The following paragraph is right.
On the eve of the Great Recession, many conservative pundits and commentators — and quite a few economists — had a worldview that combined faith in free markets with disdain for government. Such people were briefly rocked back on their heels by the revelation that the “bubbleheads” who warned about housing were right, and the further revelation that unregulated financial markets are dangerously unstable. But they quickly rallied, declaring that the financial crisis was somehow the fault of liberals — and that the great danger now facing the economy came not from the crisis but from the efforts of policy makers to limit the damage.
What's wrong with it though? Well, Mr. Krugman should not have neglected to mention that many of the "bubbleheads" were libertarian capitalists.
That said, I disagree with the Austrian School of economics but will add that many "liberals" were duped into thinking that the "bubbleheads" were wrong about the real-estate market, the huge Wall Street commercial and investment banks creating a gigantic securitization bubble built upon liars' and no-doc loans, etc.
As for inflation, I thought it would show up; but I thought that based upon the idea that the government would overshoot in its New Deal efforts. I was wrong because I had thought that the Austrians would not have any ears listening to them but that Keynesianism would immediately take over completely. Unfortunately, it wasn't Keynes who was used but Milton Friedman, the now debunked-by-history monetarist.
Live, learn, and never be afraid to admit it (that you're still learning and still capable of making mistakes), right, Mr. Krugman?