Watchhttp://www.debtdeflation.com/blogs/2012/04/02/ptolemaic-economics-in-the-age-of-einstein/
What Krugman displays here is not greater insight but blind ignorance. A recent addition to the overwhelming evidence that credit growth is a crucial factor in macroeconomics is an empirical paper by those well-known bastions of Banking Mysticism, the National Bureau of Economic Research and the Federal Reserve Bank of San Francisco. The paper analyses 200 recessions in 14 countries over 140 years, and summarises its results as follows:
We find a close relationship between the rate of credit growth relative to GDP in the expansion phase and the severity of the subsequent recession