Nobel Laureate Paul Krugman Challenges Economic Pessimism In US: 'Remember Fears That Inflation Would Get Entrenched? Not Happening'

Noted economist and Nobel laureate Paul Krugman recently highlighted the change in perceptions relating to the US economy, despite initial skepticism.

What Happened: On Thursday, Paul Krugman tweeted, “A year ago those of us who said that Americans declaring that the economy was terrible also felt pretty good about their own situation were ridiculed. Now it’s becoming conventional wisdom”.

Krugman also said in a separate post, “The Atlanta Fed measure of business inflation expectations — a better predictor than consumer expectations, more relevant to price-setting than financial markets — is in. Remember fears that inflation would get entrenched? Not happening.”

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Why It Matters: Krugman’s recent tweets further affirm his view of the positive trajectory of the US economy, challenging the narrative of economic pessimism.

Previously, Krugman had downplayed the December consumer price inflation report, suggesting that inflation could be yesterday’s problem. He criticized those who warned a year ago that reducing inflation would be challenging and require high unemployment.

He also stressed that the significant deceleration in inflation during the second half of 2022 hadn’t broken through to public consciousness due to the media’s focus on year-over-year inflation.

However, Krugman’s views are not shared by others such as Peter Schiff. The economist said in September that it is likely that the Federal Reserve has “already secretly given up its 2% #inflation target.” More recently, Schiff said that the U.S. central bank had “already lost” the war on inflation.

Photo by TANYA LARA on Shutterstock

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