Krugman is just a self hating Austrian. He dimly realizes that money dilution causes problems. But in his little totalitarian "I'm smarter than the masses" mind, those problems can and must be solved by the BIG NANNY Mary Poppins, not by the market and an elimination of money dilution.
As Krugman and the Keynesians dimly take note of the mess caused by money dilution, they nevertheless attribute the malinvestments that invariably occur therefrom to laissez faire and the free market. Thus, if the Fed and the banks lend money created out of thin air while the borrowers of that new fiat money can still spend/invest that new money however they please, that system must be called "laissez faire" according to Krugman.
This is what we are up against: Fraud ab initio even at the definition stage of the debate by Krugman and his minions.