Madam, – Paul Krugman’s latest analysis claiming there is no threat of inflation or a Greek-style collapse in the US and that a Japanese-style deflation was the real risk to the US economy, was simplistic (Opinion, May 24th). A knowledge of history and monetary history is important in these times and Mr Krugman, unlike Harvard historian Niall Ferguson, does not have that important historical perspective.
History has shown that printing money and deficit spending is no panacea to recessions and economic crises and is the preserve of misguided politicians as seen in banana republics in the 20th century and empires in decline throughout history.
Today’s ultra-Keynesians such as Mr Krugman claim Roosevelt’s printing of money ended the Great Depression. This is simplistic and misleading. The significant savings and work ethic of the American people, the US dollar’s increasing status as a global reserve currency (backed by gold), the massive “guns and butter” policies of the late 1930s and the outbreak of and US victory in the second World War all contributed to the Depression ending.
Mr Krugman’s continuing advice to print money and ignore surging budget deficits, thereby further devaluing the US dollar will likely lead to significant inflation in the coming years (particularly with regard to the price of essentials such as food and energy) and much higher interest rates internationally.
From a historical perspective, currency debasement may lead to the decline and fall of America as a superpower as it did to the Roman and British empires previously. – Yours, etc,