Krugman Can't Count

I haven't been doing much Krugman bashing since the whole election thing last year, but now that is columns are no longer pay-per-view, I will have to start. I am just amazed at how bad of an economist he has become. Tom Brown tears him apart in this analysis.

Did Paul Krugman actually write that “the bursting of the housing bubble means that someone, somewhere, has to accept several trillion dollars in losses.”?

Several trillion? Really? Numbers, please!

Here goes: Inside Mortgage Finance reports that total 1-4 family mortgage debt outstanding—prime, subprime, Alt-A, you name it—stands at $10.4 trillion. Let’s say that when he says “several trillion,” Krugman really expects just $2 trillion in mortgage-related losses. But to get to $2 trillion in losses, you have to, after allowing for partial recoveries via foreclosure sales and foregone borrower equity, assume something like $4 trillion in mortgage defaults, or around 40% of all mortgage debt outstanding. I don’t buy that. You shouldn’t buy that. I can’t believe anyone in his right mind would buy that.

Ouch!