How to Defraud Small People Out of their Savings

Paul Krugman, winner of the Nobel Prize in Economics, demands 6 to 7 percent inflation. That is about as socially responsible as using child labor in uranium mines.

Paul Krugman is the chief ideologue and torch bearer of the political and economic school of thought that eschews the idea of saving during a debt crisis, preferring to accrue still more debt and furiously run the printing press. Among politicians and voters, this ideology is obviously enjoying great popularity. The electoral victory of the socialist François Hollande in France ensured the triumph of this intellectual battle in large parts of Europe. In contrast to the supposedly misanthropic, cold ideology of neoliberalism, Krugman’s school of thought is seen as the more socially responsible and altruistic.

Krugman does not really deny that such a policy will lead to higher inflation and the devaluation of people’s savings; he simply thinks it’s justified. Thus, he regularly calls on the European Central Bank to give up its “obsession with price stability.” Although doing so would be flagrantly illegal and politically corrupt, that does not seem to be a valid counterargument to Krugman. He believes 3 to 4 percent inflation to be quite okay, and even more than 4 percent in Germany.

Although that seems rather harmless, it is not at all; according to Krugman’s prescription, Germany (and Austria in practice) would have to have inflation “4 points higher than Spanish inflation.” He clearly explained this on his blog, “Conscience of a Liberal,” in November 2011.

Given the current Spanish inflation rate of just over 2 percent, Krugman prescribes an inflation rate of 6 to 7 percent for the countries to the north. That would be their “reward” for mostly avoiding reckless deficit spending.

It remains a mystery to the Nobel Prize winner how he would keep such a high rate of inflation from exploding; those who have flirted with inflation in the past have always been forced to marry it.

Ultimately, maintaining such a high rate of inflation is about as socially responsible as having child labor in Uranium mines on Sundays. After a decade of 7 percent inflation, the purchasing power of money would be less than half of what it is today. The rest would have been devoured by inflation.

Therefore, Krugman’s plan is an excellent instrument for the widespread expropriation of small savers who have labored to set aside small fortunes by forgoing immediate consumption.

Such a devaluation of the currency would have little to no effect on the rich and super rich, whose wealth is usually tied up in real estate, equities, and direct corporate ownership. These types of property have universally survived hyperinflations largely unscathed.

What Krugman suggests is logically consistent: expropriate the small pensioners and protect the very wealthy. But ideologies of “social warmth” are never presented in this way.