Sunday, September 23, 2012

Very Consistent Fed-Bashing

Paul Krugman accuses "Fed bashers", i.e. critics of its QE schemes, of being self-contradictory when they first argues that interest rates were too low during the housing bubble

the very same people who accuse the Fed of having been too loose then accuse it now of targeting asset prices, trying to boost the stock market rather than focusing on the real economy. (Because high unemployment apparently isn’t a sufficient reason).

See the problem? The only reason for the Fed to have tightened in the naughties would have been concern about asset prices — which is the same kind of concern that is apparently dastardly now.
No, I don't see the problem. In fact, it is very consistent to have been concerned about inflated asset prices during the naughties and to be concerned about inflated asset prices now. During both periods (but clearly  not quite as dramatically now as during the naughties-yet) Fed policy have inflated asset prices.

Krugman's assertion of self-contradiction rests on his illogical claim that "concern about asset prices" must have meant "trying to lower them" in the naughties and "trying to raise them" now, which is to say his assertion that the meaning of "concern about asset prices" must have contradictory meanings in different periods of time, Or in other words, Krugman claims that Fed bashers are self-contradictory solely on the basis that they contradict Krugman's self-contradictory definition!