So Much Wrong About Inflation

07-25-2014 • http://chrisinmaryville.net/

Austrians are more and more noticed in the mainstream. You don't get much more mainstream than Paul Krugman; he has written a short blog post(HT EPJ) critical of Austrians and their supposedly creative use of the term "inflation." Referencing aNoah Smith post, Krugman writes: Noah Smith has a funny piece on the hermetic system that is Austrian economics, with its multilayered defenses against any kind of criticism. What gets me in particular, because I've noticed it a lot lately, is this: 3. "Inflation" doesn't mean "a rise in the general level of consumer prices," it means "an increase in the monetary base", so QE is inflation by definition. So when Austrians were predicting runaway inflation, they didn't actually mean consumer prices? Insisting that the term "inflation" means something else in your private language is just pathetic. … [Austrians] could have called a general rise in the CPI a banana. Were they predicting a banana? Of course they were. And they were wron