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Jul 24, 2011

Inflation Hawks

Over at the Forbes blog, Timothy Lee of the Cato Institute has a good post criticizing what he calls "libertarian inflation hawks." But as David Henderson points out in an EconLog post entitled "Timothy Lee's Blunder," Lee is quite incorrect to state that Scott Sumner is the "lonely exception" to libertarians predicting rising inflation. As evidence, David cites our own joint article defending Greenspan, published by the Cato Institute, along with two of his previous posts. He also could have mentioned our earlier defense of Greenspan, appearing in the March 28, 2008, issue of Investor's Business Daily.

Even if Lee has in mind only libertarian inflation predictions since Bernanke's response to the financial crisis, he still has overlooked an article I wrote for the November 2010 issue of The Freeman, entitled "Government's Diminishing Benefits from Inflation," in which I make almost the same point as Lee: "most libertarians . . .  anachronistically harp on how the U.S. or European governments might cover significant fiscal shortfalls with the printing press, completely oblivious to how insignificant for such governments this hidden tax has become." Indeed, this article became the basis for an op-ed that I co-authored with Sheldon Richman and, like Lee's post, appeared on the Forbes blog.

The Independent Review also recently published my article "Ben Bernanke versus Milton Friedman: The Federal Reserve's Emergence as the U.S. Economy's Central Planner," in which I explicitly agree with parts of Sumner's analysis and contend that Bernanke's "policies were closer to a quantitative tightening" than to genuine quantitative easing. But enough self-promotion. George Selgin, although he rejects David's and my evaluation of Greenspan's monetary policy, is yet another libertarian who has endorsed much of Sumner's analysis  in a discussion at Cato Unbound (to which I also contributed).

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