July 20, 2014 – In a recent column, Paul Krugman once again goes after sound money advocates. He’s now more defensive than ever about his support for official counterfeiting of our money by our government and the Federal Reserve. The longer the recession/depression lasts, the more adamant he gets defending his demands for more government, more spending, more debt, and more inflation.
Krugman’s beef is that anyone who has been warning about inflation, higher interest rates, a dollar crisis, and weak bond sales is wrong and is driven by conspiracy theories. The major problem in the debate is that there’s no agreement on the definition of inflation. Keynesians argue that it’s defined as rising prices as measured by government-rigged statistics. Proponents of the free market recognize that inflation is the increase in the money supply pointing out that Fed credit since the crisis started in 2009 has risen by 500 percent.
This distinction is crucial and will determine future policy. Without the understanding that the Fed creates the booms and the busts, we will continue down the road of a dollar collapse. By looking at only rising prices, the Fed hopes to escape the blame. What the liberal economists refuse to recognize is that low interest rates, artificially created by the Fed and a consequence of monetary inflation, is every bit as bad as the higher rates that follow.
Interest rates are key indicators needed to make economic decisions. They are crucial in helping to guide a free-market economy. Manipulating interest rates for the benefit of the politicians and the beneficiaries of the welfare/warfare state leads to the type of economy we have today.
It’s too bad for Krugman and his allies. They will have to face up to reality that their policies have driven us to where we are today. With no change in policy, current conditions can only get worse. Economic growth will return when we restore sound money and a market economy.