Joe Biden’s idea to forgive student loans caused quite a commotion last week, but a curious claim from New York Times columnist Paul Krugman got lost in the frenzy.
According to Krugman, inflation was mild this summer despite dire forecasts. Even a little knowledge of economics disproves his claims.
Stop bullshitting, Paul Krugman. Both supply chain problems, geopolitical tension, pandemics & inflation risks were seen before by those who work on these things. Except that, as usual, hot shot economists only consider risks after the fact & like to send troups after the battle. https://t.co/4iAXlY1Osg pic.twitter.com/V7dUna2tuG
— Nassim Nicholas Taleb (@nntaleb) July 22, 2022
“Not long ago, many people were predicting a long, hot summer of inflation,” Krugman wrote.
“To their surprise — and, for some Republicans, dismay — that isn’t happening,” the pundit proclaimed. “Overall consumer prices were flat in July, and nowcasts — estimates based on preliminary data — suggest that inflation will remain low in August.”
Indeed, looking at month-to-month inflation from June to July, we find that there was no inflation at all. Naturally, Krugman fails to mention that annual inflation in July was 8.5%.
Inflation has been above 8% annually for five consecutive months. If that’s low inflation, it’s terrifying to think of what Krugman calls “high.”
In addition, he provided supporting data that “beef is already getting cheaper.” However, the demand for expensive steak and other red meat has decreased, resulting in lower prices, not because inflation is dropping. The Robb Report has observed the rising cost of ground beef.
“Over the same four-week period ending August 7, ground-beef prices jumped about 7 percent compared with the same timeframe last year,” The Robb Report’s Tori Latham stated. “In contrast, the price of ribeye and beef loin fell nearly 10 percent.”
Krugman wrote his post to see if there was a painless way to aid the economy and lower inflation (which he argues is already slowing). In the 1980s, Israel came up with a “package that included a temporary wage freeze and price ceilings,” which he cites as an intriguing historical example.
Finally, Krugman concluded that “there don’t seem to be any practical alternatives” to the Federal Reserve’s objective of “cutting inflation through engineering a slowdown.”
In fact, Federal Reserve Chair Jerome Powell came to the same conclusion this week while speaking in Wyoming.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
Interestingly, Krugman changed his tune about President Joe Biden’s spending plan and inflation just last month.
He wrote that some voiced concerns that the package would cause dangerous inflation while others remained relatively calm. When it came to stress, he said he was on the Team Chill out. Evidently, that was a disastrous decision.
Also, he said, “the whole event has been a lesson in humility.” It would appear that the lesson wasn’t fully absorbed, given his recent assertions regarding inflation.