Eventually even charlatans, cranks, and economists notice when the world isn't cooperating with their grand pronouncements. Eventually reality wins. And after four years of making relentlessly wrong predictions about the second coming of Weimar, that eventually has come now for the inflation chicken littles. At least a little.
Back in March 2009, the Fed began expanding its first bond-buying program, and the usual suspects began hyperventilating about hyperinflation. They just couldn't conceive how all the Fed's "money-printing" wouldn't end with double-digit inflation, if not people needing wheelbarrows full of cash to buy the most basic of necessities. But, as Paul Krugman pointed out, this lack of imagination was really a lack of knowledge of Japan's lost decade. There, as here, prices barely rose (or in Japan's case, actually fell), despite big deficits and big bond-buying. Why? Well, the rules change when short-term interest rates hit zero. Risk-averse banks don't want to lend and risk-averse households and businesses don't want to borrow. So central bank bond-buying mostly pushes reserves into banks that just sit there, especially when the central bank pays interest on them. Now, that doesn't mean quantitative easing is pointless -- ask Europe -- just that it's not massively inflationary.
But the anti-Bernanke crowd has tried not to notice that prices haven't gone parabolic. They've mostly succeeded in this epistemic closure -- and even when they haven't, they've quickly discounted reality as just a fad. Their excuses have been as predictable as they have been wrong: either the official numbers are irrelevant, or miss "real" inflation, or will show more inflation in a few more years (just wait and see!). But with core PCE inflation, the Fed's preferred measure, now at an all-time low going back 50 years, it's getting harder and harder to get anyone to listen. Here are the stories each group has tried to tell.