Providing more stimulus worldwide could jumpstart economies, said Paul Krugman, the Nobel Prize-winning economist.
Inflation does not pose a real threat to the economy, he said at an economic conference, Bloomberg reported.
“The crisis is not behind us if we look at what matters most – jobs. Inflation is subdued to say the least. Inflation tends to decline when you have higher unemployment,” Krugman said.
The real concern is that deflation could occur during the next several years, he said.
Stimulus efforts from the government need to continue or the economy will fail to rebound, Krugman said.
“To short-change stimulus now for the sake of the long-run budget just doesn’t add up. Now is the time when we really need the government support. Unfortunately, pulling back is what seems to be happening,” he said.
The concern about deflation from investors is excessive, said Kevin Ferry, president of Cronus Futures Management in Chicago.
The real focus should be on inflation, he told CNBC.com.
“In our view we think it's the final phase of the bond market, and I'm talking about generational. We are now seeing what no one ever did in the past 25 years—demand for the longest piece of fixed-income paper you can find. They are throwing up their hands,” Ferry said.
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