Krugman Misleads About Spain & Ireland
But there are two problems with this argument: first of all, the while the ECB may not have been as aggressive as the Fed, they were in fact quite aggressive too, with real short-term interest rates being negative for several years during the boom and with money supply growth well above the alleged ECB target of 4.5% for the entire period.
Secondly, while Spain and Ireland did have higher increases in housing prices than the United States, that hardly proves anything, as they are a small part of their monetary area whereas the United States is a whole monetary area. Just like some parts of the United States had only limited house price increase, so were house price increases much more moderate in the rest of the euro zone than in Spain and Ireland. Indeed, house prices actually fell in the biggest euro area country, Germany.
Spain and Ireland should thus not be compared with the United States, but with the American states that had the biggest house price booms, such as California, Nevada and Florida. And the United States should not be compared with sub areas of the euro zone, but with the entire euro zone. Using this "apples to apples" comparison approach we can see that the bubble was greater in America than in Europe.