This week a colleague and very good friend came back from China. She went there for 3 weeks to visit her family. I think it has been a couple of years since she has not been in her homeland. After talking a while, I asked her what were the things she found different. She said now there are many more businesses, shops and great restaurants. For her dismay as earning a PhD on Urban Planning & Environmental issues, she also found many more cars and and extremely quick urban sprawl. She also commented how food has doubled price (e.g. vegetables or the same bowl of noodles from 2 yuans to 4). Other things, like transportation had not increased so much, though. An interesting thing, she found that in fashion stores like the Swedish H&M, clothes were more expensive in China than here in Denmark. “Even if they were Made in China!!”. I answered that maybe it was because over there H&M was seen as a luxury European clothes, while here it was more normal. She did not think so, arguing some reasons. [I admit I also thought about some conspiracy theories, such as dumping and others]. All in all, these stories from China are nothing new for the ones we try to follow some a little bit the Chinese economy evolution, it is just nice to confirm the data from a friend.

Then I asked her about the condo. A flat she and her husband bought in the outskirts of city relatively close to Shanghai, about a year ago. They bought it to invest their savings, not really to live there. Upon my wondering when they bought it, they explained to me that prices have increased a lot, and while they may not increase so much as the last years, prices will not go down. It found a good deal, and they rent it right away, and who knows maybe in the future they could temporarily use it, etc… I told them, the story sounds awfully similar to the one repeated over and over, in the Western countries a few years ago. I also showed them some graphs of the housing prices in Europe and the US. They said China is different because, it is not convenient for “the” Government, and that the starting prices in China were very low…. Anyways, you can’t go wrong investing in property in China… Once they bought it, the prices went up a little, but they have become flat.

-”So how’s the price of your apartment, is still stable?” I asked. “Yes -she answered- it is more or less the same as the last months… You’re SO interested about our apartment!! Why?”- She said smiling.

– “Because… your apartment is a symbol, it’s a sign for me. If the price of it goes down, then it’s like a dominoes that will reach the economy everywhere…. If prices go down, the new huge middle class in China will loose financial stability, they will get nervous and highly constrain spending. The Government and elites have been doing whatever they want, and the people won’t complain because they’re getting economically and socially ahead, but if things starts getting shaky and social protests come, they will have to start trying to give better expectations to the people. That could be spending not only in infrastructure as they have done, but they may have to offer more available health care, cheaper education (student loans?), etc. At the same time industrial production will come to halt, and unemployment will rise, then they may have to offer more unemployment benefits, and well connected companies will need more public funding, etc. Same thing as in Europe and US. For all these, China will need to start using their money and deposits in various forms in foreign countries. They will need to stop buying the crappy Western debt. This will unleash bad things. Western countries for sure will retaliate and block their products (kind of a similar thing happened when the Japan stopped buying debt from the US in the 1980s and then coincidentally the US blocked imports from Japan, destroying much of their industry. China and major Asian buyers have a much bigger population that only Japan, so they would not have a lost decade, but), this would not help China’s economy, creating more instability. Probably then China will unpegged the Renminbi from the dollar. The instability will not only be in China but everywhere. Of course, this is all a possibility, but with 65 million empty homes in China, and they’re constructing like crazy, it does not seem so unfeasible there is a housing bubble going on, and that people like in the rest of the world will start asking for more responsibility to their governments. [Ok, I gave her a lighter version]. So that’s why I care about your apartment. So could you please tell me if the prices go down, even a little?

She said she would tell me. I’ll keep you updated.

p.s. Telling this horror story I feel like using a blah, blah, blah from the zero hedge blog.

I would like to share this video from Tim Harford, first because I liked one of his book on economics (probably it would be good to get the last one “Adapt”), and second, because this video has an interesting teaching that can not be enough remembered by all of us. It’s about an illness [not really an illness] that a smart doctor, with experience in the Spanish Civil War and WWII, found among our species.

Anyways, here below is the way Tim Harford explained about him. Below I typed the part when he specifically introduces this specific illnes.

“Archie Cochrane all his life fought against a terrible affliction, and he realized it was debilitating to individuals and it was corrosive to societies; and he had a name for it, he called it the ‘god complex’. Now I can describe the symptoms of the ‘god complex’ very easily, so, symptoms of the ‘god complex’ are… no matter how complicated the problem, you have an absolutely overwhelming belief that you are infallible right in your solution. Now, Archie was a doctor, so he hangs out around with doctors a lot, and doctors suffer from the ‘god complex’ a lot. Now, I’m an economist I’m not a doctor, but I see the ‘god complex’ around me all the time: in my fellow economists, I see it in our business leaders, I see it in the politicians we vote for. People who in the face of an incredible complicated world, are nevertheless absolutely convinced that they understand the way the world works. (…) The world is simply far too complex to understand in that way.”

