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Monday, September 17, 2012

Paul Krugman: Hating on Ben Bernanke

More evidence that Mitt Romney's "economic policy is evidently being dictated by extremists":

Hating on Ben Bernanke, by Paul Krugman, Commentary, NY Times: Last week Ben Bernanke, the Federal Reserve chairman, announced a change in his institution’s recession-fighting strategies. ... The ... announcement included another round of quantitative easing, this time involving mortgage-backed securities. The big news, however, was the ... Fed ... more or less promising that it won’t start raising interest rates as soon as the economy looks better, that it will hold off until the economy is actually booming and (perhaps) until inflation has gone significantly higher.
The idea here is that by indicating its willingness to let the economy rip for a while, the Fed can encourage more private-sector spending right away. Potential home buyers will be encouraged by the prospect of moderately higher inflation that will make their debt easier to repay; corporations will be encouraged by the prospect of higher future sales; stocks will rise, increasing wealth, and the dollar will fall, making U.S. exports more competitive.
This is very much the kind of action Fed critics have advocated..., although far from being a panacea for the economy’s troubles (a point Mr. Bernanke himself emphasized).
And Republicans ... have gone wild, with Mr. Romney joining in the craziness. His campaign issued a news release denouncing the Fed’s move as giving the economy an “artificial” boost — he later described it as a “sugar high”...
Mr. Romney’s language echoed that of the “liquidationists” of the 1930s, who argued against doing anything to mitigate the Great Depression. Until recently, the verdict on liquidationism seemed clear: it has been rejected and ridiculed not just by liberals and Keynesians but by conservatives too, including none other than Milton Friedman. “Aggressive monetary policy can reduce the depth of a recession,” declared the George W. Bush administration in its 2004 Economic Report of the President. And the author of that report, Harvard’s N. Gregory Mankiw, has actually advocated a much more aggressive Fed policy than the one announced last week.
Now Mr. Mankiw is allegedly a Romney adviser — but the candidate’s position on economic policy is evidently being dictated by extremists who warn that any effort to fight this slump will turn us into Zimbabwe, Zimbabwe I tell you. ...
So last week we learned that Ben Bernanke is willing to listen to sensible critics and change course. But we also learned that on economic policy, as on foreign policy, Mitt Romney has abandoned any pose of moderation and taken up residence in the right’s intellectual fever swamps.

    Posted by on Monday, September 17, 2012 at 12:33 AM in Economics, Monetary Policy, Politics | Permalink  Comments (97)


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