In his most recent column, Krugman claims that rising food and fuel prices are nothing more than evidence of an economic recovery. Nothing else. He writes:
What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story.As for inflation, Krugman claims it is low, but what he means is that the government's Consumer Price Index is not rising by nearly as much as prices are rising for commodities. As I see it, however, the "Scarcity" argument really does not hold much water.
Krugman apparently believes that although the Federal Reserve System has been flooding the world with dollars via bailout loans around the world and an aggressive monetary expansion policy at home, all of those extra dollars really have no effects on prices. Yet, I believe that to be shortsighted, as the commodities markets are extremely sensitive to changes in the value of money.
However, Krugman claims that any dissent from his wisdom is nothing more than right-wing nonsense:
What about commodity prices as a harbinger of inflation? Many commentators on the right have been predicting for years that the Federal Reserve, by printing lots of money — it’s not actually doing that, but that’s the accusation — is setting us up for severe inflation. Stagflation is coming, declared Representative Paul Ryan in February 2009; Glenn Beck has been warning about imminent hyperinflation since 2008.Uh, I would say that stagflation (a parallel increase in the rates of inflation and unemployment) already is here, although it is not as pronounced at it was 30 years ago. But since Krugman denies that stagflation is here, then I guess it is not here no matter what the numbers tell us.
Yet inflation has remained low. What’s an inflation worrier to do?
One response has been a proliferation of conspiracy theories, of claims that the government is suppressing the truth about rising prices. But lately many on the right have seized on rising commodity prices as proof that they were right all along, as a sign of high overall inflation just around the corner.
As I have said before, people have been too quick with the predictions of hyperinflation and imminent economic collapse, but given that the Obama administration's economic "recovery" program consists of spreading dollars abroad, spending, expanding government regulation, empowering federal prosecutors against business figures, demonizing businesses, continuing costly foreign wars, and expanding an already bloated and abusive "security" apparatus at home, there isn't going to be anything akin to a real recovery.
However, the things I have listed seem to be on Krugman's list of what will bring us into recovery, although I am not sure how any of what I have listed is going to result in more goods being produced and American entrepreneurship being unleashed. But Krugman is too busy creating "Jake Blues" excuses as to why commodity price increases really have nothing at all to do with the state of the U.S. Dollar. (Remember "Jake's" encounter in the sewer tunnel with his jilted lover, played by Carrie Fisher? He gives a litany of excuses, and Krugman takes the cue.)
So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.I don't think so. Resources have not suddenly become finite; the Law of Scarcity did not come about yesterday. To deny ANY relationship between the surge in commodity prices (including gold and silver, Paul) and the dollar losing value is to deny reality. But Krugman is good at denying reality -- and demonizing anyone who disagrees with his Great Wisdom.
But that’s for the future. Right now, rising commodity prices are basically the result of global recovery. They have no bearing, one way or another, on U.S. monetary policy. For this is a global story; at a fundamental level, it’s not about us.