Tags: Krugman | economy | opposite | now

Krugman: Cure for Economy is ‘Doing Opposite of What We’re Doing Now’

By    |   Tuesday, 01 May 2012 07:51 AM

While many conservatives argue that both our fiscal and monetary policies are too accommodative, Nobel laureate economist Paul Krugman maintains they’re both too restrictive.

How should we end the recession? “By doing the opposite of what we’re doing now,” he tells Yahoo.

“By spending more, not less; by rehiring all those school teachers and other public employees; by getting the Federal Reserve to focus on the part of its mandate that says it should seek maximum employment and a little less hysterical concern about inflation.”

Editor's Note: Google Banned This Video But You Can Watch it Here

The unemployment rate stands at 8.2 percent and consumer price inflation totaled 2.7 percent in the year through March.

Curing the problem would be simple if not for political opposition, the Princeton University professor says.

“If we could wave away politics, just providing aid to state and local governments to rehire workers that they laid off, getting back to the normal trend of public employment, this would be over in 18 months.”

Krugman says the fact that Treasury bond yields are so low show financial markets accept the strategy of “spending now and deficit reduction later. It’s only the politicians who think it’s not ok.”

In Europe, which has re-entered recession, the arguments over austerity are more intense.

“The right focus for Europe is on growth,” former U.S. Treasury Secretary Lawrence Summers writes in the Financial Times. “In this context increased austerity is a step in the wrong direction.”

Editor's Note: Google Banned This Video But You Can Watch it Here

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