Thanks to a post from my friend, Bill Anderson, he alerts us to another regressive move by New York Times Columnist, Paul Krugman. Anderson notes that in his latest missive, Krugman blames Ron Paul and the rest of the "inflationistas" for Ben Bernanke shying away from even more money printing. "I’d say that the Fed’s policy is to do nothing about unemployment because Ron Paul is now the chairman of the House subcommittee on monetary policy." Krugman is critical of the Fed for not expanding the monetary base even more than he already has.
Krugman is once more revealing his exit from serious economics. He is no longer even consistent with himself. His defense of Obama's fiscal stimulus plan is that we are caught in a liquidity trap (and can't walk out). Keynes argued that if at some low interest rate, people want to hold every additional dollar the central bank creates, further increases in the money supply will not further lower interest rates, so that no further borrowing or economic activity will be stimulated. In such a scenario, expansive monetary policy is ineffective in expanding the economy.
I am not conceding that the liquidity trap is a real possibility, nor that we are in one. You can read Murray Rothbard's dismantling of the liquidity trap theory in America's Great Depression. The point I am making is that Krugman, who very much believes in liquidity traps and indeed sees one behind almost every recent financial crisis, is demonstrating inconsistency for the sake of political points. If we needed the Obama stimulus because we are in a liquidity trap, Krugman should not care that Bernanke is not even more inflationary, because it would not help anyway.