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Um, your link to gas prices show them going down. I don't consider that as "energy prices going through the roof", quite the opposite actually. By the way, a barrel of oil right now is in the same exact price range it was 5 years ago (go to Marketwatch and click 5-year price).

Furthermore, one would be hard pressed to claim a rise in food-prices resulted solely from inflation-- given the record droughts in America [1] and record fires in Russia [2] that devastated entire crops last year.

Please, for the sake of good argument, try to be factually correct when trying to claim others aren't.

[1] http://theweek.com/article/index/230673/americas-worst-droug...

AND http://en.wikipedia.org/wiki/2012_drought

[2] http://en.wikipedia.org/wiki/2010_Russian_wildfires

Also food price increases look to me like they're basically within historical norms? The posted graph makes it look like there's a big spike because it starts with the 2008-2009 time period when inflation was actually negative. http://research.stlouisfed.org/fred2/graph/?g=hxh

Sure, let's talk facts.

1) Fixed the link to include the four year gas chart. Up from $2.03 to $3.57 in four years. Doesn't bode well for your case. Short link due to ampersands:

http://goo.gl/R4r0f

2) You seem to grant that inflation contributed to the rise in food prices. A one off drought can't explain the persistence of the rise since 2008, or the fact that food inflation caused the riots which led to the Arab Spring in 2011.

http://www.telegraph.co.uk/finance/economics/8492078/How-the...

  The first graph illustrates the correlation between the 
  prices of food and the Fed’s purchase of US Treasuries 
  (i.e. its quantitative easing programmes). (A widely-
  discussed graph illustrating correlation between QE and 
  broader commodities indices can be seen here.) We see how 
  the food price index broadly stabilised through late 2009 
  and early 2010, then rose again from mid-2010 as 
  quantitative easing was re-started (QE2) following Ben 
  Bernanke’s Jackson Hole speech of August 27 – with prices 
  rising of about 40% over an eight month period. Similar 
  correlations can be observed between Fed purchases and 
  wider commodities indices, but let’s focus on food for now.

  ... But the reality is that a rise in commodity prices is 
  precisely what theory predicts would be a consequence of 
  QE2, and the data give the same picture – we aren’t 
  investigating a contentious mystery in the data; we are 
  seeing precisely what we ought to have expected.

Indeed. The amazing thing is how vehemently people insist that tripling the monetary base in a few years won't cause inflation. This is a simple matter of ratios. Bernanke, Obama, Bush, Greenspan, and Krugman have pursued a policy that enriches banks and shields them from risk by diluting dollar holders. If you understand the concept of dilution in a cap table, you should understand this much: the printed dollars are deposited in the accounts of large banks, enriching the very richest and making everyone else worse off.

Krugman himself is a knowing accomplice, one who always pulls his punches with respect to the banks:

http://krugman.blogs.nytimes.com/2010/04/12/failure-is-a-fai...

  One thing that keeps coming up in comments, both here and 
  on my column, is the widespread belief that all we need to 
  do on the banking front is (a) break up the big banks, so 
  that none of them are too big to fail (b) promise not to 
  bail out any banks in the future. That way, the claim goes, 
  bankers will know that they will face dire consequences if 
  they misbehave, and market discipline will do the rest.

  Dream on.

  ...

  But just letting banks fail isn’t going to happen — nor 
  should it. In practice, talking about doing so is just an 
  excuse to avoid real reform.

At the end of the day Krugman is for the bailouts, for the banks, and against bank bankruptcy. No wonder he's against Bitcoin.

I think with both the gas prices and food charts (thank @cdtwigg for pointing out longer-term historical food prices) I'm sorry to say but this is an extreme abuse of statistics. If you extend the chart you linked to by exactly one more year-"BOOM!" just as I said about a barrel of oil* being the same price is was exactly 5 years ago. The huge drop in price resulted from a full-blown recession that would have been worst if the Fed sat around and did nothing.

*Price of a barrel of oil is a much more reliable measure because extreme environmental laws really get in the way of building refineries, which are also prone to being shut down, thus consumer gas prices are much more volatile than the price of crude. This reminds me that the price of oil is very strongly influenced by OPEC, so that is actually something I'd avoid looking at when measuring energy prices. Besides, oil is just one component of energy (although, probably the most important and largest one I'll say). Coal is still cheap as ever (discounting environment regulations) and natural gas prices has bottomed out due to fracking.

PS: Link is a little off still (missing ampersand between USA/Average)

Replaced with a short link. Thanks.

Regarding gas prices, Bush's wars drove up the price of oil. And then just when our adventures in Iraq finally came to an end, the money printing began in earnest. Obama hasn't helped by keeping Keystone XL in political limbo, pushing offshore drilling outside the US, generally assaulting the energy sector with regulation, and setting fire to several more countries in the Middle East (Libya, Syria, Tunisia, Egypt, et alia).

