He didn't say "crash", but he was right in 1994 (for what happened in 1997 - which was when I

started to follow his writings) and again this time. Although I read his NYT columns much less frequently, since W took office he tended to add a partisan paragraph to the end of his column which made him look less objective. While I am with him on most of his criticism on the Bush government, I felt his writing was more emotional than academic and stopped reading him. My view on Krugman is best summarized by that in this Henderson WSJ Op-ed.
1) How bad is the mortgage crisis going to get? - Paul Krugman, March 17 2008
My preferred metric is the ratio of home prices to rental rates. By that measure, average home prices nationally got way too high. We'll probably basically retrace all that. So that's about a 25% decline in overall home prices. Only a fraction of that's happened so far. Of course, it varies a lot. In places like Houston or Atlanta, where home prices have not risen much compared with underlying rents, the decline will be relatively small. In places like Miami or Los Angeles, you could be looking at 40% or 50% declines.
My preferred metric is average income per family vs house price, in addition to Krugman's metric. The US housing price had a multiple (against, income/capita) very close to that of HK in 1997. So I expect similar decline this time.
Krugman then added this pithy remark
But if we think home prices overshot on the way up, why can't they overshoot on the way down too?
Why not the Great Depression?
Because I think we know something that we didn't then. The Federal Reserve was clueless back then. They were only concerned about protecting the nation's gold reserves, and the federal government believed that austerity and cutting spending was the answer to recession. I think we know more than we did then, and just the fact that we have a big federal government is a stabilizing factor. But the current problem is still pretty awesome.
The Paulson plan makes no sense and doesn't solve the problem. All it does is to save his crony i-bankers and the failed hedge fund manager, while punishing the hedge fund managers who bet correctly! There $62tr in CDS according to Big Picture (read his post on the 'blame game'), what can 0.7tr do? So Krugman is right that if the problem is in credit crunch and put your dollar into the credit directly!
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The Nobel winning paper:
The Role of Geography in DevelopmentPaul KrugmanApril 1998http://www.worldbank.org/html/rad/abcde/krugman.pdf
Other links:
Moment of Truth
Edge of the Abyss
Where Are the Grown-Ups?
and his NYT column RSS
Krugman Helped Us Understand Trade - WSJ
and the negative view focusing on all he has done wrong - Krugman’s Posthumous Nobel by a basher