Krugman vs. The Poor

The Cult of Easy Money

by David Harsanyi

Why does Paul Krugman, a guy who fashions himself guardian of the working class and poor, feel so comfortable advocating for the devaluing of all our savings and retirement accounts? Why does he want to see a spike in food, clothing and fuel costs? (Now, if we employed his writing style, we could simply accuse him of hating the poor.)  

In the New York Times today, he tells us he fears that Republican might be bullying Ben Bernanke into bad policy. What we need, the Nobel winner explains, is for the Fed to induce more inflation.

The attackers want the Fed to slam on the brakes when it should be stepping on the gas; they want the Fed to choke off recovery when it should be doing much more to accelerate recovery. Fundamentally, the right wants the Fed to obsess over inflation, when the truth is that we'd be better off if the Fed paid less attention to inflation and more attention to unemployment. Indeed, a bit more inflation would be a good thing, not a bad thing.

Hey, central banks have injected almost $7 trillion into the economy. So stingy. But you know the drill: a "modest" increase in inflation would help the nation ease its debt obligations by devaluing tomorrow's dollar against the one (or 15 trillion) that was borrowed yesterday. There is no other way out of this mess, they say. And if you trust that the Fed can control inflation this all might sound like a brilliant plan to you.

Krugman argues that the Fed will "choke off recovery when it should be doing much more to accelerate recovery." I'll let economists argue over the upside and downside of inflation. But you'll note that in today's world, "We need more inflation" or "Don't Worry About Deficit That Will Heal Itself" are the positions of serious people, while advocating for spending cuts or a sound dollar is considered deeply radical and/or immoral. For Krugman, Paul Ryan's budget was a set of "inconceivably cruel priorities" (inconceivably!) and even fans of the bipartisan Simpson-Bowles plan (as the president pretends to be) are members of a "cult".

For any economist -- considering how often they are spectacularly wrong -- to be so dogmatic on something so enigmatic is pretty amazing. Especially when you consider inflation's potential consequences. Another problem for Krugman is that mere non-wonks (and investors) are increasingly concerned about inflation and debt. Perhaps if there was any evidence that previous rounds of quantitative easing had helped spur any growth the Plebs would be more impressed. Instead, they are all in for decades of exploding debt, and, if the New York Times columnist had his way, higher prices on nearly everything.