James Pethokoukis on Conservative Fears of Inflation

James Pethokoukis, writing for “The Week,” has a column taking note of the fear of inflation among certain conservative lawmakers and thinkers which is seemingly resistant to data.

As Ron Paul, the libertarian former GOP congressman and presidential candidate, said back in 2009: “More inflation is absolutely the wrong way to go. We’re taking a recession and trying to turn it into a depression. We’re going to see a real calamity.”

Many GOP politicians have since echoed Paul’s prediction. But the Next Great Inflation never happened. The Consumer Price Index, including food and energy, has risen by an annual average of just 1.6 percent since 2008, below the Fed’s 2 percent inflation target. During the Great Inflation of the 1970s and early 1980s, by contrast, prices rose five times faster.

Instead of being relieved that inflation hasn’t materialized, some folks are apparently insisting that inflation really is high, the government statistics are wrong.

He speculates on the reasons for the impulse to see inflation around every corner:

Why this GOP inflation obsession? Maybe it’s a legacy of how rapidly rising prices in the 1970s swept conservatives into power in both America and Great Britain. Maybe it’s how many conservative talk radio shows are sponsored by gold companies who stand to benefit from inflation hysteria. Maybe it’s a belief that every single economic metric must be a nightmare under President Obama.

I’m not convinced those reasons are really on the mark. There might be some of that, but probably the deeper reasons are elsewhere; particularly in the case of someone like Ron Paul.

Ron Paul sees little use for government outside of preserving property rights. Inflation tends to hurt creditors more than debtors. So, in that sense, inflation tends to impair property rights. Furthermore, the spending policies they see as leading to inflation tend to tax the wealthy in order to provide services to the poor (or at least less wealthy). That sort of policy impairs property rights as well. My guess, then, is that if you see someone who worries about inflation more than the data would seem to justify, you’ll find someone with a very deep concern for property rights almost to the exclusion of other sorts of rights.


  1. Freedom says


    Are you serious?

    Inflation is soaring. This morning it was released that Yellen is worried about wage inflation.


    Seattle has a $15 minimum wage.

    Do you grocery shop? Prices are climbing, and sizes are shrinking.

    Consumerist has a running report on where the Shrink Ray is being used.


    Gas is $3.30.

    The average American family cannot afford a new car.


    Inflation is everywhere.

    They paid for two wars and stimulus packages with debt. That new money is dilutive of prior money.

    It is well known that the Fed is trying to devalue the dollar by 33%.


    Please tell me how you don’t see inflation, and I’ll try to steer you on the right course.

  2. Rick Westerman says

    Well it is true that (hyper)inflation can destroy an economy thus one should always be careful not to fall into it. Witness between-wars Germany and, more recently, Zimbabwe. I am not an economist but I suspect that the land and property owners suffer the least during hyper-inflation since they should come out of it with their property intact and any debts wiped out.

    Of course that is hyper-inflation. Low-level inflation (2-5%) is different. It can hurt wage-earners (i.e., the middle class and poor) if wages do not keep up. It can cause property owners to not earn as much on rent but their property values should more-or-less automatically keep up. Inflation does help debtors, a classification which actually applies to all strata of people and — my suspicion that the is the key point — the borrowing government. It rarely helps lenders.

    Personally I am mostly anti-inflation since it seems that my income (wages) only increase once a year while the price of what I purchase is constantly adjusted.

  3. Carlito Brigante says

    Maybe the right would like to try some deflation. We all know that modest inflation is necessary for growth and to avoid slipping back into deflation.

    The CPI is an interesting market basket approach to determining inflation that some believe that (excluding volatile fuel and food) slightly understates inflation. Many believe, including me, that the change in the CPI that Reagan initiated relative to to housing prices disguised one element of inflation. The Reagan area change moved from measuring the actual increase in the price of housing to a rent-based concept. The idea is that the house is actually a capital asset that the homeowner “rents” back to himself.

    There are also “hedonic adjustments” to goods that make up the market basket. One example I recall was a “hedonic adjustment” to washing machines. Even thought the prices went up, the price was adjusted downward because there are so many more features on washers and new washers do an objectively better job with clothes. (Detergents are better now, also.) Plus, I like saying the word “hedonic adjustment.” It sounds like something that Beavis and Butthead would laugh about if they heard the word “hedonic adjustment.”

  4. Mary says

    In that case, my brand new, more fully loaded, more aesthetically pleasing, elite brand dishwasher was “hedonically adjusted downward” — it does a noticeably crappier job than the simpler, less elite, somewhat beat up, 11-year-old one it replaced. Quality down and price up equals :(

  5. says

    Inflation destroys savings, so — as a result — it is the ultimate impairment of property rights. Moreover, it’s source in modern times is always government because the state is in charge of the currency: inflation is always & everywhere a monetary phenomenon.

  6. indyguy says

    According to an Options Action segment on CNBC, there has been inflation. How much, I don’t really know. Here is the clip if anyone is interested:


    So there is inflation, just not massive inflation. There can’t be massive inflation because the fact is, we have investments in this economy that favor a very small number of people, while providing a year or so of middle income living for others. For example, the winners with the new Eskenazi are those who owned the companies and reaped huge sums of money, a thousand or so construction workers made a middle class living for the few years it took to build it. The problem is that those who made well over six-figures on the deal aren’t taxed appropriately and don’t spend the amount needed to really stimulate the economy.

    Just had another debate about $15/hr. minimum wage. Many people laugh about people not pulling themselves up, but I reminded the group that back in the mid-90s I was making just over minimum wage at a retail job. Gas was only $1/gallon and tuition at IUPUI was $90ish/credit hour. Fast forward to today, minimum wage is not even $10/hour, so it hasn’t even doubled, yet gas cost over $3/gallon and tuition at IUPUI is around $270/credit hour. This is what happens when government picks winners and losers and interferes with a system that is supposed to be free market based.

      • Stuart says

        Talk about penny-wise and pound foolish. Physical infrastructure, like roads and bridges, can be postponed, even though the eventual price will be higher, but kids are the future of the civilization. You can’t recoup that expense when facing the inevitable disaster. We all know that charters and vouchers are schemes to circumvent the high expense of education, but if the politicians think they can get something for nothing in that area, they are delusional. The data clearly show that those options are seriously flawed. In the end, if you think education is expensive, try ignorance. The ideologues are wiring the mechanism for destruction, and stupidity begets stupidity, not wisdom, but as they will discover, the sword cuts both ways.

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