Paul Krugman: It’s Always 1923


 

David Glasner writes sensibly about the “currency war” issue and related subjects, set off by recent commentary by Irwin Stelzer. As Glasner says, expansionary monetary policy can cause currency depreciation — but it is not currency manipulation. There’s a world of difference between Chinese-style intervention-plus-tight-money and either the Fed’s quantitative easing or Japan’s new turn to inflation targeting.

But what really seems to get Glasner going is Stelzer’s bad history — bad history that is, one has to say, very widely accepted out there. No, the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation and depression. Hard money and a gold standard obsession, not excessive money printing, was the proximate disaster.

One thing Glasner doesn’t do, though, is point out not just that Stelzer seems weirdly obsessed with inflation risks despite the complete absence of any evidence, but the unchanging nature of that obsession. A quick bit of googling says that Stelzer has been warning about an inflationary explosion for at least four years (pdf). (In the same piece he also insisted that it would be very hard to find anyone to buy all the bonds the US would be issuing).

This gets at one of the true wonders of this ongoing economic crisis: the inflation-and-soaring-rates crowd has been wrong, again and again, year after year, yet seems completely undaunted in its certainty that it possesses The Truth. You might think that someone, at some point, would have a creeping suspicion that he might be working with the wrong model. But it never seems to happen.

It’s Always 1923 – NYTimes.com

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