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.