LyrArc Article Gist
Should inflation be set at 2% or 3-4%? This decision affects jobs and zero interest rates hurt what retirees earn on savings.  Krugman says Americans were better off during the period under presidents including Kennedy-LBJ, Reagan right up to 2008 when interest rates were between 5-8%, and inflation of 4% was considered to be acceptable. Consider that about 90% of American retirees have savings of less than $100,000, and 50% have no savings at all after two decades of near zero interest rates. Krugman points out that Fed 2% inflation targeting is a mistake because the research is wrong and inflation of 2% gets you to near zero interest rates a third of the time, not 5% of the time as US Fed research incorrectly shows. Financial crises such as 2009 from lack of regulation of financial institutions and laissez faire policy led to zero interest rates that hurt average Americans.