@paulkrugman continues his efforts to minimize the inflation threat to the American economy and progressive politics by pointing to the fact that inflation surged and then there was a year of deflation after World War 2.
If this is the best argument for not being alarmed that someone as smart, rhetorically effective and committed as Paul can make, my anxiety about inflation is increased.
Pervasive price controls were removed after the war. Economists know that measured prices with controls are artificial, so subsequent inflation proves little.
Millions of soldiers were returning home and a massive demobilization was in effect. Nothing like the current pervasive labor shortage was present.
It was only 15 years since the price level had fallen 25 percent. The 1948 Samuelson text graphed the price level rather than the inflation rate through time. Psychology was radically different.
Political economy of 1948 was also radically different than today. Economy was not still under influence of a massive positive aggregate demand shock. Policymakers had overwhelmingly recognized inflation as dominant problem w Pres Truman convening a special session of Congress
If monetary policy stays w what Fed now projects & no break in asset markets, economy grows reasonably rapidly, inflation returns by end of next yr to 2% range, I will have been wrong & excessively alarmist in my warning. Paul, what will cause you to admit you have been wrong?
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