Paul Krugman: Inflation and Economic Hooliganism

In a way, I miss the months that followed Lehman’s failure. O.K., not really — but if it was a time of terror, it was also a time of clarity. The whole world was going to hell in a handbasket, and policy makers everywhere shared a common goal: stopping the plunge.

Today, by contrast, the picture is full of seeming contradictions. Are we in a runaway boom, or is growth weak? Is inflation low, or is it spiraling out of control? The answer to all of these questions is yes. China, India and Brazil are growing much too fast for comfort; America, Europe and Japan remain depressed. Inflation is running high in the emerging world, while the prices of oil and food, which are determined in global markets and are largely driven by demand from those emerging nations, have soared; but underlying inflation in the wealthy nations remains low.

In short, at this point we’re living in a world that is characterized not so much by the sum of all fears as by some of all fears. Whatever you’re afraid of, be it inflation or unemployment or fiscal crisis, it’s happening somewhere — but the problems are different in different places.