In his latest volley in the war against the war against inflation, celebrated liberal economist and best-selling author Paul Krugman tries to analyze "the inflation cult," a loosely affiliated group of pundits and academics who, Krugman says, are being duped by "con men" into believing hyper-inflation is just around the corner. The conclusions he reaches are pretty scary.
Before explaining what makes them tick, Krugman gives some examples of high-profile inflation cult members and argues that despite their patent wrongness, their ideas still hold significant power. "Whom are we talking about?" Krugman writes. "Not just the shouting heads on CNBC, although they’re certainly part of it. Rick Santelli, famous for his 2009 Tea Party rant, also spent much of that year yelling that runaway inflation was coming. It wasn’t, but his line never changed."
Along with Santelli, Krugman writes, are people of considerably more repute — like former vice-presidential candidate Paul Ryan. "[I]t’s not as easy to dismiss the phenomenon of obsessive attachment to a failed economic doctrine when you see it in major political figures," Krugman writes. "In 2009, Representative Paul Ryan warned about 'inflation’s looming shadow.' Did he reconsider when inflation stayed low? No, he kept warning, year after year, about the coming 'debasement' of the dollar."
After remarking that the fear of hyper-inflation often goes alongside a belief in "small government," Krugman claims that "everything is political" in America today, because social tribal loyalties, forged along ethnic and cultural lines, are so intertwined with politics. "In an important sense," Krugman writes, "I’d argue, the persistence of the inflation cult is an example of the 'affinity fraud' crucial to many swindles, in which investors trust a con man because he seems to be part of their tribe." But the funny thing about it, Krugman writes, is that these people are only "conning themselves."
This tribal interpretation of the inflation cult helps explain the sheer rage you encounter when pointing out that the promised hyperinflation is nowhere to be seen. It’s comparable to the reaction you get when pointing out that Obamacare seems to be working, and probably has the same roots.
But what about the economists who go along with the cult? They’re all conservatives, but aren’t they also professionals who put evidence above political convenience? Apparently not.
The persistence of the inflation cult is, therefore, an indicator of just how polarized our society has become, of how everything is political, even among those who are supposed to rise above such things. And that reality, unlike the supposed risk of runaway inflation, is something that should scare you.