Will Krugman be the next pilot?

In yesterday's column, "The Intimidated Fed," Paul Krugman bemoans the continuing plight of the unemployed and underemployed.  Krugman is upset that Bernanke will not be flying his helicopter as much after June, bringing to a temporary end his massive monthly increases of the monetary base.  At the Fed's first-ever press conference the day before, Bernanke, Krugman says, had argued that the program of monetary inflation called QE 2 "has been effective."  Why not do more?, Krugman wants to know.

Perhaps because QE 2 has not been effective. Along with unemployment, business loans have been rising very slowly since QE 2 kicked in, and consumer loans have continued to fall.  Might there be a causal connection among those facts?  As Ron Paul has written,

The only success the Fed has had in maintaining full employment has been on Wall Street, where it props up crony banks and investment houses to protect them from going bankrupt as they should. Instead they survive to malinvest another day while their executives enjoy jackpot bonuses.

But therein lies the problem, according to Krugman - the "inflationista" Ron Paul, whose unflagging concern about inflation, corruption, debt, and government growth is intimidating the Fed and costing the country precious jobs.  The underlying premise, it appears, is that the Fed can print jobs and prosperity.  Of course, if that were true where would poverty be?

But inflation, to Krugman and Bernanke, is reflected in the government-managed CPI, and by that measure it's running low. Okay, so gas prices are soaring, but that can be explained by emerging markets and Middle East unrest.  It can also be explained by the availability of more dollars for the trading of oil on international markets, though neither Bernanke nor Krugman mentioned this.

With CPI inflation low and unemployment high, Krugman finds it "deeply disheartening" that Bernanke is showing signs of cutting back on his helicopter drops.  What's a little inflation compared to major unemployment?  Bernanke knows better than to back off, so Krugman concludes he's scared of Ron Paul. 

Perhaps Bernanke is afraid of something else, too, such as his own judgment.   In spite of the accolades he's received, Bernanke still remembers his blindness about the housing debacle.  All was well, he said, as the rafters above his head were splintering. 

The housing mania was not something a trained economist should easily miss.  It would be akin to a meteorologist missing a Cat Five hurricane.  A man of his intelligence does not forget blunders of that magnitude.  Nor do the many Fed watchers.

Krugman, though, is unmoved by Bernanke's gross negligence. Given that the Fed's primary purpose is to inflate, and given Krugman's utter fearlessness about confronting the inflationistas, he might be ready to take the pilot's seat if Bernanke has developed a fear of flying.

Can the economy withstand such a shock?