An extremely quick Google search convinces me that lawyers are massively over-represented in the Canadian Parliament. I am quite sure that something similar is true in other countries too. Lawyers are far more powerful in setting government policy than are ordinary middle-class people like me.
So if we want to understand why monetary policy is so tight, we really need to ask the question: why are lawyers opposed to higher inflation?
It might be false consciousness. Lawyers don't understand macro as well as the average macroeconomist like myself, and they don't realise that they too would gain from a looser monetary policy, which would cause an increased demand for lawyers, and so higher real incomes for lawyers. So they are acting against their own class interest, because they don't understand it.
No. That's too easy. Political economy is hard.
I need to drink more beer.
Aha! I think I have an answer! It's because lawyers' fees are stickier than other prices! So if central banks loosen monetary policy, lawyers' fees will rise more slowly than other prices, so lawyers' fees will fall in real terms!
[Update: actually, as any good New Keynesian economist should be able to figure out, even if you grant my assumption about lawyers' fees being stickier than other prices, my above paragraph is wrong. Lawyers' real incomes and utility will rise even if their real fees per hours fall, for small increases in AD. But I hear similar sorts of rubbish from people all the time.]
Do you have a better theory to explain why monetary policy is too tight?
[More studies in applied orthogonality. Or maybe another foray into Macroeconomics and the Celestial Emporium of Benevolent Knowledge. There are sensible ways to divide up the world, and silly ways to divide up the world. And which way is sensible and which way is silly depends on the question we are asking. And a fanatic is someone who can only divide up the world one way, and tries to apply it to everything. Marxists are a classic example. I once had two friends who were Communist Party members. One supported Glasgow Rangers; the other supported Glasgow Celtic. And they would argue about whether a Rangers win or a Celtic win would be better for the Revolution.]
[And this satire is aimed at a helluva lotta people, not just Paul Krugman. I'm probably guilty of this sin too, sometimes.]
P.S. Now I'm getting worried. This theory is starting to look almost sensible to me. After all, lawyers (and ex-lawyers and soon-to-be-lawyers-again, and those trained as lawyers even if they've never practised) really are massively over-represented in the seats of power and as advisors to those who occupy those seats. And didn't I read somewhere recently that German economic policy is even more dominated by lawyers? So my theory explains why Germans are even more paranoid about inflation!