Krugman on inflation obsessives

The Inflation Obsession - NYTimes.com

Paul Krugman writes, after noting that inflation worrying was dominating the Federal Reserve just before the crisis hit, writes:

The point, however, is that inflation obsession has persisted, year after year, even as events have refuted its supposed justifications. And this tells us that something more than bad analysis is at work. At a fundamental level, it’s political.

This is fairly obvious if you look at who the inflation obsessives are.While a few conservatives believe that the Fed should be doing more, not less, they have little if any real influence. The overall picture is that most conservatives are inflation obsessives, and nearly all inflation obsessives are conservative.

Why is this the case? In part it reflects the belief that the government should never seek to mitigate economic pain, because the private sector always knows best. Back in the 1930s, Austrian economists like Friedrich Hayek and Joseph Schumpeter inveighed against any effort to fight the depression with easy money; to do so, warned Schumpeter, would be to
leave “the work of depressions undone.” Modern conservatives are generally less open about the harshness of their view, but it’s pretty much the same.

The flip side of this antigovernment attitude is the conviction that any attempt to boost the economy, whether fiscal or monetary, must produce disastrous results — Zimbabwe, here we come! And this conviction is so strong that it persists no matter how wrong it has been, year after year.

Finally, all this ties in with a predilection for acting tough and inflicting punishment whatever the economic conditions. The British journalist William Keegan once described this as “sado-monetarism,” and it’s very much alive today.