Lunchtime Must-Read: Paul Krugman: Switzerland and the Inflation Hawks

…since 2009 if not earlier, and have refused to change their views…. Inflation truthers insist that the government is hiding the real numbers…. Normally sensible conservative economists… see the non-inflationary story as somehow the result of very special circumstances…. Martin Feldstein and others have claimed that it’s all about the 0.25 percent… interest rate the Fed has been paying on excess reserves. Without that… quantitative easing would indeed have produced… big inflation….

So, can we talk about Switzerland?… Never paid interest on reserves… [now] charging banks 0.25 percent…. So has the Swiss National Bank’s huge increase in the monetary base, which dwarfs what the Fed has done, produced inflation?… Monetary base up by a factor of eight. Money supply up by much less, because banks didn’t lend the funds out. And consumer prices flat, indeed flirting with deflation. This is all exactly what a basic liquidity trap model–the one I laid out in 1998–predicted…