Vulgar Monetarism

 Krugman takes on more bad arguments - something he has been calling "zombie lies" for as long as I've been reading his work. In this post, he addresses the argument from Scott Bessant that basically the only cause of inflation is an increase in the money supply. In other words, if the Fed keeps interest rates high the tariffs and deportations can't be inflationary. Let's pause for a moment and addresses something Krugman doesn't: Trump wants to CUT interest rates. That's why he's falsifying charges against Lisa Cook. 

Now, printing lots of money IS a cause of inflation. It's simply not true that it's the only one. One of the biggest causes on inflation is a supply shock. In fact, I argue in class that probably the leading cause of the debilitating inflation of the 1970s were the rolling oil shocks. Given the centrality of oil to just about all economic activity, oil embargoes hit everyone everywhere all at once. The other issue (that Krugman addressed weeks or maybe months ago) is that once inflation takes root, it's very hard to get rid of.

Back to 2025, the Trump administration has been actively creating a supply problem along the two major axes of its policy. The first is, of course, tariffs. They are fundamentally inflationary by design. If tariffs aren't raising the price of imported goods, then they cannot achieve the hallucinatory goal of returning manufacturing to the US. 

The second is the Stephen Miller pogrom against immigrants or really any non-white people. Food prices should spike because the migrant workers are being rounded up. Same goes with construction costs, which is a shame, because there's some real political will to override a lot of NIMBY regulations and boost the stock of housing via more dense construction. 

Then you have the dual problem of the ICE raid on Hyundai plant in Georgia. This seems to combine the anti-immigrant policies of Miller with the effort to force foreign companies to build in the US. We shall see if Hyundai abandons the plant. I certainly would (if I could afford the sunk cost). Regardless, all the chaos means that no one will hire based on policy uncertainty.

As we marinate in the unreality of the flood of mis- and disinformation surrounding the Charlie Kirk assassin, just remember that this unreality is also informing the right's economic policy. In the end, supply and demand are simply too powerful and economic force to be talked around. Tariffs reduce the supply of goods; deportations reduce the supply of labor. Reduce the supply, the price goes up. No amount of Scott Bessant or Donald Trump arguing otherwise will change that.