OK, so I know Krugman is supposed to be a genius. That is why I'm baffled at some of the things written in this article that seem so obviously incorrect. I am not an economist but I am a business professional with an MBA degree so I can assure you I'm not illiterate and I have many years of practical business experience. First, in the beginning of the article he states that Austrian economics is based on a "hangover" theory that states that we need to suffer slumps to "pay" for booms. In fact, from the Austrian work I have read, they state that neither slumps nor booms are necessary and that they are caused by an artificial stimulation of the credit markets (pretty obvious in this most recent boom and bust). I didn't gather that the Austrians believe that we need busts to pay for good economic times at all (when not caused artificially). Next, he states that the "problem" with Austrian theory is that total spending always equals total income and so an investment slump should simultaneously result in a spending boom. Has he never heard of credit? Look at the chart of income and spending in the U.S. during the 2000s. Spending is higher than income when credit allows it to be. Does he really not understand this simple fact? Regarding employment and unemployment, he may be right that Hayek and Schumpeter couldn't figure it out (not sure) but today it is clear why a boom (like the housing boom) increases employment (think construction workers as the most obvious example and then go on and on to Home Depot, Best Buy, etc.). Correspondingly it is obvious why the corresponding credit contraction causes unemployment (all these jobs are lost). Krugman surprisingly doesn't even seem to understand this. He states that when the recession hits, for "whatever reason" a large part of the private sector tries to increase its cash reserves. "Whatever reason"??? It is called investments gone bad. This causes individuals to save more and banks also need to build their cash position. And it continues. He then states the solution is remarkably simple: "why not simply increase the supply of money? Junk the bad investments and write off the bad loans." Am I the only one that sees how perilous this "simple" prescription is? How about the moral hazard created from these actions? One of the primary benefits of a free market economy is the invisible hand that allocates resources so effectively. If bankers and real estate speculators are bailed out for making bad decisions, how can it not affect their future decision making? Contrary to what Krugman suggests throughout his article, his theory is the one that it so tempting for people to believe. Imagine if we could solve problems so easily. There isn't enough money to solve "x" problem, let's simply print more and erase everyone's debts! Finally, he states that the Austrian's "hangover theory" is intellectually incoherent because no one can explain why bad investments in the past lead to unemployment in the present. Hello? Mr. Economist? Look at the recent housing boom! I live in Miami so perhaps it is a lot easier for me to see. Over investment (over building) and over spending (consumers spending easy credit) lead to a contraction in spending. Everyone is over-leveraged and so they need to spend less and save more which means less spending which equals less jobs (less goods and services needed). OK, so as you can see I remain baffled. Please tell me what I'm missing. Thanks in advance!