For the record, I personally never predicted hyperinflation. It is plainly the case that the bulk of money creation happens through the fractional reserve banking system, and banks are not loaning out much money. We are PRIMED for hyperinflation, but that will only happen if the economy starts expanding significantly again, and that will only happen if we have a non-Socialist in the White House.
For the rest, though, Krugman is plainly wrong. The Fed caused the bubble AND the crash that started the recession of 1929. Herbert Hoover and to a much greater extent FDR EXTENDED the recession into a massive depression through idiotic monkeying with the economy that had never been tried before, which failed utterly–creating by far the worst Depression America has ever experienced–and which is only considered successful because of ideologically motivated hacks like Krugman who write the economic histories. Put bluntly, all socialists think FDR’s policies SHOULD have worked, so they proclaim them as successful, and ignore and bury all evidence to the contrary.
Here is the simple fact about Austrian economics: it is based on the latent idea that all money creation is theft. If they did not quite put it that way, it was understood. Gold is capital. You have to buy it. You have to save money, and invest it. Fiat money is not capital. It is created ex nihilo, and the power to do so is the power to summon wealth to you without creating it, without contributing ANYTHING to our actual sum of productive capability, intellectual or physical.
Let me offer up an example that to my mind is quite stunning. We are in the course of building and deploying a new class of aircraft carriers, the Ford class: http://en.wikipedia.org/wiki/Gerald_R._Ford_class_aircraft_carrier. Research and development for the class of carriers was about–I just closed the link–about $14 billion, and each carrier actually build will be, after cost overruns, about 10 billion. That sounds like a lot of money, doesn’t it? There are an army (navy) of people looking this thing over, making sure the government doesn’t get screwed by the contractors. Congress has to approve these expenditures, at least in terms of allocating money to the DoD.
Compare that to the decision of Ben Bernanke to create $600 billion ex nihilo. That is the equivalent of 600 [edit: make that a mere 60] state of the art aircraft carriers, of the sort no nation but perhaps China would even contemplate building. This money was created, again, FROM NOTHING. Zip. They write the check, and now it can be cashed.
Who was this money given to? We don’t know. Can we ask? Yes, but we get only fragmentary reporting, after the fact, and that only because a Socialist–Bernie Sanders–was for once asking good questions, and got reporting inserted into the supposed Wall Street reform bill. I say supposed, since we can assume from the fact that the large firms on Wall Street supported it, that they viewed it as a competitive advantage.
THIS IS LUNACY. We have unelected people created incomprehensibly large amounts of money whenever they want, giving it to whomever they want, and doing so without supervision or even adequate reporting. From what little we do know, they are not even confining their activities to our borders, and are bailing out banks around the world.
Anyone who fails to condemn this very simply is not capable of the operation of common sense; or, they are aspiring totalitarians.