War Of Words Over Inflation Stirs Questions for the Fed

By Judy Shelton, Special to the Sun | May 14, 2021 

The war of words unleashed on Wall Street and in Washington by Wednesday’s announcement of an unexpectedly high rate of consumer price inflation is escalating by the day.

Legendary hedge fund manager Stanley Druckenmiller had warned on Tuesday in the Wall Street Journal that the Fed was enabling fiscal and market excesses by not standing up to the political whims of Congress; he stated on CNBC that the Fed’s overly accommodative monetary policies posed a risk to the status of the United States dollar as a global reserve currency.

Refuting such concerns, Paul Krugman asks today in his column for the New York Times whether President Biden should scrap his entire economic agenda merely because the spike in consumer prices as reported by the Bureau of Labor Statistics was bigger than expected. “OK, I’m being a bit snarky here, but only a bit,” Mr. Krugman concedes.

Snarky is hardly the word for the crass deprecations he offers in his concurrent newsletter, wherein he notes “a lot of buzz around how the Fed’s wanton abuse of its power to create money will soon lead to runaway inflation.” The Nobel laureate dismisses fears of monetary debasement as being anchored in neither fact nor logic but rather attributable to an “infestation of monetary cockroaches.”

What seems to be missing in the debate over whether the inflation number itself is alarming as a bellwether — some were disconcerted when the Fed’s vice chairman, Richard Clarida, admitted that it “surprised” him — is the larger question of government competence in steering the economy.........To Read More.....