If I wasn’t already convinced that he mixes a political agenda into his explanation of economics, his work this week certainly would’ve pushed me over to that side.
In Friday’s NY Times, Paul Krugman had a piece entitled “Lust for Gold” in which he criticizes so-called conservatives for embracing gold, both as a safe asset and for suggesting a return to the gold standard. His beef is that political actors were pushing it as protection against money printing. No, he writes, we have not seen inflation and there is no indication that we will see anything remotely problematic come from a discretionary monetary policy, except perhaps that it will be stymied by the right-wingers. He offers some other polemics, but it’s just not worth responding to. Still, in the course of doing all that, he does admit that gold can be a good investment as it is like a “very long term bond that’s protected from inflation”. Remember that last bit, because it’s important.
Now, go back to Thursday, and on his blog he writes a piece explaining why he is so supportive of the recent BOJ announcement concerning aggressive new policy measures. Specifically, he endorses it because “[i]f investors believe that the central bank will keep the pedal to the metal even as the economy begins to recover, this will imply higher inflation than if it hikes rates at the first hint of good news – and higher expected inflation means a lower real interest rate, and therefore a stronger economy.” In other words, the central bank can “credibly promise to be irresponsible”.
Do you see what just happened there? The first day he explains that all this money printing is intended to create inflation, and in a manner where people believe that it will be done irresponsibly. The next day, while admitting that gold is a good inflation hedge, he suggests that anybody who has been buying it in the past few years either suffers from a case of bad economics or bankrupt morals. Does that strike you as bizarre? Sometimes I wonder if this guy keeps track of everything he writes, or maybe it’s just two different people taking turns on alternate days. Whatever it is, it won’t help anybody to navigate what’s coming.