I love this quote, and the whole speech.

Unfortunately, I think like all of us, he’s not free from this illness. In the same speech to prove his point he mentions than 10% of the American business disappear every year. That is for him an example of the crucial trial-and-error process.

Trying to explain the entrepreneurial dynamics only through these entrepreneurship rates… it’s as he would say: “simply far too complex to understand in that way“.

UPDATE 6-feb: Initially I calculated there could not be more than 50,000 protesters at a given time. However it could be feasible with the adjacent areas that there were up to 200,000. A friend told me about this better picture, than the one I used in the original post below See picture 44.
UPDATE 15-feb: Please read the comments. Special attention to Adham, GeoCom and NooNoo.

—-

An interruption from my normal posts in this blog, to show how a little geographical concepts can help.

Social network software and media are discussing the amount of people who met today for the 1 Million people protest in Cairo, Egypt. Al Jazeera reports that there is “More than a million gather in Cairo’s Tahrir Square”. New York Times says “Hundreds of thousands of people in Tahrir Square on Tuesday demanded the ouster of President Hosni Mubarak”. Haaretz mentions “At least one million in Egypt take to the streets to call for Mubarak’s ouster”. Fox News says “An estimated 250,000 Egyptians mass in the heart of Cairo”. Le Monde talks about 200,000. All the media I quickly checked agree that there are hundreds of thousands.

Indeed, we can see the massive amount of people in the square, surrounded by military checkpoints.

Well, I have to be a bubble buster or arrogant. But I can not believe there are in Tahrir Square more than 50,000. I’m an economic geographer, more economist than geographer, so I know some basic geographic tools. Ok, ok, Google Planimeter can be hardly classified as a geographic information science… So the calculation it’s a rough estimate (with all the caveats of google maps and planimeter).

That is an area of 31,890 square meters.

If we generously put 1 person for each square meter, then we would have 32,000 people. 2 people per square meter would be extremely dense and not likely according to the pictures. Still that would be 65,000.

Perhaps what Japan Today reported “More than 10,000 people beat drums, played music and chanted slogans in Tahrir Square”, maybe closer than the Western and Middle Eastern media. (I never though one could put all of them together).

Wow! right now a Top Tweet in Twitter (this means massively repeated) is “army has estimated number of protesters at entrance of tahrir at 2 million #jan25“.

If the media buys it, we would have this amount of people, and the history books will say it too. If you read this post, you could tell your grandchildren, that maybe there were not so many people.

Image from Twitter. Who said social media would bring us transparent numbers?

But before posting this. 2 postscripts:

p.s. My heart is with the people of Egypt. I mourn the 300 people killed these last days (according to the UN) and the thousands imprisoned in harsh conditions. I hope that there are free elections in the near future and transparency emerges. In Spain we had to wait 40 years for dictator Franco to die. Many believed another Civil War could erupt back then in 1975, but there was a peaceful transition.

p.s.2 I would believe, though, there could have been 1 million, and even 2 million people protesting all around Egypt today. But not in the Tahrir Square.

p.s. (30 Nov 2011). In Spain democracy came after Franco died, because of 3 things, not necessarily in order. a) international support, b) intelligent nationalistic and communists to agree to accept mainstream democracy (including accepting the King appointed by Franco), c) brave militaries to accept mainstream democracy.

I just found this article surfing Google Scholar. I think it’s interesting. The author is Liav Orgad, and the name of the paper is “Illiberal Liberalism Cultural Restrictions on Migration and Access to Citizenship in Europe” THE AMERICAN JOURNAL OF COMPARATIVE LAW, 2009, Vol. 58. pp. 79-83

The Danish Exceptionalism
In May 2007, Denmark introduced its own citizenship test (indfødsretsprøve). Every applicant who requests Danish citizenship has to correctly answer twenty-eight out of forty multiple-choice questions within an hour. A wide range of topics are addressed. The applicant has to be familiar with Danish history from the Viking era, royal families, sports, literature, poetry, and art. The applicant
should know that during the twelfth century, Saxo Grammaticus wrote Gesta Danorum, which is an essential source of Danish history; that the story of The Ugly Duckling was written by Hans Christian Andersen; that Jørn Utzon is a Danish architect who designed the Sydney Opera House; that Vilhelm Hammershøi is aDanish painter; that Niels Bohr is a Danish scientist who won a Nobel Prize in Physics; that Denmark won the European Football Championship in 1992; and that Erik Balling is the director of the film The Olsen Gang. Other questions focus on constitutional issues, such as abortion, equality or free speech.

