Professor Krugman’s Just Deserts

The retirement of Paul Krugman as a New York Times columnist is cause to lament — in part because it forecloses the prospect of a final reckoning from the Nobel laureate in respect of an honest dollar and the role of the Federal Reserve in America’s crisis of fiat money. For years, Mr. Krugman has served as a kind of bête noire of sound money advocates, mocking their warnings of inflation and denying gold’s role as the basis of monetary value.Mr. Krugman tended, when faced with criticism of today’s monetary certitudes, to dismiss his opponents out of hand. Such debates, he said, proved that “we aren’t having a rational argument over economic policy.” When the Sun, in an editorial headlined “The Female Dollar,” made light of the Times for dwelling on the gender of the next Fed chief at a time when the dollar’s value in terms of gold had plummeted, Mr. Krugman would have none of it. He denounced the Sun as “a marginal publication, with strong gold-bug tendencies,” and contended “nobody would pay much attention if the rest of the right had ignored or distanced itself from that editorial.” And yet, Mr. Krugman conceded, the Wall Street Journal had “immediately followed up with its own editorial along the same lines, in the course of which it approvingly quoted The Sun piece, female dollar and all.” Mr. Krugman called this “unmistakable sexism” and “bad economic analysis.” The right’s criticisms of the Fed “debasing the dollar” and “warning of runaway inflation,” he said, “have been wrong every step of the way.” This rhubarb took place a few years after Mr. Krugman had dismissed the alarm of some conservatives who, in 2010, had warned, in an “Open Letter to Ben Bernanke,” that the Fed’s Quantitative Easing program would ignite inflation. Mr. Krugman mocked the missive as a “failure in prognostication.” Despite the Fed’s “expansionary course,” he said, “inflation stayed low.” Yet while inflation statistics might have looked calm, the value of the dollar in gold — the basis of monetary value — was telling a different story. Before the Fed’s QE program the dollar was worth a 775th of an ounce of gold. Four years later it had plunged to less than a 1,700th of an ounce. Gold was sending a warning signal.While the dollar recovered some of its value, the Fed would launch another round of QE during the Covid pandemic, accompanied by a wave of federal borrowing and overspending. The dollar dropped again, reaching a nadir of less than a 2,700th of an ounce in gold. This coincided with an inflation spike that got under way in the early months of 2021 as a result of President Biden’s economic policies. At first Mr. Krugman downplayed the inflation risk. By year-end, though, he conceded America was in the grip of “the highest inflation in almost 40 years.” In a kind of cri de cœur, he noted that he would “always associate inflation with the taste of Hamburger Helper.” In 1973, he recalled, amid stagflation, the cost of ground beef had soared 49 percent, so he “tried to stretch it.” He noted the “dismay” of being unable to afford real burgers, but even worse, “the anxiety, the sense that things were out of control.” Even so, Mr. Krugman has yet to connect the dots between the plunging value of the dollar in terms of gold and the inflation that conjured up bad memories of the 1970s. In 2023 he confessed to being perplexed by the “substantial demand for gold” when, as he contended, it hadn’t “served any monetary purpose for a very long time.” This was akin, these columns observed, to missing the forest for the trees — the gold, after all, is the money.It would be a stretch to suggest that Professor Krugman’s errors on inflation somehow led to Mr. Krugman’s resignation. Yet his absence as President Trump takes office on a vow to “defeat inflation” is an incipient disappointment. For if President Trump is able to restore sound money and reverse the inflationary tide, one can only imagine how much Hamburger Helper would be needed to make palatable Mr. Krugman’s much deserved portion of humble pie.

Professor Krugman’s Just Deserts

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