I recently read Jason Hart’s blog entry about death panels, in which he plays a video clip of Nobel-prize winning economist and part-time lawn gnome Paul Krugman. It reminded me of just how unbelievably wrong Professor Krugman, as his acolytes refer to him, is about almost everything on a consistent basis.
In the days after Obama’s stimulus and the Fed’s first Quantitative Easing back in 2009, Krugman had a field day poking fun at conservative concerns about inflation. As stated in television appearances and on his blog, “The Conscience of a Liberal,” his position was that there were no “inflationary pressures” on the horizon, and that much greater governmental efforts to stimulate the economy were needed. He cited the example of Japan’s quantitative easing, which he claimed similarly produced no inflationary effects. While comparisons between countries as different as Japan and the U.S. aren’t as informative as they seem, especially since the former has had to deal with a cataclysmic natural disaster, the Wall Street Journal recently reported about potential inflation hazards in . . . wait for it . . . Japan!
And that’s usually all you have to do regarding inflation when you print reams of cash to prop up your economy: wait for it. The effects of inflation are like exposure to toxic substances. You don’t always feel sick immediately, but deleterious health problems continue to pop up for years afterward. Eventually all of those additional dollars catch up to the relatively unchanged amount of goods and services they’re chasing. At first businesses attempt to absorb the costs in the hopes that the rise in prices will be temporary. But eventually they have to pass on the increased costs to consumers.
And, after another round of quantitative easing and talk of a third, that’s precisely what’s happening in the U.S. today. Based on the Consumer Price Index, inflation is at its highest annual level in nearly three years. What’s more, prices are up for essentials consumed by all Americans, including the many who are struggling these days. Energy prices are higher, as are prices for food, cars, and medical care. More change we can believe in.
A categorical problem with liberal economists like Krugman is that they’re foolishly short-sighted. Conservatives have warned for years that the federal government should not pressure banks into giving money to risky lenders, but they were dismissed as “uncaring” or “alarmist”. And when the housing bubble burst, liberals blamed it on “greedy Wall Street bankers” and insufficient government regulation. The reality is that too much government intrusion into the markets catalyzed this recession, and repeated intrusions by those with Krugman’s misplaced faith in government have exacerbated it.
As manifested by the departure of Christina Romer, Larry Summers, and Austin Foolsby from the Obama economic team, I guess the real world is a lot harder to deal with than theoretical economic models.