If I interpret you correctly, you state that prices would have fallen if the Fed had sat around and done nothing. I believe we may simply disagree on the desirability of this: some may prize debtors, but I value savers. And I thus generally think of falling prices for household goods (the dreaded deflation!) as a good thing. However, the Fed looks at one of its primary duties as propping up the prices of mortgages. The ostensible purpose is to protect "underwater homeowners" who spent beyond their means. The actual purpose is to take toxic waste off the balance sheets of banks and to put this hot potato in the laps of dollar holders (not just taxpayers, but all dollar holders, including the Chinese).

Anyway, we can talk all we want about these macroscopic phenomena, but ultimately what it boils down to is that people want the Fed to "help the poor" and not simply stand there. And the optics look like they are helping the poor by diluting the dollar and thereby inflating away debts (i.e. the inflation which "doesn't exist" will soon be called a feature and indeed set as a goal by the likes of Krugman).

However, the Fed is also inflating away earning power, and the banks are the first recipients of these inflated dollars, thereby profiting the most from said inflation. The result is a policy that actually hurts the poor far more than simple inaction and rewards the very richest - not entrepreneurs or technologists but the banks that receive direct deposits from the Fed for its "purchases" of mortgage-backed securities (meaning $1 purchases of things worth $.01, or $0).

Bitcoin is a strike against the Fed and the banks by the Valley, perhaps a critical blow. It is very surprising to me that pg (or anyone) could think that USG could possibly have released something like Bitcoin, as it strikes at the very core of the US government's power: the ability to print money.

I agree with you in that I value savings more than debt (hate the current savings rates) and that the Fed does nothing to help the poor (but that's not their job or incentive to do so and I never thought of it that way ever). The Fed had to do what it did because the banks would have failed otherwise. And if the literally too big-to-fail (and prosecute and everything else) banks failed, then the recession would have been far worst than the Great Depression.

However, a lot of people who still held on to their mortgages do depend on the value of homeprices to stay up, (and the value of a college degree while we're at it since student loans recently overtook creditcard debt).

We're getting way off topic here though. I'll just close out with I think the best solutions are to: 1) Bring back the Glass-Steagall Act and don't allow Investment banks to gamble with consumer money 2) Once (1) is actually in place, then the next time a banking crisis comes around, let all the Investment banks fail and only prop up the ones that actually provide deposits, loans and savings. That will right a terrible wrong done 5 years ago. 3) I came up with this recently after reading Liar's Poker and a followup interview a few years ago of Micheal Lewis and John Merriwether: make all banks private (non-public) corporations again. The only bank that is not fully public is Goldman Sachs (yes, they went public in the 90s, but there are still partners who essentially control it) and is probably part of the reason they do better than everyone else.

"the printed dollars are deposited in the accounts of large banks, enriching the very richest and making everyone else worse off."

I absolutely agree with you on this one though, but that also shows why the current printing of money isn't manifesting itself as hyper-inflation, it's sitting around in bank-deposits, or at the fed itself, doing nothing.

Using the loose definition of inflation as "too much money chasing too few goods", the extra money that is flying around isn't chasing any goods, so it's not a problem for now, which is not to say it won't be a problem later, say in a year or two.

The droughts are not one off, they are occurring with more regularity due to global warming

And the 2007-2008 world food prices were cause by this, not related to inflation at all: http://en.wikipedia.org/wiki/2007%E2%80%932008_world_food_pr...

Except inflation takes more than just increased money supply.. You need to pair the money supply with velocity to get an indication of inflationary pressure.

As seen here: http://research.stlouisfed.org/fredgraph.png?g=hxg

There is no conspiracy.. MIT's billion prices index matches CPI almost verbatim. (http://bpp.mit.edu/usa/)

Don't forget the Bank of Japan has also joined the party.

Having held interest rates at 0.5% or less, for 18 years now (since 1995) they are also going to conjure up $76 Billion/month of funny money to buy government bonds, on a mission to double the monetary base by $1.4 Trillion within 2 years.

Nobody really knows what the consequences are going to be, but I think one thing is certain: ordinary people are going to find it hard to accept so-called 'austerity measures' and reduced living standards when they pick up a newspaper and read about central bankers creating money out of thin air.

[1] http://au.news.yahoo.com/thewest/business/a/-/world/16670172...

The graphs you've shown indicate nothing about "out of control". Krugman"s central claim is actually quite true.

There are very good reasons most economists DO NOT include commodities like oil and food in inflation indicators: they're highly volatile, as you point out. And they tend not to be correlated to other inflationary indicators. Just look at the Gold crash the past two days, and oil crash today.

Please explain what economic model you use to indicate your preferred economic policy? Krugman uses standard IS-LM, which has been vindicated time and time again during this crises.