The blog of Jay Calderwood.

baseballlibertarian:

It’s time to go back on the gold standard so Keynesians like Krugman can’t continue to destroy the dollar. 

How wrong can a Keynesian get? Pretty wrong.

Despite the fact that indicators continue to suggest that Bernanke’s money printing is impacting the economy and that price inflation is likely the next development, Keynesian Paul Krugman wants the Fed to continue to keep interest rates near zero, which means more money printing.

Krugman writes:

Aha. Greg Mankiw tells us that when you apply the coefficients for his suggested simple Taylor rule (a rule for setting the Fed funds rate), it shows the desired rate closing in on zero from below, suggesting that the end of the liquidity trap may be near.. If nothing else, we’ve learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan; it’s a very real threat, and if and when it ends we should nonetheless be guarding against its return — which means that there’s a very strong case both for a higher inflation target, and for aggressive policy when unemployment is high at low inflation.

The bottom line is that the Fed almost surely won’t, and very surely shouldn’t, start raising interest rates any time soon.

Krugman is right that the Fed is not likely to raise interest raise anytime soon. However, he is dead wrong that this is a good thing. Price inflation is never a good thing, but especially at the early stages of a recovery, when prices are likely to start accelerating anyway.

His advise will comeback to haunt him, on this, just like so much of his commentary does.