Just Call Him Bernanke-sama

http://krugman.blogs.nytimes.com/2010/10/18/just-call-him-bernanke-sama/

Krugman cites this graph, I think as part of his general belief that deflation is a bigger threat than inflation. I will only point that core CPI is woefully inadequate, because it excludes taxes (I believe), food and shelter. Taxes are Americans' largest single expenditure, while food and energy are also obviously necessary costs. Taxes, food, and energy -- which, along with healthcare (also rising) -- are the most essential/unavoidable (in the case of taxes), and as the BLS acknoweldges, all of these have risen in the last year. Excluding essential goods from a price calculation renders it useles.

Krugman I think is also citing Japan as an cautionary tale to be avoided. I agree, for very different reasons. Japan suffered a "lost decade" in which the government adopted the very Keynesian policies, running massive deficits, that Krugman now advocates. Krugman will of course argue that the Japanese government didn't spend enough, or wisely. But, the Japanese drank the Keynesian Kool-Aid, running up a national debt close to 200% of the GDP (By way of comparison, Greece, a glorified Third-world, basket-case of a nation has a national debt that is 113% of its GDP), bailing out banks, keeping interest rates at zero -- its hard to see what, from a Keynesian perspective, Japan did wrong.

But, here Japan is, an economically struggling state, a fact made more remarkable by the country's economic dynamism from 1945-1990, before it adopted Keynesian policies. The upshot is that I don't think that there can be any serious argument that: a) from 1945-1990 Japan enjoyed spectacular economic growth and b) since then, Keynesian policies have corresponded temporally with economic stagnation. Krugman evidently misses the irony of using Japan as an example to be avoided while at the same time advocating the same policies that destroyed the Japanese economy in the first instance.