Passing the test is only one step on the road to citizenship. The applicant is required to renounce other citizenships, if requested, to declare loyalty to the Danish state, to pass a test proving a high level of proficiency in the Danish language, to have resided in Denmark for nine years without interruption, and to be selfsupporting for at least one year prior to the application. These requirements apply to family members and refugees alike. They come in addition to another set of requirements needed for admission. One of the admission criteria is the “housing requirement.” Under this clause, a Danish citizen seeking family reunion must demonstrate that he or she owns a dwelling place—renting is not sufficient—of a“reasonable size”—that is, “no more than two occupants per room” that “must have an area of at least twenty square meters per occupant.” Admission is also subject to the “24-year age requirement.” Under this rule, both spouses have to be above the age of twenty-four years; this condition, it is alleged, is part of the efforts to prevent forced marriages. A more controversial criterion is the “attachment requirement.” Under this provision, both spouses must demonstrate that their aggregate attachments to Denmark are stronger than their aggregate attachments to any foreign nation. But even all these requirements are not sufficient. Before naturalization, the applicant has to sign a Declaration of Awareness of the terms, and provide a deposit of DKK 54,158 (about €= 7,270) to cover future public expenses that his or her spouse may incur. In addition, the applicant has to sign a Declaration on Active Participation and Integration into the Danish society. Here are some parts of the declaration:

I declare that to the best of my abilities I will make active efforts to ensure that I and my children (if any) acquire Danish language skills and integrate into Danish society. I will make active efforts to become self-supporting through gainful employment. I will make active efforts to learn the Danish language. I will make active efforts to acquire an understanding of the fundamental norms and values of Danish society. I will make active efforts to participate in the life of the community.I will participate actively in any introductory programme I am offered. I will make active efforts to facilitate the integration of my children by working with day-care centres, schools, etc. to ensure that they acquire Danish language skills as early as possible.
[ . . . ]
I am aware that in Denmark principles apply such as the need for respect and for equal opportunities for girls and boys to develop; that adults are obliged to listen to their children; and that corporal punishment is prohibited.

(…)

Denmark, like other EU states, is struggling over defining the essential elements of Danishness. One way to identify what is Danish is by defining what is not Danish. Danish sociologist Peter Gundelach explains: “We know we are Danes only because others are not. It’s all cultural.” The “others” are the non-Western migrants, who have “hijacked the Danish identity.” As part of the campaign to spot the “other,” the DPP showed a poster of a blond Danish girl (“Denmark today”) contrasted with a veiled Muslim woman (“ten years ahead”). The “other” is seen as a cultural threat and a social burden. Danish Prime Minister Fogh Rasmussen explains: “Denmark must not be the social security office for the rest of the world.”

Danish immigration policies are among the strictest in Europe and have been criticized by the Council of Europe and the United Nations. Recently, a decision of the European Court of Justice (ECJ) that restricts Member States’ power to regulate migration—and implies that the Danish policies are incompatible with EU rules—has brought to the forefront the relationship between Member States and EU institutions over matters of immigration regulation. In that case, the ECJ reviewed whether a restrictive Irish law, stipulating that foreign spouses of EU citizens must have lawfully resided in another EU state before being granted admission to Ireland, is in line with the EU Directive on Family Reunification.160 In an important precedent, the ECJ recognized the authority of Member States to regulate terms for entry and residence of non-EU family members, but noted that these terms may be based only on “grounds of public policy, public security or public health.” The ECJ dismissed other grounds, such as economic need and culture. It ruled that EU citizens have a protected right to freedom of movement within the EU, which includes the right to reside freely in another Member State with non-EU family members who accompany them. In addition, the ECJ has called upon Member States to review their legislation to ensure that it is in line with the EU law. According to opinion polls, fifty-five percent of the Danes disagree with the EU’s intervention in Danish immigration law, seeing it as “robbing our national statehood.” The DPP leader stated that “the Government must tell the EU system that it was a prerequisite for Danish EU membership to be able to run our migration policies independently; it is [the] Folketinget [Danish Parliament] that decides—not ECJ judges.” To date*, the Danish policies are still in force.

