I’ve been hearing a lot of libertarians and conservatives raising alarm bells about inflation recently. According to Ron Paul, a prominent critic of Bernanke’s job as chair of the Fed, the coming currency crisis “won’t be as bad as Zimbabwe… but perhaps something like 1979 or 1980.” Conservative rising star Paul Ryan told Bernanke recently that “Our currency should provide a reliable store of value—it should be guided by the rule of law, not the rule of men… there is nothing more insidious that a country can do to its citizens than debase its currency.”
There is evidence that Paul and Ryan’s concerns about inflation are misplaced. Here’s a graph from David Leonhardt:
Kind of seems like there are other priorities that should take precedence over fighting inflation right now, no?
Ron Paul has nutty views on a lot of things, including monetary policy, and is a fairly fringe political figure. But Paul Ryan is a mainstream republican (he even gave the State of the Union rebuttal), which indicates how this inflation anxiety has permeated the thinking of right-leaning American political figures.
Of course, inflation is bad, and it should be a priority to keep it low. In the early 1980s, as you can see from the graph above, inflation was very high, and the Reagan/Volker tight money policy was exactly the right response. But the economic context is very different now, and instead of recognizing that, politicians like Ryan continue to keep pushing the same crude version of Reaganomics. In the absence of evidence indicating future increases in inflation, this dogmatic obsession with inflation just impedes economic recovery.