New York Times columnist and – we’re constantly reminded – Nobel Laureate Paul Krugman says that inflation, which hit another new high this month, will soon abate. Why? Because, he wrote on Tuesday, “Lumber prices have plunged in recent weeks. Prices of industrial metals such as copper are coming down. Prices of used cars are still very high, but their surge has stalled and they may have peaked.”
Oh, wait. That was from a column that Krugman wrote in June 2021.
What he wrote this week was that the gigantic bipartisan infrastructure bill passed last fall will get inflation under control because it will “alleviate the supply bottlenecks that have played a big role in recent inflation, while making workers more productive.”
Our apologies. That was Krugman in August 2021.
What he wrote was that “if we finally get this pandemic under control, the inflation of 2021 will soon fade from memory.”
Oops. That was Krugman in September 2021.
Here’s what he said. “The Fed can easily contain any pickup in inflation.”
Sorry, again, that was Krugman way back in January 2021, when he promised that President Joe Biden’s $2 trillion “rescue” plan wouldn’t cause an inflationary spiral and that the Fed could deal with any uptick in prices with a modest boost in interest rates.
It’s hard to keep up with all the times Krugman reassured us over the past year that inflation wasn’t and wouldn’t ever be a problem under Biden.
What Krugman actually wrote this Tuesday was that “inflation will probably fall significantly over the next few months.”
Why? Because, he now says, oil prices have moderated and retailers are “sitting on unusually large inventory. Car lots are filling up; demand for trucking is falling quickly. International shipping rates seem to be coming down.”
We certainly hope Krugman is right … for once.
Because high inflation is the most pernicious tax devised by man – one that hits the working class hardest, drains prosperity across the board, saps people’s energy, and does so without producing anything good in return.
But we suspect Krugman is wrong … again.
Once inflation takes hold and inflationary expectations set in, it is exceedingly hard to stop. Also, despite Krugman’s Pollyannish view of the economy, shortages are still bedeviling the economy. The latest example is infant formula. Staff shortages still plague much of the economy. Etc.
Plus, the day after Krugman’s op-ed posted, the Labor Department reported that producer prices – which measure inflation before it hits consumers – were up 11.2% in March, which is the fastest pace on record.
On Thursday, the Labor Department released a report showing that “U.S. import prices surged by more than expected in the month of March.”
Does any of this auger a sudden drop in inflation?
To be fair to Krugman, there was a time when he did predict a big inflationary hike.
That was back in 1983 when, as our friends at The Committee to Unleash Prosperity point out, he declared that Reagan’s economic policies would unleash an “Inflation Time Bomb.” The annual inflation rate had plunged from 13.5% in 1980 to just 3.2% in 1983. But Krugman argued that this drop was “merely temporary.” He said that “higher oil prices” and “increased consumer demand due to tax cuts,” would cause “prices to rise again.”
What happened? Inflation fell to 1.9% by 1986.
The co-author of that paper, interestingly enough, was Larry Summers, who bravely stood up to attacks from Krugman to warn that Biden’s “rescue” would produce the very inflationary spiral we are now suffering. Which goes to show that some people are actually willing to learn from their mistakes. Just not Krugman.
Too bad the Nobel folks saw fit to give the prize for economics to Krugman, because it apparently unleashed an inflationary spiral of egoism that has never abated.
(By the way, if Krugman turns out to be right this time, we will be the first to admit it.)
— Written by the I&I Editorial Board