Sunday, May 31, 2009


Krugman vs. Murphy on Inflation: Two Men Enter, One Man Leaves

I'm not even going to bother linking to a post; any reader for more than a month knows that I am expecting significant price inflation in 2010, and I think we will see it kicking in later this year. (If people want to link to my specific predictions in the comments, feel free.)

For a while I was mad because I thought Paul Krugman would be able to explain away what happened, in case I am right. But in a recent column Krugman leaves no wiggle room at all. After going through the economic analysis of why there's no inflation risk right now, Krugman says:

All of this raises the question: If inflation isn’t a real risk, why all the claims that it is?

Well, as you may have noticed, economists sometimes disagree. And big disagreements are especially likely in weird times like the present, when many of the normal rules no longer apply.

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

So he has no wiggle room at all. If he's accusing the people who predict inflation of doing so just to discredit Obama, then Krugman EITHER

(a) believes there is no intellectually defensible reason to predict high inflation right now, and hence that's why they must be saying it,


(b) knows full well there is a risk of inflation--Krugman is a sharp guy after all--and he is himself engaging in political spin.

So if I'm right and large price inflation comes by the end of 2009, this column alone will prove that Krugman either botched his macroecon big time, or he is a character assassin. We'll let him choose, if and when the time comes.

That sounds like the title of a really raunchy and bad, gay porno.
"this column alone will prove that Krugman either botched his macroecon big time, or he is a character assassin."

I think there are a lot of good reasons to think that both of these possibilities are true.
"But it’s hard to escape the sense that the current inflation fear-mongering is PARTLY political..."

Unfortunately, he still has an out. Like you say, he's clever.
That sounds like the title of a really raunchy and bad, gay porno.

Rericino, if and when I do a gay porno, it will be all class.
A lot of commenters I know from news sites love Krugman. It's like he's some kind of Kruggie-bear they cling to so they can feel better. They always mention that blasted Nobel as evidence of his perpetual intellectual divinity. This drives me crazy. For the sake of truth and economic recovery, I look forward to the day when Krugman is wholly and publicly deconstructed. Go Bob!
I predict tar and feathers for Krugman, once massive inflation strikes and the Obama administration remembers that it was he who went to China and tried to convince them that the bi-lateral "dependence" no longer existed, so they were free to stop buying Treasuries. Of course, the Chinese know that the moment they start the big selloff it's game over for the US economy, but the Obama administration can probably do with a scapegoat economist to throw to the angry mob, stalling them while they head for the back door.
This isn't an either / or.

It's a both.

It's always a both with Krugman.
I submit that if one understands Krugman’s arrogant totalitarian mindset, his statements tend to make sense within those confines. Keynes himself said that his policies would work best in a totalitarian system. Krugman clearly thinks that the government can indeed manage an economy and a society. He sees fiat money dilution as just another wonderful tool to be used by our betters (him) to manage our lives and the economy. However, if the fed is going to be creating all of this new credit out of thin air, but the peons are going to be allowed to borrow and spend as much of it as they like, the game will get out of control and the wheels will come off. Here, the Austrians agree with Krugman. Krugman, being a totalitarian creep, proposes not to get rid of the Fed and its credit expansion, but to forbid everything that isn’t expressly permitted. In his mind, if the peons are simply forbidden from speculating via tough government regulation, fiat money creation will not cause the boom/bust cycle or inflation because the peons can be scientifically managed by the all-knowing genius overlords like him. That's my explanation of his recent column attacking Reagan's financial deregulation.

Similarly, the peons' economic activities can and should be severely suppressed by the all-knowing benevolent genius overlords at whatever cost to prevent the satanic GLOBAL WARMING.

That being said, I think Krugman is just winging it now in predicting low inflation in the near future. Or perhaps he has had an electrode implanted in his neck by Martians like in “Invaders From Mars” from 1953, which I saw at the theater, being quite old myself. Or by Bernanke, who hired him at Princeton.
From "Invaders from Mars" (1953), here's how Bernanke (or the Martians) would insert his deadly electrode in the back of the neck:
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