Paul Krugman: Inflation Is Good for You!

by Apr 9, 2012Liberty & Economy0 comments

Paul Krugman repeats his mantra that “more inflation would be a good thing” for the country.

Paul Krugman repeats his mantra that “more inflation would be a good thing” for the country. He offers the argument that inflation is “a bit below the Fed’s self-declared target of 2 percent”, but that “a rise in inflation to 3 percent of even 4 percent” would “almost surely help the economy” by “eroding the real value of debt” and “acting as a spur to investment”, so “more of the ‘quantitative easing’ that is now the main tool of Fed policy should be a no-brainer.”

This is of course coming from the guy who called for the Fed to lower interest rates in the wake of the collapse of the dot-com bubble in order to create a housing bubble to replace it (see my book, “Ron Paul vs. Paul Krugman”). He is of course defining “inflation” as a uniform rise in prices of consumer goods, not as an increase in the supply of money. The former is, of course, a—but not the only possible—consequence of the latter. The CPI may have shown “normal” levels of inflation throughout the housing bubble, but that obviously didn’t mean that there was no problem of inflation. It was just directed into that particular sector of the economy, rather than showing up in a uniform rise in prices in consumer goods. And, of course, he uses the government’s rigged Consumer Price Index (CPI) as a measure of price inflation.

But setting all that aside, think about his argument for a moment. So people have borrowed money by signing a contract promising to repay the loan principle plus interest. What Krugman is proposing is to have the government-legislated monopoly over the supply of money, the Federal Reserve, interfere in these contracts by defrauding lenders. The role of government is, of course, supposed to be to protect property rights and enforce contracts, and not vice versa.

Krugman claims more inflation will help lessen unemployment, so the thus lays claim to a concern for the well-being of the working class. But devaluing the dollar also defrauds laborers by robbing them of the purchasing power of their income.

His other argument is that lowering interest rates would discourage savings and encourage spending. This is true. But Krugman apparently believes that wealth can be created by printing money. Economic growth does not come from encouraging people to go deeper into debt. It comes from savings and investment of capital. Krugman has failed to learn from his mistakes in advocating a low-interest-rate policy to create a housing bubble, failed to learn the lesson that artificially low interest rates send wrong signals to investors about the available pool of capital and thus lead to the creation of artificial booms. He thinks that doing more of the same thing that caused the problem will also be the solution for it.

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About Jeremy R. Hammond

About Jeremy R. Hammond

I am an independent journalist, political analyst, publisher and editor of Foreign Policy Journal, book author, and writing coach.

My writings empower readers with the knowledge they need to see through state propaganda intended to manufacture their consent for criminal government policies.

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