Back in May 2009, Paul Krugman published a column titled “The Big Inflation Scare.” In it, he complained about the “inflation fear-mongering” going on at the time.
“Suddenly,” Krugman wrote, “everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. …But does the big inflation scare make any sense? Basically, no … Deflation, not inflation, is the clear and present danger.”
I know that many faithful Alt‑M readers aren’t exactly big Paul Krugman fans. But let’s face it: despite a quadrupling of the size of Fed’s balance sheet by 2015, and persistently low interest rates, Krugman was right, and the inflation mongers were wrong. If the Fed has failed to meet its objectives since the last crisis, it’s done so not by exceeding, but by consistently falling short of, its chosen inflation target.
Wolf!
You might think that the utter failure of the last round of high-inflation forecasts would make even die-hard inflation mongers think twice about declaring that, because interest rates are back to zero, and the Fed’s balance sheet is ballooning again, high inflation must be just around the corner.
No such luck. Even setting aside professional doomsayers who predict hyperinflation as often as clocks strike midnight, pundits are starting once again to treat the Fed’s emergency measures as a near guarantee of severe inflation to come.
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