The latest scoop from the New York Times is that the Federal Reserve is asking the “thorny question” of “how to better understand inflation after surprises.” It’s a template of Timesian blame shifting. Who, after all, was surprised? Not readers of the Wall Street Journal, say, or Grant’s Interest Rate Observer, or Judy Shelton. Want to “better understand inflation”? Cancel your subscription to the Times and read another newspaper.

The Times has spent the last generation trying to palm off on its noble readers the patent falsehood that warnings about inflation were ridiculous. The Journal, in contrast, is the paper that first carried the warning about inflation issued in an open letter to the Federal Reserve in 2010 by conservative economists, thinkers, and journalists. The editor of the Interest Rate Observer, James Grant, was among  its signers.*

Signers of that letter were too modest, in our view, to claim vindication, given that consumer prices, on which they focused, didn’t begin soaring until a decade later. Asset prices — on the stock market, art going for nine figures, apartments — did follow, though. The value of the dollar in gold fell, at one point, to below a 2,000th of an ounce. It still lurks at 1,868th of an ounce of gold, down nearly 27% from when the inflation letter was published.

As recently as last year, though, the Times’ star economist, Paul Krugman, was mocking those who were warning “about 1970s-type stagflation?” Okay, Mr. Krugman wrote, “many people are still saying such things, some because that’s what they always say, some because that’s what they say when there’s a Democratic president, some because they’re extrapolating from the big price increases that took place in the first five months of this year.”

Notice Mr. Krugman’s en passant questioning of motives. Plus, he goes on to say that “for those paying closer attention to the flow of new information, inflation panic is, you know, so last week. Seriously, both recent data and recent statements from the Federal Reserve have, well, deflated the case for a sustained outbreak of inflation. For that case has always depended on asserting that the Fed is either intellectually or morally deficient (or both).” 

“That is,” Mr. Krugman caviled, “to panic over inflation, you had to believe either that the Fed’s model of how inflation works is all wrong or that the Fed would lack the political courage to cool off the economy if it were to become dangerously overheated. Both beliefs have now lost most of whatever credibility they may have had.” Mr. Krugman wrote all that in June 2021, right before inflation erupted. Talk about being “so last week.” 

By now there’s hardly a single upright-walking biped who doesn’t nurse doubts about the Federal Reserve’s model of how inflation works. Or doesn’t reckon that the Fed lacks for political courage. Or hasn’t concluded that our central bank shares in the blame for igniting the inflation that has flabbergasted the Keynesian establishment and the partisans of fiat money, meaning money not defined in law and convertible into specie, such as gold or silver.

No wonder the Times calls the question “thorny.” The Democrats — and, sad to say, a faction of Republicans — have wandered into a monetary and fiscal briar patch of historic proportions. It is going to take a mighty effort in Congress to return to a system of honest money so as to be able accurately to read the price signals that are necessary for a stable economy — and to avoid such confessions as the Times has had to make that the catastrophe of inflation was a surprise.

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* Signers of the letter included Roger Hertog, the founding chairman of the Sun, and historian and journalist Amity Shlaes, who is married to the Editor of the Sun.