M'mm . . . . A bit of a spat in the Keynesian house!
I was also amused by Bernanke's latest buzzterm -- "accommodative
monetary policy". Last month it was "macroprudential measures". I
can't wait for his report next month. What about "jobs recovery
program"? Or would that be going too far? Hostage to fortune and all that.
In truth, Bernanke is as desperate as Krugman is reckless.
Keith
<<<<
Bernanke Takes On Krugman's Criticism Ignoring Own Advice
By Jeff Kearns and Craig Torres - Apr 26, 2012
Federal Reserve Chairman
<http://topics.bloomberg.com/ben-s.-bernanke/>Ben S. Bernanke took on
Nobel prize-winning economist Paul Krugman yesterday and called his
advice to reduce unemployment by boosting inflation "reckless."
"The question is, does it make sense to actively seek a higher
inflation rate in order to achieve" a slightly faster reduction in
the <http://topics.bloomberg.com/unemployment-rate/>unemployment
rate, Bernanke said yesterday to reporters after a Federal Open
Market Committee meeting. "The view of the committee is that that
would be very reckless."
April 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke
offers his views on the outlook for central bank monetary policy and
the U.S. economy. Fed policy makers say they expect growth to
accelerate, while refraining from new actions to lower borrowing
costs. Bernanke says the central bank stands ready to add to its
stimulus if necessary. (Excerpts. Source: Bloomberg)
Krugman, whom Bernanke hired at
<http://topics.bloomberg.com/princeton-university/>Princeton
University in 2000 when he was chairman of the economics department,
said in a New York Times Magazine article that the Fed should raise
its 2 percent inflation target to cut unemployment. Such a policy
shift would align with Bernanke's comment in 2000 that the
<http://www.bloomberg.com/quote/8301:JP>Bank of Japan (8301) should
pursue faster inflation to escape deflation, he said. Japan's
consumer prices fell 0.2 percent that year.
"While the Fed went to great lengths to rescue the financial system,
it has done far less to rescue workers," Krugman wrote. "Higher
expected inflation would aid an economy" because it would persuade
investors and businesses "that sitting on cash is a bad idea," Krugman said.
Bernanke, during yesterday's press conference in Washington, denied
that the FOMC's policy contradicts his prior academic work. The
chairman spoke in response to a reporter's question referring to
Krugman's story, titled "Earth to
<http://topics.bloomberg.com/ben-bernanke/>Ben Bernanke," published
April 24. The article cited "the divergence between what Professor
Bernanke advocated and what Chairman Bernanke has actually done."
'Absolutely Incorrect'
"So there's this view circulating that the views I expressed about 15
years ago on the Bank of <http://topics.bloomberg.com/japan/>Japan
are somehow inconsistent with our current policies," Bernanke said.
"That is absolutely incorrect. My views and our policies today are
completely consistent with the views that I held at that time."
Krugman didn't respond to telephone and email messages to his
publicist, Sarah Fogarty.
Bernanke said the main difference between Japan's economic slump 15
years ago and the U.S. today is that Japan was in deflation and the
world's largest economy isn't, with an inflation rate that's close to
the Fed's objective.
The U.S. today doesn't face a deflation threat, in part because the
Fed expanded its balance sheet to
<http://www.bloomberg.com/news/2012-04-25//quote/FARBAST:IND>$2.88
trillion through $2.3 trillion in bond purchases, Bernanke said. The
FOMC today raised its estimate for the personal consumption
expenditures price index for this year to 1.9 percent to 2 percent
versus 1.4 percent to 1.8 percent in January.
Inflation, Deflation
Bernanke said pushing the increase in prices above the Fed's 2
percent goal would risk undermining inflation expectations and erode
the central bank's credibility as a force for stable prices.
As a result, "we would in fact have less rather than more flexibility
to use accommodative monetary policy to achieve our employment
goals," he said.
"We, the <http://topics.bloomberg.com/federal-reserve/>Federal
Reserve, have spent 30 years building up credibility for low and
stable inflation, which has proved extremely valuable in that we've
been able to take strong accommodative actions in the last four, five
years," Bernanke told reporters. "To risk that asset for what I think
would be quite tentative and perhaps doubtful gains on the real side
would be, I think, an unwise thing to do."
Krugman, who won the 2008
<http://topics.bloomberg.com/nobel-prize/>Nobel Prize in Economics,
said in a
<http://krugman.blogs.nytimes.com/2012/04/25/bernanke-responds/>blog
posting on the New York Times' opinion page yesterday that Bernanke's
response was "disappointing stuff."
Krugman, 59, has previously proposed higher inflation to boost
employment and criticized Bernanke in a Bloomberg News interview last
year for not taking more aggressive action.
Professor Bernanke
Bernanke, 58, joined Princeton, in
<http://topics.bloomberg.com/new-jersey/>New Jersey, as a professor
in 1985, according to the central bank's website. He was a member of
the Fed's Board of Governors from 2002 to 2005 and chairman of
President <http://topics.bloomberg.com/george-w.-bush/>George W.
Bush's
<http://topics.bloomberg.com/council-of-economic-advisers/>Council of
Economic Advisers from 2005 to 2006, when he took office as Fed Chairman.
"Krugman's views are not closely related to the reality in which
Bernanke is forced to operate," said Anthony Karydakis, an adjunct
professor of economics at New York University's Leonard N. Stern
School of Business and former chief U.S. economist at JPMorgan Asset
Management. "One of them has the responsibility of steering the
economy through treacherous waters and the other has the luxury of
sitting in his office and sending articles to the New York Times,"
Karydakis said.
To contact the reporters on this story: Jeff Kearns in
<http://topics.bloomberg.com/washington/>Washington at
<mailto:[email protected]>[email protected]; Craig Torres
in Washington at <mailto:[email protected]>[email protected]
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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