The Wall Street Journal takes note of Paul Krugman’s attack on “Austrian/Ron Paul types” (1/13/13) page C1, “Ahead of the Tape”).
We have all heard of the boy who cried wolf.
A similar charge is being leveled against pundits who warned of runaway inflation as a result of the Federal Reserve’s extraordinary stimulus. Economist Paul Krugman, for example, pilloried “Austrian/Ron Paul types” for being so wrong the past three years.
Even after a tripling of the monetary base, Mr. Krugman’s sanguine view is in favor.
Of course Krugman’s charge against the Austrians ignores Henry Hazlitt’s warning to be aware of both the immediate and long run effects of an economic policy. But even in the short run the Fed’s policy is having obvious effects on prices. Here is the comment I posted on the Wall Street Journal article:
CPI is only one measure of prices. Fed policy is aimed at keeping stock and bond prices high and they have accomplished that goal. They are also obviously trying to keep housing prices propped up with low interest rates and their buying of mortgaged-backed securities. Fed policy along with other central banks have resulted in higher gold, oil, and commodity prices. Mainstream economists like Krugman are looking at a failed statistic just as Irving Fisher and Benjamin Strong did in the 1920s.