Ideally someone else would make this post, since it will seem petty and defensive coming from me, but sometimes you look inside yourself and realize that you are the only one who can get the job done.
Anyway, I think it’s fair to say that Paul Krugman has been running around for a good two years with variants of the following (which are my words, but very much in the spirit of what he’s been saying):
[FAKE PAUL KRUGMAN QUOTE]: I can’t believe the shameless dogmatism of these right-wingers. Ever since the crisis unfolded, they’ve been trotting out scary-looking charts of the monetary base, predicting huge surges in [price] inflation, and even saying the US was headed the way of Zimbabwe. Well, history has shown them to be totally wrong. And yet, even though their model spit out erroneous predictions about inflation, they continue with the same policy recommendations that they were giving in the beginning. It’s really astounding to behold.
I’m not even going to bother citing the above; Krugman has obviously been making that type of case repeatedly for years now.
In this context, let’s review a Krugman post from February 2010 when he wrote:
Now, the measurement issue: we’d like to keep track of this sort of inflation inertia, both on the upside and on the downside — because just as embedded inflation is hard to get rid of, so is embedded deflation (ask the Japanese)…
The standard measure tries to do this by excluding the obviously non-inertial prices: food and energy. But are they the whole story? Of course not…Hence the growing preference among many economists for measures like medians and trimmed means, which exclude prices that move by a lot in any given month, presumably therefore isolating the prices that move sluggishly, which is what we want.
And what these measures show is an ongoing process of disinflation that could, in not too long, turn into outright deflation:
Japan, here we come.
So in conjunction with that chart, Krugman is clearly predicting that the line will keep falling, perhaps even crossing into negative territory, and then will stay down there indefinitely. That’s what happened in Japan, after all: According to this website, over the last 20 years Japan’s CPI has been virtually flat. (This more official-looking site shows Japan’s annual CPI increases have been slightly negative, typically, for the last decade.)
So, how did Krugman’s prediction pan out? Is it true that the Cleveland Fed’s measures of yr/yr median and trimmed CPI kept falling, perhaps even going into negative territory, and then stayed there for years on end? Here’s the chart from the Cleveland Fed (Krugman’s source):
Oops. Krugman’s prediction totally blew up in his face about 7 months later. Rather than falling into negative territory, and not even just staying at its current level, both of the “core” inflation measures
roughly tripled more than doubled, jumping back up to almost their pre-recession levels.
In light of his model’s bad inflation predictions, what did Krugman do? Well just recently, when linking to this old post, Krugman explained, “(In that post, I worried about deflation, which hasn’t happened; I’ve written a lot since about why).”
Now if memory serves, Krugman back in early 2010 favored massive government and Fed stimulus to prop up aggregate demand, because we were headed into Japanese-style deflation. When it turned out he was totally wrong about that prediction, he then began calling for— Oh.
Look, I’m not being coy here. If we only cared about the one specific measure of, “Which economist gave his readers a more accurate guess as to what the government’s official CPI numbers would be, over the next five years?” then Krugman was less wrong than me. But he was wrong, and he didn’t even get the direction right.
Yet that’s fine, in Krugman’s book. He’s a scientist, after all. He can still offer the exact same policy recommendations, because he’s “written a lot since” his erroneous worries, tweaking his story about downward wage rigidity blah blah blah.
In contrast, the people warning of large price inflation are supposed to hang up their keyboards and go fishing. They aren’t allowed to say, “Hmm, maybe paying interest on excess reserves, or the situation in Europe, or the effects of ObamaCare, might be contributing to the surprisingly large demand to hold cash…” Nope, that would just be grasping at straws on their part, a ridiculous inability to admit they were wrong about how prices would behave.