The Federal Reserve Board seeks to maintain an inflation rate around two percent per year. While this rate might sound low for older types who remember double-digit inflation rates in the late 70s and early 80s, and a rate of 5.4 percent as recently as 1990, why tolerate, let alone seek to sustain, any inflation at all? Why not seek to establish zero inflation and stable prices? After all, even an inflation rate of only two percent a year means nominal prices still double every 36 years. And while people can and do broadly adjust their behavior in the face of anticipated inflation, it’s not a seamless process. Inflation distorts people’s economic decisions, whether as producers or consumers, labor or capital, and so imposes costs on us all.
To compare The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace to a 100,000-word inflationist op-ed by Paul Krugman would be unfair—unfair to Paul Krugman. It goes beyond Keynesian hagiography to Keynesian deification.