One of the most infuriating things about the Fed haters — i.e. the people who predicted massive inflation and dollar debasement as a result of quantitative easing — is that they have never really admitted they got it all wrong.
Maybe a few have, but for the most part, the people predicting doom and gloom and Weimar, Germany-like outcomes continue to say the same thing, without regard for actual evidence.
This is what makes folks like Krugman so infuriated, and why he’s so harsh towards his critics, because he regards them as intellectually dishonest.
There’s more evidence of that today, courtesy of a great Bloomberg piece by Caleb Melby, Laura Marcinek and Danielle Burger in which they called up various signatories to a 2010 letter that warned Bernanke about impending inflation.
The upshot: For the most part, they don’t accept they were wrong.
Here for example is Jim Grant, editor of Grant’s Interest Rate Observer, and intense critic of Fed easing:
Jim Grant, publisher of Grant’s Interest Rate Observer, in a phone interview:
“People say, you guys are all wrong because you predicted inflation and it hasn’t happened. I think there’s plenty of inflation — not at the checkout counter, necessarily, but on Wall Street.”
“The S&P 500 might be covering its fixed charges better, it might be earning more Ebitda, but that’s at the expense of other things, including the people who saved all their lives and are now earning nothing on their savings.”
“That to me is the principal distortion, is the distortion of the credit markets. The central bankers have in deeds, if not exactly in words — although I think there have been some words as well — have prodded people into riskier assets than they would have had to purchase in the absence of these great gusts of credit creation from the central banks. It’s the question of suitability.”
Grant is not 100% wrong in his concerns about the recovery. It has been disappointing. But a rising stock market is not how people measure inflation, and the labour market has recovered significantly, bringing real relief to millions of people. It is true that it hasn’t been a great time to be a saver who’s been 100% in cash, but if you’ve been in stocks (or even bonds!) you’ve done quite well.
And here’s Niall Ferguson also trying to claim credit: “Though generally regarded by a cause for celebration (even by those commentators who otherwise lament increasing inequality), this bull market has been accompanied by significant financial market distortions, just as we foresaw.”
Sorry, but no. “Distortions, just as we foresaw” is at worst wrong, and at best tautological, in the sense that you can define distortions in any way you want, relative to any baseline that you have imagined in your head.
Has the recovery been disappointing? Yes. Are there things the government and the Fed could have done differently to make the recovery better? Certainly. Have the Fed haters gotten things right? Not even close.
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