There they go again.

WITH the appointments of liberal Keynesians Alan Blinder and Janet Yellen, the center of gravity at the Federal Reserve Board will be shifting leftward toward a softer dollar, easier money, and higher inflation. Well-credentialed academics with little or no experience in monetary policy, both are firm subscribers to the discredited Phillips Curve, which argues for a tradeoff between inflation and unemployment. In other words, a little higher inflation is never a problem because it generates lower unemployment and stronger growth This of course ignores the facts of recent economic history. Both inflation and unemployment increased sharply during the 1970s under the easy-money policies of Arthur Bums and G. William Miller; then both declined substantially in the 1980s and early 1990s under the hard-money policies of Paul Volcker and Alan Greenspan.

Mr. Blinder who will become Vice Chairman of the Reserve Board, is a self-confessed "good Keynesian" and "inflation dove." A few weeks ago he told a meeting of money- and bond-market participants in New York that "there is no inflation." What's more, he has written that "4 per cent inflation is a minor irritant that is better tolerated than eliminated." Should inflation ever exceed 4 per cent, then he would prefer wage and price controls, or an incomes policy, to halt its rise. Not long ago he wrote: "The older I get, the less respect I have for the signals emitted by our vaunted speculative markets." As such, not only will he oppose the Fed's goals of near-zero inflation and general price stability, he will also disregard early-warning inflation indicators thrown off by commodity, gold, bond, and foreign-exchange markets. This will put him at loggerheads with Chairman Alan Greenspan, who last February told Congress that gold is a useful indicator of inflation, and that "things were a lot better in many respects back when we had stable gold prices."

Miss Yellen, an expert in East German labor markets before the Berlin Wall fell, is a protegee of Nobel Laureate James Tobin, a Yale professor who has been one of Mr. Greenspan's strongest critics. Like her close friend CEA Chairman Laura Tyson, herself a specialist in the Cold War Rumanian economy, Miss Yellen sees no future inflation threat in the United States. Indeed, only two weeks ago Miss Tyson argued in a lengthy New York Times op-ed--without ever mentioning the word money--that the present inflation threat was a myth.

Perhaps so, but broad commodity indexes have increased over 10 per cent in the past year, while gold has jumped 15 per cent, about the same magnitude as the decline in government bond prices, where yields jumped from 5 3/4 per cent last autumn to about 7 1/4 per cent currently. When combined with a weak dollar and double-digit Federal Reserve credit creation, these would appear to be ample warnings that future inflation will be significantly above the current pace. As an added warning, this winter the producer price index rose at a 3.9 per cent annual rate. Supply-siders believe that markets contain more wisdom and information than even the best-trained Keynesian economic planners. This proposition has been tested more times than one may care to remember. But here we go again.