New York Times columnist Paul Krugman writes today that it’s too early to begin removing the monetary stimulus engineered by the Federal Reserve.
“A few months ago the U.S. economy was in danger of falling into depression,” he notes in his column. “Aggressive monetary policy and deficit spending have, for the time being, averted that danger. And suddenly critics are demanding that we call the whole thing off, and revert to business as usual. Those demands should be ignored. It’s much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss.”
He may be right…or not. Debating the correct monetary policy is always topical in real time, and always unclear. As it happens, the stakes are unusually high in the current debate. The future, however, isn’t necessarily any clearer, nor is it apparent that the Federal Reserve has suddenly transformed itself into an institution with omniscient powers.