Paul Krugman

@paulkrugman ↗

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Last Checked Jan. 13, 2021

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Sat Dec 19 18:51:10 +0000 2020

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Paul Krugman @paulkrugman

The answer is that the people/institutions who have the knowledge to buy also tend to already own a lot of the assets in question. When prices crash, they're left without cash or the collateral to borrow, so they can't play their usual stabilizing role 4/ — PolitiTweet.org

Posted Dec. 19, 2020

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Paul Krugman @paulkrugman

I generally think of these crises in terms of the framework Shleifer and Vishny offered in 1997, explaining how it's possible for some assets to become massively underpriced; why don't buyers rush in? 3/ https://t.co/i6LHPgbH9r — PolitiTweet.org

Posted Dec. 19, 2020

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Paul Krugman @paulkrugman

That's where the Fed and other central banks come in. When the financial system seizes up, they can step in — because they can print cash! — and prevent a self-reinforcing downward spiral. Often the promise that they will intervene if necessary ("whatever it takes") is enough 5/ — PolitiTweet.org

Posted Dec. 19, 2020