Chairman Bernanke Should Listen to Professor Bernanke by Krugman

I suspect that the old Bernanke would have scoffed. He would have pointed out that the Fed could still keep inflation within bounds — that 4 percent inflation (which is what we actually had during the late years of the Reagan administration) need be no more unsettling than 2 percent inflation. He would also, I suspect, have argued that the risks of losing credibility pale beside the risks of inaction. Bear in mind, whenever someone invokes the specter of a return to ’70s-style stagflation, when the economy is weak and inflation is high — a greatly overrated risk — that what we are going through now is much, much worse than anything that happened in the ’70s. It takes a certain mind-set to worry more about a hypothetical loss of confidence than about the clear and present suffering of the unemployed — the mind-set, one might say, of a conventional central banker.