—–
* My friend Bram, just pointed out that, actually yesterday the rule got tighter. I guess that’s why I received so many visits on the blog. Now, it’s not only that your spouse has to be over 24, it also needs some points. Even though, a “23-year-old American nurse, who already speaks some Danish, should find it easier to move to Denmark with her spouse” (According to the Government outlet CPH Post). I wonder how is she going to speak Danish living in the USA, because a CD language course I assure you it does NOT work :) According to Information, the main idea is to stop Muslim immigration.

Well, as long as I live here, and I’m not a Dane I’m not going to comment anymore :)

I try to focus on cities, but last post I talked about Norway, and today I will talk about Spain. I also think that national policies can teach us lessons about local economic development.

A few weeks ago Richard Florida informed me (and to his 60,000 followers in Twitter :), that Newsweek came out with a new ranking for countries. Newsweek it’s the type of outlet that when I’m living for a few months in the US I feel they’re in the left, and that once I live in Europe a few months, I consider them as a conservative piece of work. Anyways, I always like to take a look at these rankings. I think they made a good job overall. I always like to see how the countries that interest me, the US, Denmark, Bolivia, Ecuador and my native Spain score. There was something that striked me about Spain. I mean, I knew it, but it seemed so clear.

Why the education system in Spain sucks and the healthcare system is so good?

Both, are mostly public, with some private activity though. Both, had the same governments, and similar policy makers, similar history, similar environment, similar population (now 45 million), similar civil servants, similar everything! But why they’re so different??.

The healthcare system in Spain, of course it’s not perfect, but citizens overall are proud of it. That is, universal healthcare, including the 5 million immigrants in the last decade, no waiting lists longer than any other country (or different waiting time than in the US – I tell you this if you’re American), and good quality for all. Great doctors by the way. Also many other countries try to learn from us.

In the other hand, the education system after the golden Spanish era, a few centuries ago, it has been quite bad compared to the rest of advanced countries. 20 years ago it seemed it was taking off, but again is doing really bad. In primary, secondary and university level.

One day I will find out why both systems have such a different results. If you have any idea, please share. I think this gives an important lesson on economic development and policy, even on similar circumstances a mostly public field (there are competing private schools and health care provides but they are the minority) can thrive while other fail, when compared to the rest of the world.

p.s. Here is this ranking, and this opinion to complement the one of Newsweek, which point out Spain’s healthcare top position. I will not post about Spain’s position in education, but you can trust me on this one.

Every time I get into a second hand book I always find something ‘super interesting’. My wife picks on me about it. Earlier this semester I found the book of The Prince [Translated by Daniel Donno. Bantam Classic. 2003], for 1 dollar. I already read some parts but now I want to read the whole thing. I liked most of it, and it is true, that he is not that “Machiavellian”, as the people say. Come on! he was born in 1469! Governments were all about realism.

Because he was leaving in near poverty, he was trying to find a position back in the government. He had to convince the guys in power that, he was a good and useful guy, and even if they tortured him before!

I transcribed the last paragraph of the Chapter 21, ‘What a Prince Must Do to Be Esteemed’. Here it is Machiavelli discussing entrepreneurship policy, local economic development, “cultural economy”, and the importance of having a charismatic/catalystic local government.

For the ones unfamiliar with the term, a prince, was what he was referring to the man in power of the Italian city-states. And the Lorenzo de Medici, which he (or one of his friends) later hired Niccolo.

A prince should also demonstrate that he loves talent by supporting men of ability and by honoring those who excel in each craft. Moreover, he ought to encourage his citizens peaceably to pursue their affairs, whether in trade, in agriculture, or in any other human activity, so that no one will hesitate to improve his possessions for fear that they will be taken from him, an no one will hesitate to open a new avenue of trade for fear of taxes. Instead, the prince ought to be ready to reward those who do these things and those who seek out ways of enriching their city or state. In addition to all this, at the appropriate time of year, he ought to keep the people occupied with festivals and spectacles; and since every city is divided into guilds or other corporate bodies, he ought to take these into account and assemble with them on occasions, thus giving proof of his affability and munificence, yet never failing to beat the dignity of his position in mind, for this must never be lacking.

Niccolò Machiavelli, 1513

In his grave it says: TANTO NOMINI NULLUM PAR ELOGIUM (No eulogy would be adequate to praise so great a name)

I believe that the engine of economic life is in the cities. Of course, it is important the national economic policy, but there probably is too much of a bias towards the national level, this is true for academics and policy makers.

