The odd misjudgments of inflation hawks

THE ODD MISJUDGMENTS OF INFLATION HAWKS…. Don’t just roll your eyes and assume I’m mocking Sarah Palin’s dimwittedness again for its entertainment value. This one’s actually pretty important.

As the U.S. readies to join the other Group of 20 nations in Seoul, South Korea, [the Federal Reserve’s] plan to pump money into the banking system to jump-start the recovery is finding enemies both foreign and domestic — from finance officials in Germany and China to Sarah Palin.

Former vice presidential candidate and Tea Party favorite Palin weighed in on the debate late Monday over whether the plan, known as quantitative easing, would help boost the U.S. economy, calling on Federal Reserve Chairman Ben Bernanke to “cease and desist.”

“When Germany, a country that knows a thing or two about the dangers of inflation, warns us to think again, maybe it’s time for Chairman Bernanke to cease and desist,” Palin said in a speech in Phoenix.

The international dynamic is odd enough. Sarah Palin is taking China’s side over that of U.S. officials? For that matter, it’s amusing, in a way, for the former half-term governor to rely on Germany to bolster her case — since when does the far-right care what Europe thinks? Isn’t the conservative line that Americans should only reference Europe as an example of what to ignore?

More substantively, though, Palin’s principal concern doesn’t appear to make sense.

“All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher.”

I’m well aware of the fact that Sarah Palin is deeply confused about, well, pretty much everything, but it’s important Americans realize how painfully backwards the concerns from “inflation hawks” really are.

Indeed, David Leonhardt explained the other day that those worried about inflation over the last year or so have been consistently, tragically wrong. At the precise time the Fed should have been doing more, it did less, due entirely to fears about inflation that didn’t exist.

So, when Palin insists inflation has been a real problem “over the past year or so,” the people who tell her what words to say haven’t the foggiest idea what they’re talking about: “[F]ar from ‘rising significantly,’ overall prices have moved at historically low rates in recent months — just 1.1 percent in the past year. The Wall Street Journal’s Sudeep Reddy dug deeper into the numbers and found there was even less evidence to back up Palin’s specific groceries claim — inflation for food and beverages was less than .6 percent for the first nine months of the year. That’s the slowest rate of price increases for food and drinks since the Labor Department began keeping track in 1968.”

The real fear right now is over deflation. Palin may not know what words like these mean, but that’s the opposite of inflation.