That was to cry, Fire, Fire in Noah’s Flood.”

[Davy07]

what does this mean?
I read it from Mr. Krugman's column The Big Inflation Scare
in which he quoted "All in all, much of the current inflation discussion calls to mind what happened during the early years of the Great Depression when many influential people were warning about inflation even as prices plunged. As the British economist Ralph Hawtrey wrote, “Fantastic fears of inflation were expressed. That was to cry, Fire, Fire in Noah’s Flood.” And he went on, “It is after depression and unemployment have subsided that inflation becomes dangerous.”

can anyone shed some lights on this?

Thank you in advance.
_________________
Only the Paranoid Survive

[Jamie (K)]

There is a problem now in the United States that the Obama administration is trying to "spend us out of a recession". The majority in both houses of Congress are of the same party a Obama (at least maybe until 2010), and they are using the current financial crisis to try to convert the United States' economy into more or less a socialist system of the type that has caused problems in Europe, but maybe worse.

Obama and the Democrats in Congress have instituted enormous government spending programs that are estimated to add a trillion dollars a year to the national debt. The only way the government can pay off that debt quickly (if they have any intention of paying it off in this generation) would be to print more money. That increase in the money supply is liable to cause a lot of inflation, especially if the health of the economy doesn't return very fast. Many economists are warning against this possible inflation.

Krugman is wrong in making an analogy with the Great Depression, because the US monetary system is different now. All through the Depression, and up to the 1960s, all US money was backed by gold or silver, and the government was obligated to exchange your cash for those metals if you asked for it. The money supply could not grow faster than the supply of gold and silver. This usually kept the value of the currency stable, but it didn't allow for enough economic growth.

Now American currency is not backed by anything but "the full faith and trust of the American government", and so the Treasury department can theoretically print as much money as they want to, which would cause inflation.

There was a recession during Jimmy Carter's administration also, and at that time the government was purposely causing inflation to make the national debt "cheaper" to pay off. However, it caused a lot of problems in ordinary people's lives.