This is a very interesting catch by Dean Baker. He created a Google Trends report that shows that searches for the keyword “hyperinflation” are back down to where they were before the financial crisis. As Baker noted, this is good news. But the whole thing disturbs me. Why would the financial crisis stir concerns about hyperinflation? Recession? Sure. Even famine and political instability make sense. But not hyperinflation.
The reason that people were concerned about hyperinflation was that certain people on the right were pushing it as a scare story. Inflation is a standard obsession among conservatives. People who think about economics with any kind of seriousness know that moderate inflation is a good thing—especially right now when individuals are trying to deleverage. Moderate inflation makes debt more manageable and spurs economic activity. Conservatives hate it because it helps the poor and hurts the rich.
Many years ago, I read a primer of libertarianism. It made the standard case for the gold standard. Specifically, it noted that the government never had to print more money. If money because scarce, it would simply go up in value: problem solved! Unfortunately for the libertarians, it isn’t so simple. First, if one can increase his wealth by holding on to money, there is an active disincentive for business investment. Second, any person who owes money will see that amount go up over time.
As a practical matter, the first issue is most important. Deflation would really put a drag on the macroeconomy. As a philosophical matter, the second issue is critical. Conservatives often argue that inflation is bad because it steals money from people. But they have no such concerns about deflation. So what they are effectively saying is that they care about inflation when it harms lenders but not when it harms borrowers. That’s a critical point.
It is hard to get people riled up about inflation when it has generally been too low the last 25 years. That’s why conservative commentators have latched on to the idea of hyperinflation. And this all happens in the context of a world in which not only hyperinflation but high inflation is becoming a thing of the past. Paul Krugman wrote a good article on the complete absence of triple-digit and the great decline in double-digit inflation, The Death of High Inflation. So it is good that people in general have calmed down about the threat of hyperinflation, but I don’t expect this to last. Soon the conservatives will be back with a new reason why we are turning into, “Zimbabwe! Zimbabwe, I tell you!”