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Comment by kukx | Hacker News Reader

He predicted the financial crisis. And predicting is hard, especially, if you have a "creative" government. The underlying problem was postponed, not fixed, and it got bigger in the mean time. I do not agree with him on everything, but he has many apt observations and convincing explanations. And at least he looks at fundamental mechanisms, which I like to interpret as a hard reality. I believe we now live in a soft reality, where the sweet falsehoods are preached to and believed by masses.

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The technical explanation why, when rates are zero, and you 'print money', inflation does not (or at least in all our current experiences has not) appear(ed):

* https://en.wikipedia.org/wiki/Liquidity_trap

It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation:

* https://www.brookings.edu/bpea-articles/its-baaack-japans-sl...

* Same paper: https://www.princeton.edu/~pkrugman/japans_trap.pdf

The paper is probably still relevant today, especially since more places are hitting zero. Krugman has made better predictions than some trillion dollar asset managers:

* https://www.businessinsider.com/this-was-the-bill-gross-blun...

* https://www.salon.com/2014/10/03/paul_krugman_schools_the_de...

* https://delong.typepad.com/delong_long_form/2014/10/pimco-ho...

I started reading Krugman's weblog around 2009, and AFAICT, everyone who bet/predicted against Keynesian economics in the intervening years has generally been wrong (or at least more-wrong, even if K hasn't been spot-on).

Krugman said that Trump, if elected, would bring global a recession. [0] Oops.

Point being, he tends to let politics cloud his judgement—especially in the last 10 years or so.

[0] https://www.politico.com/story/2016/11/krugman-trump-global-...

And he quickly (2-3 days) retracted that call once he recovered from the initial despair of the 2016 election results:

> But will the extent of the disaster become apparent right away? It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.

> In fact, don’t be surprised if economic growth actually accelerates for a couple of years.

* https://www.nytimes.com/2016/11/14/opinion/trump-slump-comin...

* http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/

We all make mistakes: the important things is to own up to them and learn from them.

Have any of the people who said Bernanke's QE would cause (hyper)inflation and currency debasement publicly recanted?

The money printed to finance the government debt is not backed by a production of value. It just increases the money supply, while not increasing the amount of goods that one can buy with that money, hence by nature it is inflationary, ie it makes money less valuable. The market is complex and the effects may be postponed in time by years, but the fundamental mechanisms persist. The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected.

> The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected.

This was published ten years ago (November 2010):

> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.

* https://economics21.org/html/open-letter-ben-bernanke-287.ht...

Still waiting for said debasement and inflation. Any time now. Real soon.

There is the CPI, but it does not represent all prices. House prices and stock went up a lot, in many cases to irrational levels. The young people without a house feel the pain. They will inherit the national debt as well. Now the commodity prices steadily increase. Add to it increasing wages and more expensive imports and we will see rising costs of production and in consequence the CPI.

The CPI takes into account housing, specifically the carrying costs (which is 'rent equivalent'). Housing itself, like stocks, is considered an asset and is not part of inflation.

> [Young people] will inherit the national debt as well.

You know who else will inherit the national debt? Their children, and grand children, and great grand children, and great-great grand children. Not too long ago the UK rolled forward debt from the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), and WW1 (1910s):

* https://www.theguardian.com/business/2014/oct/31/uk-first-wo...

As long as economic growth is higher than the interest rate of the debt, it's generally not a problem. And interest rates have been, with some gyrations, dropping for over 700 years:

* https://www.visualcapitalist.com/700-year-decline-of-interes...

> Housing itself, like stocks, is considered an asset and is not part of inflation.

The CPI is an arbitrary indicator set and counted by the government in secrecy, the same entity that has the incentive to keep its value low. Even if someone trusts the government, it does not mean they should trust it completely.

* https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo...

* https://www.forbes.com/sites/greatspeculations/2020/08/31/is...

As I mentioned before printing money not backed by the creation of value diminishes the value of money. Otherwise why bother working. The government could print money for all of us and we could party all the time. The printing press was invented quite a while ago, I wonder why no one come up with this solution earlier!

The debt is a burden and increasing it, increases the burden. You can argue of utility of increasing the debt in bad times, but then it should be decreased in good times. If it is not happening then there is something fundamentally wrong.

CPI is peer-reviewed and a form of it is used in most countries:

* https://en.wikipedia.org/wiki/Consumer_price_index

* https://en.wikipedia.org/wiki/Price_index

It's is reproducible by non-government people:

* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project

If you think that inflation is higher than the reported GDP growth:

* https://www.youtube.com/watch?v=d3dO8BW9RHg

* https://awealthofcommonsense.com/2021/01/inflation-truthers/

* Discussed: https://news.ycombinator.com/item?id=25644580

CPI measures a basket of goods and these will differ from country to country. But, let's assume the US government does a good job on estimating the increase in the consumer prices for an average citizen. Still it does not address the problem I mentioned about printing money, which is dissolving the value of money. If that was not true, as I mentioned earlier, we could just print the money and have eternal vacations.

The question is why we do not see the negative effects in the reported CPI. One explanation is a deflationary force that mitigates the inflationary moves. The long term stable deflationary force is an increase in productivity by technological advancements. But I do not think it can keep up with the printing press.

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