Inflation Chicken-Littles Can't Quite Grasp That It Isn't Happening

Meanwhile, Paul Krugman is trying to bat away inflation-hawks, but since these morons proliferate like Tribbles, he is getting swamped:

Let’s back up here. By spring 2009 a sharp division had emerged among economic commentators. On one side, many people looked at big budget deficits and the rapid expansion of the monetary base, and saw terrible things happening to interest rates — who will finance all that government borrowing? — and inflation — look at all that money the Fed is printing! On the other, some of us — especially those of us who had studied Japan in the 1990s — argued that this wasn’t that kind of situation. With the economy depressed and short-term interest rates up against the zero lower bound, government deficits would not crowd out private spending, but rather promote it. And when you’re in that situation, expanding the monetary base isn’t inflationary. On the contrary, the danger was deflation from excess capacity.

In effect, we’ve had a test of those two views. And guess what? Interest rates have fluctuated, but as of 20 minutes ago the 10-year bond rate was 3.17, yes, 3.17 percent. Bond vigilantes, where have you gone. Meanwhile, core inflation — and yes, that is the right measure — just keeps falling. (As Mark Thoma points out, this is a total refutation of those who kept claiming that there is no Phillips curve.)

But as I said, the people who want their deficit-and-inflation crisis just won’t take no for an answer.