Oftentimes, Paul Krugman maintains his Keynesian theology by deliberately missing the point of people who say things that don’t conform to it.
In a post yesterday, he takes issue with the argument that there was indeed substantial price inflation during the housing bubble years and the corollary that the Fed monetary policy was “too loose”, meaning that it was printing too much money out of thin air. The argument is that while the inflation might not have shown up in Fed’s preferred price index, it showed up in food and energy prices, and in the bubble itself, with its rising home prices.
His counter-argument? If you look at the Fed’s preferred measure of price inflation, which excludes food and energy, “inflation was indeed quiescent”, and as with an alternative index that includes food and energy, one shouldn’t look at home prices as any indication of inflation because they were “wildly erratic”.
So he just begs the question and defines “inflation” according to whatever measure excludes the price increases seen during the bubble years, the very same intellectually dishonest cherry-picking of whatever data conforms to his view that he just accused someone else of.