Krugman Says Fed ‘Reckless’ to Allow High Jobless Rate

Nobel Prize-winning economist Paul Krugman suggested Federal Reserve policy makers led by Ben S. Bernanke are “reckless” for refusing to pursue higher inflation, which he said could lower U.S. unemployment.

“The reckless thing is to allow mass unemployment to continue,” Krugman, a Princeton University professor, said on Bloomberg Television’s “Street Smart” yesterday. “We have had a massive failure of our political system that has come to accept that 8 percent unemployment is the new normal and there is nothing that can be done,” Krugman said. “We’re in a low- key version of the Great Depression.”

Krugman, whom Bernanke hired at Princeton in 2000 when he was chairman of the economics department, has said the Fed should tolerate inflation of 3 percent to 4 percent to boost the economy and put Americans back to work. He was responding yesterday to Bernanke’s comments last week that pursuing such a policy would be “reckless.” Read more.....