He acted too early. Keynesian measures are more effective to implement once the system has already cleaned out the inefficiencies. But now, he cut the rates to try to cover up the problems, and he made it all much worse, the way things are now he risks people losing confidence in the central bank... A crisis of confidence on the central bank is much more dangerous than anything we could've gotten out of the subprime.
Maybe US thought that what they teach may not work for them, or maybe they thought that as leaders or world champion, such things can not happen to them. They seem to have throw the caution to the winds or adopted an ostrich approach.
Have learnt so much about US financial crisis, thanks to everyone for their inputs. A question remains, that Asian markets are different from that of US, so how can the remedial methods that shall work for them, work for US? Please explain.
Can it be because they are the masters of the world? They control UN, IMF, trade etc., so maybe that is why it is possible.
Whether you like him or not, Krugman nailed this one. Nailed it. Look at the date he wrote this, and what has happened since. Before you say "but things were looking gloomy," there were a ton of analysts screaming buy the financials and banks back in February and March. They were screaming it from the rooftops. WAMU, C, BAC, MER, LEH, and even bond insurers such as ABK and MBIA (Cramer made his famous "Bear Stearns is fine call on 3/11, three days before this article was written - think about that). Look how far they've fallen. Look at what they've had to do to shore up operating capital.