Krugman Dismisses Inflationary Risks

In his column from Monday, “Stay The Course”, Paul Krugman dismissed the idea that current government policies are potentially inflationary as follows:

What about the claim that the Fed is risking inflation?  It isn’t.  Mr. Laffer seems panicked by a rapid rise in the monetary base, the sum of currency in circulation and the reserves of banks.  But a rising monetary base isn’t inflationary when you’re in a liquidity trap.  America’s monetary base doubled between 1929 and 1939; prices fell 19 percent.  Japan’s monetary base rose 85 percent between 1997 and 2003; deflation continued apace.

On the surface it’s persuasive.  But Krugman doesn’t seem to acknowledge that there are consequences and costs to the current radical policy actions.  I think he likes them because they represent increasing government control over the economy which creates the foundation for implementing his social agenda.

The guy is a good writer and tremendous rhetoritician.  But in the end, he’s usually just a sophist.