Saturday, April 17, 2021

Why is Paul Krugman Protecting the Federal Reserve?

Paul Krugman

Well, I knew that couldn't last long.

After writing some decent commentary about the economically ignorant Andrew Yang, who is running to become the next mayor of New York City, Paul Krugman has gone off the deep end in a way that competes quite well with Yang's babbling economic absurdities.

In a new column for the New York Times, he devotes the entire column to the developing price inflation. 

He focuses on the supply-side bottlenecks that are developing as a result of the lockdowns:

 Mainly because the pandemic had weird economic effects, sharply depressing some activities while boosting others. And this probably means that we’re going to have a weird recovery too, with huge surges in things like travel, plus an unusual set of bottlenecks, like the global container shortage, resulting from the pandemic hangover.

So I expect to see a lot of price blips outside food and energy — some resulting from “base effects,” that is, recovery of prices that were depressed during the worst of the pandemic, some resulting from those bottlenecks.

I should point out that I warned in the EPJ Daily Alert about supply disruptions in the early stages of COVID-19 when it was just a problem in China.

I wrote in the February 24, 2020 edition of the Alert :

Given the slowdown in production from parts of China and this new "entry closed"
development, the fears of a supply chain problems could be very real. Indeed, it
could result in the opposite of the smothering of price inflation by productivity
increases out of China. We may see a kind of anti-productivity situation where we
could see tight supplies in the US this summer, even if the virus peaks soon, as
Chinese manufacturing would have to crank up and then be shipped to the US. This
would mean upward pressure on prices.

As the COVID-19 panic escalated in the United States, throughout the summer I warned about the likely increasing bottlenecks because of the lockdowns her in the US. For example, in the middle of it all, in August of last year, I wrote in the  Alert

As I have noted before, the Fed is launching its AIT adjustment based on the idea that
price inflation will advance at a very slow rate but there is zero in theory that supports this
claim. Indeed, with the amount of money pumped in over recent months and COVID-19
lockdown supply related disruptions the potential for a major spike in price inflation is just

And therein lies the rub, while I recognized the tight supplies as a price inflationary problem months before Krugman, I also recognized that the massive Fed money printing was going to a big part of the problem.

Money supply has absolutely exploded during the lockdowns.

Last year money supply growth hit more than 26%. This is massive growth not seen in many decades---and the Fed is still printing at mad rates.

This kind of money growth on top of supply bottlenecks is driving the price inflation but you can't ignore the irresponsible money printing by the Fed and the major role it is playing in the price inflation and just blame it all on bottlenecks.

Yet Krugman does not mention, not once, the Fed money printing as he discusses the coming price inflation.

So the question becomes why is Krugman protecting the Fed?

He has to understand that money growth is playing a major role in the price inflation. I don't think he really is the economic ignoramus that Yang is.



  1. "The Pandemic!"...convenient patsy for everything the government caused...and convenient pretext for everything the government does to us...

  2. Nothing Krugman says is motivated by economic reasoning. He's an emotionally fragile dorkling who just wants to hang out with the cool kids and will say whatever he thinks will better position him to do so. He's the economic equivalent of those senior retired military officers with all those ribbons on their chest but no victories under their belt. The expertise angle is just a bad joke with decent pageantry good lighting.