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Friday, September 12, 2014

Paul Krugman: The Inflation Cult

What accounts for the survival of the inflationistas?:

The Inflation Cult, by Paul Krugman, Commentary, NY Times: Wish I’d said that! Earlier this week, Jesse Eisinger..., writing on The Times’s DealBook blog, compared people who keep predicting runaway inflation to “true believers whose faith in a predicted apocalypse persists even after it fails to materialize.” Indeed. ... And the remarkable thing is that these always-wrong, never-in-doubt pundits continue to have large public and political influence.
There’s something happening here. What it is ain’t exactly clear. ... I’ve written before about how the wealthy tend to oppose easy money, perceiving it as being against their interests. But that doesn’t explain the broad appeal of prophets whose prophecies keep failing.
Part of that appeal is clearly political; there’s a reason why ... Mr. Ryan warns about both a debased currency and a government that redistributes from “makers” to “takers.” Inflation cultists almost always link the Fed’s policies to complaints about government spending. They’re completely wrong about the details — no, the Fed isn’t printing money to cover the budget deficit — but it’s true that governments whose debt is denominated in a currency they can issue have more fiscal flexibility, and hence more ability to maintain aid to those in need...
And anger against “takers” — anger that is very much tied up with ethnic and cultural divisions — runs deep. Many people, therefore, feel an affinity with those who rant about looming inflation... I’d argue, the persistence of the inflation cult is an example of the “affinity fraud” crucial to many swindles, in which investors trust a con man because he seems to be part of their tribe. In this case, the con men may be conning themselves as well as their followers, but that hardly matters.
This tribal interpretation of the inflation cult helps explain the sheer rage you encounter when pointing out that the promised hyperinflation is nowhere to be seen. It’s comparable to the reaction you get when pointing out that Obamacare seems to be working, and probably has the same roots.
But what about the economists who go along with the cult? They’re all conservatives, but aren’t they also professionals who put evidence above political convenience? Apparently not.
The persistence of the inflation cult is, therefore, an indicator of just how polarized our society has become, of how everything is political, even among those who are supposed to rise above such things. And that reality, unlike the supposed risk of runaway inflation, is something that should scare you.

    Posted by on Friday, September 12, 2014 at 12:24 AM in Economics, Inflation | Permalink  Comments (73)


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