So somebody sent me this article by Mike “Mish” Shedlock, where he takes me out to the woodshed. Here is the relevant portion:
Flashback November 23, 2010: Austrian economist Robert Murphy predicts “high inflation” and and writes a post Has Mish Deflated the “Inflationistas”?
My response which in retrospect has clearly carried the day was Failure to Consider Constraints – My Response to “Has Mish Deflated the Inflationistas?”
I invite you to read my detailed response to someone who was clearly wrong but here is the key snip.
OK, the term “high inflation” (note his quotation marks) isn’t in the November 23, 2010 article. Indeed, I don’t make any predictions at all. Instead, I go through and point out three bad calls Mish made because of his “credit deflation” worldview.
Now in fairness, I think what Mish means is that he is linking to one of my earlier pieces where I am worried about price inflation. If you read his original response to me, you will see the discussion.
Also, I should note that Mish was cool about linking to my Krugman Debate. I didn’t realize he had done that, until just now. (I think because it was buried at the end of his blog post; I must have stopped reading it when I thought he was done with me, when it first came out.) Since that is the case, I can now tell this story:
Back when the Krugman Debate was launched, I of course was trying to get various people to promote it. I wanted the thing to take off and gain currency outside the readership just of Mises.org etc. So when Mish called me up out of the blue, and said he was really interested in the debate and was going to push it on his blog, I was thrilled.
The only problem was, I had a pending article at Mises.org that was critical of Mish. Like, it was going to run within a few days of him calling me. So I was in a quandary. Obviously I wanted Mish to push the Krugman Debate, but I also didn’t want to be a jerk and not mention that I disagreed with his deflationist perspective. I considered telling the Mises guys just to pull the article, but that would have made me feel dirty.
So, my solution was to send Mish an email giving him a heads’ up, just so I wouldn’t feel funny if he pushed the debate and then my “hatchet job” (not really) came up the next day or something. I can’t remember if he answered that email, but as far as I knew, he never mentioned the Krugman Debate, and I filed away another cynical encounter with my fellow human beings.
Thus, I am very pleasantly surprised now to see that Mish in fact did still promote the debate, notwithstanding our tiff. (To be clear, the reason I am telling the story publicly now, is that it has this happy ending. Back when I thought Mish changed his mind out of spite or because he didn’t want to promote somebody who was an idiot on inflation, I didn’t blab the episode because that seemed ungentlemanly.)
Anyway, back to the big argument: inflation or deflation? Mish and I do NOT refer to prices with those terms. I have in mind money broadly conceived (including demand deposits and maybe some other things), whereas Mish includes “credit” though I’m not sure exactly how he defines that specifically. The point is, neither of us mean prices when we use the terms with no qualifier.
However, in terms of telling the public what we think is going to happen, surely the movement of consumer prices is key. And on that score, I think Mish and I were both wrong. He has been running around telling people that Bernanke is a small player compared to the global credit system, whereas I have been warning people that the excess reserves could leak out and spiral out of control very quickly (calling them a genie in the bottle). Here’s what has actually happened to CPI:
Note the units: It’s percentage change over the previous 12 months. Yes, consumer prices dropped sharply when the crisis first struck, but then with QE1 they turned around. Since then they rose
steadily, started falling and them zoomed up rapidly (because of QE2? I am not going to bother matching it up), peaked at almost 4 percent, a rate rarely achieved in the last 20 years. Then CPI’s increase slowed, so that the yr/yr growth rate has fallen down to a bit above 2 percent.
Obviously this is nowhere near where I thought it was going to be. But, someone running around saying “deflation” for 3 years has been wrong too.
As I said to the guy who is a fan of both of us, back when he was feeding me Mish’s response to me, “Well we’ll just have to wait and see. If prices rise very quickly then I’m right. If prices start falling then Mish is right. If we have modest price hikes for a few years then Krugman is right.”
I’m paraphrasing, but that’s basically what I said to the guy. On that score, then, I think of the three of us, Krugman has the most justification for running victory laps (though even he too threw the deflation threat around a bit much, just not as much as Mish).
If any of you are regular Mish readers, I would love some clarity here. What is his position? Is he merely saying, “I bet we won’t have hyperinflation in the next two years?” Well no kidding, most people don’t think that. It seems to me he has been saying a lot of more.
23 Responses to “Mish vs. Murphy”
Leave a Reply