Friday, December 9, 2011

Krugman Calls for More Inflation but Disses Those who Bring up Zimbabwe or Weimar

There's nothing like ending a work week with Paul Krugman calling for a good dose of inflation. At 5:18 PM, probably before heading out to a "Pass the canned tuna, you can't eat gold, meeting", he posted this call for inflation (and, btw, doubled-down on his view that we are currently under "depression conditions")
One thing I often see in comments is people attributing to me, or to others, the notion that you can inflate your way to prosperity — which is presented as self-evidently absurd.

Well, if you think that it’s self-evidently absurd, you’ve been listening to the wrong people.

Nobody thinks that an economy operating somewhere near full employment can inflate its way to higher output. But under depression conditions — which is what we have now — inflation is very much a positive thing.
This is a tired warn out model of a trade-off between inflation and unemployment. That is Krugman is still using the Phillips curve to defend his call for inflation. The damn thing was discredited decades ago. Here's Murray Rothbard, years ago, on the absurdity of the thing:
Every time someone calls for the government to abandon its inflationary policies, establishment economists and politicians warn that the result can only be severe unemployment. We are trapped, therefore, into playing off inflation against high unemployment, and become persuaded that we must therefore accept some of both.

This doctrine is the fallback position for Keynesians. Originally, the Keynesians promised us that by manipulating and fine-tuning deficits and government spending, they could and would bring us permanent prosperity and full employment without inflation. Then, when inflation became chronic and ever-greater, they changed their tune to warn of the alleged tradeoff, so as to weaken any possible pressure upon the government to stop its inflationary creation of new money.

The tradeoff doctrine is based on the alleged "Phillips curve," a curve invented many years ago by the British economist A.W. Phillips. Phillips correlated wage rate increases with unemployment, and claimed that the two move inversely: the higher the increases in wage rates, the lower the unemployment. On its face, this is a peculiar doctrine, since it flies in the face of logical, commonsense theory. Theory tells us that the higher the wage rates, the greater the unemployment, and vice versa. If everyone went to their employer tomorrow and insisted on double or triple the wage rate, many of us would be promptly out of a job. Yet this bizarre finding was accepted as gospel by the Keynesian economic establishment.

By now, it should be clear that this statistical finding violates the facts as well as logical theory. For during the 1950s, inflation was only about one to two percent per year, and unemployment hovered around three or four percent, whereas later unemployment ranged between eight and 11%, and inflation between five and 13 %. In the last two or three decades, in short, both inflation and unemployment have increased sharply and severely. If anything, we have had a reverse Phillips curve. There has been anything but an inflation- unemployment tradeoff.
In his post, Krugman has pretty much banned anyone who brings up the dangers of hyperinflation (since he only wants to inflate a "little"): get an immediate failing grade if you start ranting about Zimbabwe or Weimar.
But how is Krugman going to deal with Rothbard's correct attack on the Phillips curve itself?


  1. Re: How Krugman will deal with Rothbard's correct attack on the Phillips curve itself.

    Like this....

  2. Considering that entering upon the inflationary road is not an easily-undoable thing, YTF is Krugman-berg-stein even considered a sane man any more? Anyone who listens to such pompous, ignorany windbags deserves what he gets... Yes, I've had some vino tonight... The truth is the truth. Godspeed.

  3. Imagine economic news without the squirts of Krugman,DeLong,Stieglitz or Roubuni.It will be like the Drudge Report without a picture of Obama,like the View without Jim Cramer or Fox News Sunday without Liz Cheney.My God!

  4. Oh hell, let's just let ol' Paul have exactly what he wants and agree his money has no value. All of us just stop accepting cash, credit cards, etc. for anything he wishes to buy. Sort of an economic persona non grata. If that's what he wants, I say let the boy have it. Couldn't happen to a more deserving person.

    From now on - barter goods are all that we will accept from this bonehead. He want's something of value, he will have to give something of value.

    As for me, I'll stick with gold, silver, and hard assets, but, I will volunteer to help him wallpaper the inside of his outhouse with fiat...