A lot of journalism is just asking the big, dumb question, and Michael Kinsley did a good job of that with his piece in The Atlantic worrying about whether big-time inflation is on the way—and that the press isn’t doing what it can to keep his nightmare from becoming reality.
Kinsley acknowledges that most economists don’t think the danger he sees is real. But that’s not enough.
Maybe I’m like those generals who are always fighting the last war, but I am not reassured. I worry that when and if the recession is well and truly over, there is a serious danger of another round of vicious inflation. (If the recession is not over, or gets worse, we’ll have other problems.) This time, inflation will be a lot harder to stop before it turns into hyperinflation. Whether Obama navigates these shoals successfully will be a big factor in his historic reputation. And journalists will be kicking themselves (and other people will be kicking journalists) for missing a disaster story on the level of Hurricane Katrina, if not 9/11 itself.
In short, I can’t help feeling that the gold bugs are right. No, I’m not stashing gold bars under my bed. But that’s only because I lack the courage of my convictions.
The piece got the attention of Paul Krugman, who called it “odd” and drew attention to this passage from Kinsley about hyperinflation:
Hyperinflation is when inflation feeds on itself and takes off beyond control. You can have stable 2 to 3 percent inflation. But you can’t have stable 10 percent inflation. When everybody assumes 10 percent, all the forces that produced 10 percent push it to 20 percent, and then 40 percent, and soon people are lugging currency in a wheelbarrow, as in the famous photos from Weimar Germany.
Professor Krugman disagreed:
Uh, no—at least not according to textbook economics, which makes a real distinction between the kind of inflation that bedeviled the 1970s and 1923 (or Zimbabwe)-type hyperinflation.
The two have by now gone back and forth a few times. This afternoon, Kinsley noted that “Paul Krugman has now responded to my response to his response to my column about the risk of inflation.”
While Krugman clearly can claim the economics edge in this debate, Kinsley deserves credit for stepping back and asking a very good question.
It’s worth reading the whole back-and-forth (with more sure to come), both for the underlying economic debate and the fun sparring about introductory economics textbooks.
As Kinsley puts it:
I guess that an economics textbook author’s opinion about what is and is not “textbook economics” is self-validating.
Nice. Now maybe he can sleep at night.
—President Obama’s plan to double exports in five years meets some much-needed skepticism in The Washington Post.
This was one of those State-of-the-Union pledges that largely went unexplained—and unchallenged. But lately, administration officials have been out selling the initiative, which, the White House says would create 2 million jobs.
But economists, business officials and others say that companies emerging from the recession may have ways to meet new export orders without adding new employees — by accelerating underused production lines, restoring full workweeks to employees or improving worker productivity, for example.
Trade disputes could further complicate the Obama plan, as will similar export pushes from other countries, including net exporters like China and Germany.
The Post story is a good follow-up, and a good reminder that even something that it’s hard to be against, like boosting exports (and apple pie), still merits some scrutiny—especially when it’s a key element of an economic plan.
—Finally, in sports, the Times has a fascinating business story about BWP Bats, a “boutique bat maker” in Pennsylvania, and its push to make the bigs.
In the quirky world of wooden bats, Pagan’s game-ending home run was a huge endorsement. Major leaguers are on television often and widely imitated, so bat makers are desperate to get their wares in their hands. Yet many players are also superstitious and resist changing their equipment, bats included.