Liberal economist Paul Krugman accuses Fed Chairman Ben Bernanke of caving to his critics, criticizing him for his announcement last week that the Federal Reserve plans to scale back its stimulus programs as early as later this year.
Writing in his column in the New York Times, Krugman's piece "Et Tu, Bernanke?" questions whether the embattled chairman has finally given in to the chorus of criticism that has routinely plagued the central bank's $85-billion-a-month purchases of government bonds.
"They have tried to boost the economy even as most of Washington seemingly either forgot about the jobless, or decided that the best way to rue unemployment was to intensify the suffering of the unemployed," Krugman writes.
But the recession is far from over, he explains, noting the unfortunate reality that while the number of people filing for unemployment is down, so is the number of people still looking for work. And while the stock market is hitting record highs, so too is income inequality — a reminder that times are looking pretty great for a lucky few, surrounded by the continued suffering and hardship of that disenfranchised void we used to call the middle class.
"One answer," Krugman writes, regarding the stimulus scale-back, "might be that the Fed has quietly come to agreement with critics who argue that its easy-money policies are having damaging side-effects, say by increasing the risk of bubbles. But I hope that's not true, since whatever damage low rates may do is trivial compared with the damage higher rates, and the resulting rise in unemployment, would inflict."
He notes that of adults in their prime working years (25-54), the ratio of those with jobs "fell from 80-75% in the recession, and has since recovered only to 76%."
"It's hard to avoid the suspicion," he concludes, "that Fed officials, worn down by the constant attacks, have been looking for a reason to slacken their efforts, and have seized on slightly better economic news as an excuse."
What do you think? Is the Bernanke stepping back a sign of good times to come, or a sort of political surrender to his most vocal critics?