Making the Case for Higher Inflation? Krugman’s Cockamamie EconomicsPosted: April 10, 2014
Making the Case for Higher Inflation? Krugman’s Cockamamie Economics
by JBS President John F. McManus
A correct definition of inflation, something increasingly hard to find, appeared in “Webster’s New 20th Century Unabridged Dictionary (1957)”. It said that inflation is “an increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices.” Note that what is inflated is the amount of currency. The effect of inflating the amount of currency is a rise in how much more of the less-valuable currency is needed to purchase anything.
In 1920, in a burst of youthful honesty, British economist John Maynard Keynes wrote a book entitled “Economic Consequences of the Peace.” In it, he correctly identified inflation as an increase in the amount of currency and then summarized, “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens …. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.” Here we see that inflation constitutes thievery by government. Keynes, however, didn’t stand firmly by his correct 1920 attitude. His later twisted thinking greatly influenced President Franklin Delano Roosevelt and the socialistic New Deal of the 1930s.
Jump ahead to 1946 and the publication of economist Henry Hazlitt’s book “Economics in One Lesson.” It presents the absolutely correct definition of inflation. A prominent columnist whose work appeared regularly in Newsweek and other publications, Hazlitt minced no words when he wrote that inflation “tears apart the whole fabric of stable economic relationships. Its inexcusable injustices drive men toward desperate remedies. It plants the seeds of fascism and communism. It leads men to demand totalitarian controls.” The correctness of his dire forecasts was demonstrated in recent years as inflation ravaged Zimbabwe, Argentina and elsewhere. Hazlitt’s warnings should have been heeded in our country but they haven’t been listened to by most Americans. In our nation, inflation (courtesy of the Federal Reserve and a compliant Congress) continues to erode the value of everyone’s dollars.
Nobel Prize winner Paul Krugman writes about economic matters for the New York Times. On April 7th, without ever defining inflation, he told readers that more inflation is needed. He proposed a “compelling case for raising inflation targets above 2 percent.” In presenting “the case for higher inflation” he stated that “moderate inflation turns out to serve several useful purposes.” Not only did he rely on the false notion that inflation’s definition is rising prices, he proposed that America needs those prices to rise even higher.
No, Mr. Krugman. America needs honest money whose value can’t be manipulated by government, the Federal Reserve, or even by Nobel Prize winners. Americans also need a correct definition of inflation, not a confusing mishmash of highbrow economic verbiage that cloaks the real truth about thievery, solves no problems, and destroys the people’s wealth – in their paychecks, savings, pensions, insurance policies, investments, etc. The value of all dollars continues to sink, something every supermarket shopper experiences week to week and wonders why. The cause is inflation and its continuing toleration by a government that allows the Federal Reserve to produce a continuous stream of freshly created cash.
Could the people of our nation become desperate and “demand totalitarian controls” as Henry Hazlitt soberly suggested? The answer is obvious. But Paul Krugman doesn’t tell Americans what they need to know. Without the truth about inflation, the people will continue to worry about their future, maybe even begin to “demand totalitarian controls.”
Mr. McManus has written “Dollars & $ense,” a booklet explaining solutions to the economic meltdown.