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Tag Archives: Federal Fiscal Policy

The housing bubble, the credit crunch, and the Great Recession: A reply to Paul Krugman

By Ben S. Bernanke Why was the Great Recession so deep? Certainly, the collapse of the housing bubble was the key precipitating event; falling house prices depressed consumer wealth and spending while leading to sharp reductions in residential construction. However, as I argue in a new paper and blog post, the most damaging aspect of the unwinding bubble was that it ultimately touched off a broad-based financial panic, including runs on wholesale funding and indiscriminate fire sales of even...

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