I think this bias in the US comes in part after the WWII, the Manhattan Project and Annevar Bush (he basically asked to brutally fund his Ivy League schools to bring national victory through science – he was a very intelligent person), and the traditional nationalistic tendencies of the European countries (I’ll put also a little blame to the Marshall Project for funding them at national level).But anyways, the fact is a professor has more chances to succeed if he focused on the national level, (or even regional level in the case of Wales, Catalonia or Basque Country for their political-economic system – is in it a coincidence that the Regional, instead of National System of Innovation, was created in those places?), instead of cities. Also the national media plays an important role into tell citizens, that they’re not citizens of a city, but of a country. It was not until my research in Latin America for my Master thesis that I started realizing of the importance of the city-region, instead of the national level.

However, sometimes I can not avoid to think about the policies at the national-global level. Today I would like to comment on how screwed up can be the monetary policies of the Central Banks or Federal Reserve during the last decade.

I remember a decade ago, all the pressure that the Euro Zone was receiving to lower the interest rates. I remember all the economic press on how stupid the Euro was going to be with such a high interest rate. For many years Frankfurt, had to defend itself. The idea was fighting inflation and control the economy. After all, Japan had 0% interest rate for almost 15 years, and this did not help them. The American economy was growing well, and everyone though it was because of quasi-god Greenspan, who so smartly had the interest rates low.

What happen when we have low interest rates? Nobody wants to save. If you put the money in the bank they will give you a 0,5% a year, with an inflation of 2% a year, this is loosing your money. You have to spend it, as fast as you can. And yeah, consumption… and the economy grows… Fantastics isn’t? (True, much better than in the 1980s, with double digit rates.)

Wall Street also loves the idea of lower interests, for two reasons. First, because people with savings instead of putting in their savings account in the bank, they will put it in the stock market, you can make up to 10% a year!! without any effort!!. Second, the investment firms they can play, yeah play, easier with cheap money.

There is someone else who likes a low interest rate: The US government. And this is for two reasons. First because they can do all the projects they want printing money, instead of having to tax the people. Something that of course it’s against the “freedom” of the American people. Second, because they borrow so much money to foreigners (especially Asian), if they raise their interest rates, then they have to pay them back more Billions, (or is it Trillions?) in interest.

One of my heros, or one of my former heroes?

Me with the Krugman's name tag, right after his speech at the American Association of Geographers in DC last April

So, is it a good idea to low interest rates in the face of deficits and high unemployment?. This question is highly relevant in 2010. Here it is Nobel Prize in Economics, Dr. Paul Krugman answering:

“it is quite possible to reduce the deficit and increase employment at the same time. All you need to do is cut interest rates, so that private spending takes up the slack” (Krugman, 1998; The Accidental Theorist, p. 37)

This is found in the Chapter “Unmitigated Gauls: Liberte, Egalite, Inanite” in which Krugman bashes the French for maintaining relatively high interest rates. Many Anglos, (German and Spaniards too) think that one can not go wrong criticizing the French, but I have to admit that they were not that wrong, and their influence to have the ECB maintain realistic interest rates. Even though finally after all the pressure, they took it almost as low as the Fed. Which was a bad decision in my opinion.

Looking at the statement of Krugman, sounds pretty ridicule today. Yes, we have to give him that this was after the 1990s US economic growth, but are these articial low interest rates the cause of this? (hint: look at the cities), Did not these low rates contributed to the dot.com bubble? Are not these artificial interest rates the trigger of the today’s housing bubble & bust? Did they not greatly affect  the financial mess in which we are? Did not the low rates helped governments, firms and families got into a huge amounts of debt? With all my regret I have to say, yes, yes, yes, yes and freaking yes.

Yeah, Krugman and others “foresaw” the housing bubble when it was in its last throats, but that was not that hard. Heck, I myself tried to convince all my family and friends to don’t buy an overpriced house!!

Yesterday Krugman, he kept saying how wise it was to keep interest rates low. He says

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. (Krugman, The Third Depression, June 27, 2010)

This time I agree with him. That is Economic 101, from the textbooks he writes! That is when the economy is slow keep interest rates low. But WHY, WHY by the end of the 1990s??

