Krugman on the Inflation Hawks

The wealthy are worried about keeping the value of the dollars up since they think they sense impending "inflation". They don't care that mass unemployment is terrible or that the economy is faltering. They just want to make sure that their sacks of dollars keep their value. This is the insanity behind the rumbling from various heads of the Federal Reserve and various right wing nuts.

Here is the key bit from Paul Krugman's latest op-ed in the NY Times:

The economic historian Peter Temin has argued that a key cause of the Depression was what he calls the “gold-standard mentality.” By this he means not just belief in the sacred importance of maintaining the gold value of one’s currency, but a set of associated attitudes: obsessive fear of inflation even in the face of deflation; opposition to easy credit, even when the economy desperately needs it, on the grounds that it would be somehow corrupting; assertions that even if the government can create jobs it shouldn’t, because this would only be an “artificial” recovery.

In the early 1930s this mentality led governments to raise interest rates and slash spending, despite mass unemployment, in an attempt to defend their gold reserves. And even when countries went off gold, the prevailing mentality made them reluctant to cut rates and create jobs.

But we’re past all that now. Or are we?

America isn’t about to go back on the gold standard. But a modern version of the gold standard mentality is nonetheless exerting a growing influence on our economic discourse. And this new version of a bad old idea could undermine our chances for full recovery.

Consider first the current uproar over the declining international value of the dollar.

The truth is that the falling dollar is good news. For one thing, it’s mainly the result of rising confidence: the dollar rose at the height of the financial crisis as panicked investors sought safe haven in America, and it’s falling again now that the fear is subsiding. And a lower dollar is good for U.S. exporters, helping us make the transition away from huge trade deficits to a more sustainable international position.

But if you get your opinions from, say, The Wall Street Journal’s editorial page, you’re told that the falling dollar is a terrible thing, a sign that the world is losing faith in America (and especially, of course, in President Obama). Something, you believe, must be done to stop the dollar’s slide. And in practice the dollar’s decline has become a stick with which conservative members of Congress beat the Federal Reserve, pressuring the Fed to scale back its efforts to support the economy.

The rich have never cared about the poor. I joke that during the feudal age the rich lords used serfs in the field for target practice. It kept their skills honed. Did they care that they killed the peasants? Nope, they breed like rats, so the big shots didn't care. Well, we aren't all that far removed from the same kind of thinking today.

The rich don't care that the poor will have to pay the penalty for the greed of Wall Street through taxes to retire the huge deficits being run up. The rich are only concerned that they get "made whole" by tax dollars when their business schemes fail. And they want to make damned sure the poor don't take anything from the public coffers. Those are reserved for the "deserving" rich.

So the campaign is on to start raising interest rates, cutting back government spending, suppressing "runaway" economic growth. All while unemployment is headed over 10% and millions are losing their homes and can't afford medical care. But as the rich view it, those are the petty problems of rats who quickly multiply, so who cares?