A two-part review by Paul Krugman and his wife, Robin Wells, ran in recent consecutive issues of the New York Review of Books. The review closes with their call for tougher sanctions against China, which Krugman has repeated elsewhere and for which he has received justifiable flak. But the review has some surprising good stuff as well, although I hate to say anything positive about Krugman these days.

Part 1, entitled "The Slump Goes On: Why?" and appearing in the September 30 issue, considers four possible explanations for the housing bubble: (1) Fed policy; (2) global savings glut; (3) financial innovation; (4) moral hazard. Predictably, Krugman and Wells downplay moral hazard, but they also dismiss the causal significance of financial innovation. And they offer some very cogent arguments about why the primary factor was the global savings glut rather than Fed policy.

Part 2, entitled "The Way Out of the Slump" and appearing in the October 14 issue, contains their usual enthusiasm for more vigorous fiscal policy, but it also criticizes Bernanke along the same lines of Scott Sumner, for pursuing a monetary policy that is too tight. As they put it:"Proponents of unconventional policy often quote from a 1999 critique of the Bank of Japan written by none other than Ben Bernanke, in his pre-Fed days. Like the Fed today, the Bank of Japan had pushed conventional monetary policy to the limit. But it had not run out of options, Bernanke argued: 'Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.' As many people have noted, much the same could be said of the Fed today."

Worth checking out.