The War on Hamas Spells Trouble for the War on Inflation
The clash in Israel and Gaza should bring a reminder from the 1970s: Central bankers and investors must beware of false dawns.
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Source: Pictorial Parade/Archive Photos/Getty Images
I am not sure Oct. 12, 2023, was the day I’d have chosen to declare victory. Just five days after Hamas and Palestinian Islamic Jihad launched their barbaric rampage from Gaza, the Nobel Prize-winning economist Paul Krugman tweeted, “The war on inflation is over. We won, at very little cost.”
I leave aside that the measure he selected to prove his point — consumer price inflation excluding food, energy, shelter and used cars — was not one in common use, for the obvious reason that a measure of inflation that omits the cost of eating, heating, housing and driving would strike most people as utterly useless. My interest is that he picked that moment — just after the outbreak of the second war in as many years — to celebrate inflation’s defeat.