices falling .3% per quarter. And really, that was always what I thought at least the old Austrians were thinking about.

It is not the size of the bump-recession that matters the most it is its length. Would Krugman want his aching tooth pulled out fast or slow?


"Whatever the reason, all that investment leads to the creation of too much capacity--of factories that cannot find markets, of office buildings that cannot find tenants."

As a layperson, is there any studies I can look at to investigate this? Namely, the question of is this investment coming from external sources, from loans, from selling off stock, or is it coming from internal sources, like profit. Or are these two things functionally the same? Does the term investment count for both of them the same?

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