Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. The author argues the US could face a "sudden stop" — an abrupt cutoff of the foreign capital inflows that fund its large trade deficit — which would sharply lower the dollar's foreign exchange value. Because those inflows also finance much US domestic investment, their loss would push interest rates higher and cause a severe housing crash.

Paul Krugman Paul Krugman Substack
Date Posted:
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Krugman speculates that loss of confidence in the dollar might cause a “sudden stop” in capital flows from abroad and sharply higher interest rates, resulting in a “severe” housing crash as in the domestically triggered credit crisis of 2008.

What would an abrupt cutoff of foreign capital inflows do to housing?

Core argument: Krugman argues the United States may face an emerging-market-style "sudden stop," an abrupt cutoff of the foreign capital inflows that cover the large US trade deficit.

[The 2008 US financial crisis] was very different from the emerging-market crises I used to spend so much time on. And right now I’m worried that the U.S. might be facing an emerging-market-type crisis: A “sudden stop,” an abrupt cutoff of inflows of foreign capital. If we have a crisis like that it could, in particular, cause a severe housing crash. We have a big trade deficit covered by large inflows of capital. A sudden stop to capital flows into America would mean that there would no longer be money to cover those big trade deficits — and this would mean a sharp drop in the foreign exchange value of the dollar. The impact on interest rates could be especially ugly. The United States relies on inflows of capital from abroad to pay for a significant part of domestic investment spending. Losing any significant part of that money would force interest rates higher. And what would be hit if interest rates surge? The answer, overwhelmingly, is housing. A sudden stop in capital inflows would mean a severe housing crash.

Takeaways by Macro Roundup® AI

  1. Krugman argues the United States may face an emerging-market-style "sudden stop," an abrupt cutoff of the foreign capital inflows that cover the large US trade deficit.
  2. A sudden stop in capital inflows would sharply lower the dollar's foreign exchange value, since the money covering large US trade deficits would no longer be available.
  3. Because the United States relies on foreign capital to fund a significant part of domestic investment spending, Krugman argues that losing that money would force interest rates higher and cause a severe housing crash.

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Showing 103 database articles primarily about Fiscal Deficits