Paul Krugman cannot believe there is an eternal and external value which makes competitive devaluations especially bad. I will try to explain in my poor, unorganized manner. One can start by stating there must be a transfer mechanism to transmit Value across Time. This is normally attributed to be called Property; and yet, there can not be an understandable medium of transmission without some form of universal value exchange–what I am talking about here is Money! Now the perfect transfer mechanism would be without Inflation or Deflation, just a constant Pricing of Property. No one would be able to mistake the intrinsic value of any Property. Such an idyllic state could not long exist with humans involved, with their rabid desire for chicanery.
Property Holders want greater payment than the Value they ever put into their Property, and Debtors never desire to repay the full value of what they borrowed. Herein, Inflation is a God, as long as it is slow and steady; Deflation is a Demon–Satan himself–because people must separate themselves from Dollars which buy more if only retained. It is now time to discuss a Special Class, which I will define as Labor. These are people who work hard, and even do what their Peers–the Property Holders–tell them to do; which is Save their Money. They often put in years and decades doing exactly this, but find that they never have the wherewithal to join the major Property Holders. This leaves them with a dim prospects for use of their limited amount of Money. They can place their Money in banks, buy shares in their Government–here called Treasuries, or involve themselves in equity schemes–whether Mutual Funds, Hedge funds, or wildcat self-delusion Investing.
We now come to a combination of forces which must be discussed. Bernanke and the Fed insist that banks be precluded from paying a decent Interest rate to Depositors through the supply of artificial cash from elsewhere–another term for printing Money without the Ink. Mutual Funds and Hedge Funds always come up with enough Charges on Money-handling that they never pay more than banks would normally pay for Savings deposits. The deluded individual Investors regularly watch their capitalization wiped out, while Investors in Mutual and Hedge Funds periodically witness their 401k plans get cut in half; a taxation much greater than ever coming from taxation ever in history. Everyone is told to put in their funds, which they will only lose if they think to remove those funds on a uniform basis; the important item here being what happens to market prices whenever there is a serious removal of such funds. Now economists assert that the proper use of said Money is to devalue it, when and however it is removed. The devaluation, though, remains a devaluation of the labor which went into the making of said funds in the first place; this all meaning that Labor bears the full Cost of every Inflation–Great or Small–which is never made up in sustained economic growth; thereby inciting the slashing of those 401k plans once more. lgl