Having expressed all these things, I have to say that I really respect and admire Krugman. Specially for stand against many of the Bush policies and supply-side economics (I think now they go by the name of Tea Party :), and the academic field for his proposition in geographical economics, importance of the cities, and his efforts to bring together Economists and Geographers. And of course because his theories convinced the Swedes to give him that golden medal :)

 

I believe that the engine of economic life is in the cities. Of course, it is important the national economic policy, but there probably is too much of a bias towards the national level, this is true for academics and policy makers. I think this bias in the US comes after the WWII, the Manhattan Project and Vannevar Bush (he basically asked to brutally fund his Ivy League schools to bring national victory through science – he was a very intelligent person), and the traditional nationalistic tendencies of the European countries (I’ll put also a little blame to the Marshall Project for funding them at national level). But anyways, the fact is a professor has more chances to succeed if he focused on the national level, (or even regional level in the case of Wales, Catalonia or Basque Country for their political-economic system – is in it a coincidence that the Regional, instead of National System of Innovation, was created in those places?), instead of cities. Also the national media plays an important role into tell citizens, that they’re not citizens of a city, but of a country. It was not until my research in Latin America for my Master thesis that I started realizing of the importance of the city-region, instead of the national level.

However, sometimes I can not avoid to think about the policies at the national-global level. Today I would like to comment on how screwed up can be the monetary policies of the Central Banks or Federal Reserve during the last decade.

I remember a decade ago, all the pressure that the Euro Zone was receiving to lower the interest rates. I remember all the economic press on how stupid the Euro was going to be with such a high interest rate. For many years Frankfurt, had to defend itself. The idea was fighting inflation and control the economy. After all, Japan had 0% interest rate for almost 15 years, and this did not help them. The American economy was growing well, and everyone though it was because of quasi-god Greenspan, who so smartly had the interest rates low.

What happen when we have low interest rates? Nobody wants to save. If you put the money in the bank they will give you a 0,5% a year, with an inflation of 2% a year, this is loosing your money. You have to spend it, as fast as you can. And yeah, consumption… and the economy grows… Fantastics isn’t? (True much better than in the 1980s, with double digit rates.)

Wall Street also loves the idea of lower intererest, for two reasons. First, beacuse people with savings instead of puting in their savings account in the bank, they will put it in the stock market, you can make up to 10% a year!! without any effort!!. Second, the investment firms they can play, yeah play, easier with cheap money.

There is someone else who likes a low interest rate: The US government. And this is for two reasons. First because they can do all the projects they want printing money, instead of having to tax the people. Something that of course it’s against the “freedom” of the American people. Second, because they borrow so much money to foreigners (especially Asian), if they raise their interest rates, then they have to pay them back more Billions, (or is it Trillions?) in interest.

So, is it a good idea to low interest rates in the face of deficits and high unemployment?. This question is highly relevant in 2010. Here it is Nobel Prize in Economics, Dr. Paul Krugman answering:

“it is quite possible to reduce the deficit and increase employment at the same time. All you need to do is cut interest rates, so that private spending takes up the slack” (Krugman, 1998; The Accidental Theorist, p. 37)

This is found in the Chapter “Unmitigated Gauls: Liberte, Egalite, Inanite” in which Krugman bashes the French for maintaining relatively high interest rates. Many Anglos, (German and Spaniards too) will think that one can not go wrong criticizing the French, but I have to admit that they were not that wrong, and their influence to have the ECB maintain realistic interest rates. Even though finally after all the pressure, they took it almost as low as the Fed. Which was a bad decision in my opinion.

Looking at the statement of Krugman, sounds pretty ridicule today. Yes, we have to give him that this was after the 1990s US economic growth, but are these articial low interest rates the cause of this? (hint: look at the cities), Was not this low rates the cause of the dot.com bubble? Are not these artificial interest rates the trigger of the today’s housing bubble? Did they not greatly affect the financial mess in which we are? Did not the low rates helped governments, firms and families into into a huge amounts of debt? With all my regret I have to say, yes, yes, yes, yes and freaking yes.

Yeah, Krugman and others “foresaw” the housing bubble when it was in its last throats, but that was not that hard. Heck, I tried to convince all my family and friends to don’t buy an overpriced house!. It was not until yesterday (literally) that I read Krugman saying that the G-20 should consider rise interest rates. (I guess the only one in favor would be the Chinesse economists who always take the wrong decisions against the mainstream – please note irony)

Having expressed all these things, I have to say that I really respect and admire Krugman. Specially for stand against many of the Bush policies and supply-side economics (I think now they go by the name of Tea Party :), and the academic field for his proposition in geographical economics, importance of the cities, and his efforts to bring together Economists and Geographers. And of course because his theories convinced the Swedes to give him that golden medal :)