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Professor Krugman said in an interview with Bloomberg TV on the 18th (local time) that the inflation catastrophe of the 1970s could come again. “The inflation catastrophe that started in the 1970s led to the early 1980s. It took more than 10 years.”
“At the time (1970s~1980s), President Linden B. Johnson’s excessive fiscal expansion policy was a combination of two oil shocks and irresponsible monetary policy under Fed Chairman Arthur Burns, resulting in a double-digit inflation rate. He pointed out that the situation is different from now.
He presupposed that “the Federal Reserve (Fed) is unlikely to re-adopt a very, very irresponsible monetary policy like the Fed in the 1970s.” “We have easy policy tools that can cope with it.” “Even if we assume the worst-case scenario, it will be the extent to which inflation has risen temporarily due to massive fiscal stimulus as in the early 1950s of the Korean War.”
Prof. Krugman also said, “This additional fiscal stimulus for the Corona 19 response is not a fiscal stimulus that causes massive inflation, it is a really essential and important stimulus.” “This would rather play a role in helping the Fed not to implement excessive monetary easing policies for too long to cope with massive unemployment caused by Corona 19.”
In addition, he said, “The Fed officials will not give up or give up the policy introduction (to catch inflation) because they are afraid of the reaction in the bond market.”
In particular, he added, “There was a temporary shock as the Fed took monetary tightening measures in 1994, but in the end, as nothing terrible has happened since then, the Fed officials will keep that situation in mind.” “No one in the Fed wants to let inflation like the 1970s reappear.”
Earlier last month, Professor Krugman said in a New York Times column that “President Joe Biden’s ($1.9 trillion stimulus plan) plan is not excessive.” Is high”.