We Need a Weaker Dollar

Paul Krugman argues that we need more inflation, not less
By Kevin Spak,  Newser Staff
Posted Apr 6, 2012 10:45 AM CDT
We Need a Weaker Dollar
A little more inflation would be good for the economy, not bad, Paul Krugman argues.   (Shutterstock)

Ben Bernanke has become a popular punching bag for the right lately, with people like Ron Paul and Rick Perry trying "to bully the Fed into doing exactly the wrong thing," writes Paul Krugman in the New York Times. "The right wants the Fed to obsess over inflation," constantly warning that it will explode any day now. They're wrong—inflation has remained stable just below 2%—but even if they weren't, Krugman thinks a little inflation would do us good.

The Fed has a dual mandate: It's supposed to worry about price stability and employment. So "if the Fed refuses to take even the slightest risk on the inflation front despite disastrous performance on the employment front, it's violating its own charter," Krugman argues. Besides, would 3% or 4% inflation really be so terrible? It would help reduce the real value of bubble-era debt. The Fed knows this, yet it's doing nothing, because it's politically intimidated. "American workers are paying the price for their timidity." (Read more Paul Krugman stories.)

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