The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Economics: What If the Experts Are Wrong? And What If They’re Lying?

Posted on | January 25, 2010 | 14 Comments

After the stock market lost 500 points last week, I figured it was well past time to produce another financial news aggregation at NTC News. In a more-or-less random way, I collected these items:

This last item — a column by Caroline Baum of Bloomberg News — raises some very interesting questions. The Fed and other government regulatory agencies earlier this month warned of the need to be prepared for future interest-rate increases. Baum writes:

It’s no surprise interest rates are going up. They can’t go any lower. The Fed’s benchmark rate has been close to zero for more than a year.
Are regulators reading their own memo? Rising interest rates introduce a new kind of balance-sheet risk for the Fed. With $1.2 trillion of variable-rate liabilities and $2 trillion of fixed-rate assets, when rates rise, the Fed’s net interest margin shrinks. What would happen if it disappeared? . . .

Economics junkies should read the whole thing (and in times like these, everybody should be an economics junkie). What Baum perceives is that the stimulus spend-a-thon, fueled by massive issuance of Treasury debt and zero-interest Fed rates, must soon approach a fiscal end-game. And that CNN poll — Americans disapproving the Obama stimulus policy by a 14-point margin — is in line with my own educated guess that the end-game is going to be rather ugly.

Since early last year, I’ve been using the phrase “Weimar America” to describe the hyperinflation threat posed by the Obama-Bernanke-Geithner economic policy. Although I’m certainly not trained as an economist (journalism is a field overcrowded by the math-impaired), years of amateur study of the dismal science leave me dreading the moment when the bill comes due and the bond market experiences a psychotic freakout.

There was a lot of talk last year of the possibility of a “double-dip” recession — or, in more optimistic language, a “W-shaped recovery” — that so far seems to have been averted. The gravity-defying stock market, with the Dow still above 10,000, indicates that financial insiders believe that the worst of the recession is behind us. But . . . what if they’re wrong?

If there’s any single uniting theme of the Tea Party movement, it’s that the federal government’s deficit spending is out of control. Elitists who dismiss the “angry mob” as ignorant “teabaggers” ignore this fundamental message — a message the Tea Party protesters are only too willing to explain to anyone who actually bothers to talk to them. While media elites, Wall Street insiders and most economic experts assure us that a “Weimar America” fiasco can be prevented by shrewd policy, these assurances contradict most people’s basic common-sense understanding of economics.

When you start talking “common sense” in economics like this, you’ll find yourself pooh-poohed by clever people — with no more economic training than you — who insist that your gut-hunch concerns about skyrocketing federal debt are irrational and ignorant. “Nothing to be worried about! The experts know what they’re doing!”

Right. Keep in mind three points:

  1. How many of those “experts” gave timely warning of the 2008 crisis? I don’t remember any such warnings from Paul Krugman.
  2. There are plenty of professional economists who disagree with the current neo-Keynesian policy, including a few who are quite concerned about the possibility of hyperinflation.
  3. Did the person who is now deriding you as an alarmist because of your concerns about the economy ever express any skepticism when all the “experts” were bamboozling us with fake global-warming data?

Some people are just natural-born suckers for an “expert consensus.” And some of us have a keen nose for the smell of bovine excrement. If we’re being deceived, I don’t want to be the last to catch on to the deception.

UPDATE: Of all the several hundred words here, the one phrase that’s getting re-Tweeted is the accidental aphorism: “Journalism is a field overcrowded by the math-impaired.”

And it’s true. If you’re good at math, you become an engineer, a banker or an accountant. Journalists are People Of The Word and, with rare exceptions, suck at math. When I worked in Georgia, every time the board of commissioners changed the property tax rate, the newsroom would come to a screeching halt while the business editor — the only guy in the building who could do math worth a crap — calculated the percentage of change and what this meant to the typical homeowner.

Beyond basic mathematical ineptitude, most journalists know next to nothing about economics. You can understand basic economics without getting heavy into math, but most journalists flunk at even the most elementary conceptual level — e.g., why is capital investment so crucial to economic growth? (Hint: How much better would this blog be if I had $3 million?)

I’m convinced that economic illiteracy accounts for most of what we call “liberal bias” in media. Once you understand that the poverty of the poor is not caused by the wealth of the rich, the entire egalitarian agenda of liberalism ceases to make sense.

At any rate, my minimal competence at economics — far superior to my ability at forecasting the Vikings-Saints game — enabled me to predict in September that the unemployment rate (then at 9.7%) wasn’t going to go down anytime soon. And somebody owes me an apology.

Speaking of apologies, I’m sorry if I’m running behind again on my thank-you notes to tip-jar hitters. If I had $3 million, I’d hire a couple of cute chicks as “administrative assistants” to keep track of the thank-you notes. And bring me coffee, etc.

Well, so much for mid-morning reveries. Economic catastrophe looms, and not only at the macro level. The finance company keeps calling me about the overdue payment on my 2004 KIA Optima and that genius venture capitalist offering me $3 million is still nowhere in sight, so please hit the tip jar.

One of these days, when you’re getting thank-you notes signed by an administrative assistant named “Kelli,” you’ll know I’ve hit the big-time.

Comments

14 Responses to “Economics: What If the Experts Are Wrong? And What If They’re Lying?

  1. uberVU - social comments
    January 25th, 2010 @ 10:40 am

    Social comments and analytics for this post…

    This post was mentioned on Twitter by HukiBuki: RT @rsmccain: Economics: What If the Experts Are Wrong? And What If They’re Lying? http://bit.ly/4MtHAF #teaparty PLZ ReTweet…

  2. S. Wolf
    January 25th, 2010 @ 4:55 pm

    A pertinent read: Washington Is Nuts

  3. S. Wolf
    January 25th, 2010 @ 4:55 pm

    A pertinent read: Washington Is Nuts

  4. S. Wolf
    January 25th, 2010 @ 11:55 am

    A pertinent read: Washington Is Nuts

  5. Mr.K
    January 25th, 2010 @ 7:22 pm

    I have a feeling, by the time “Kelli” is available for hire, “Kelli” will be a transvestite…

  6. Mr.K
    January 25th, 2010 @ 7:22 pm

    I have a feeling, by the time “Kelli” is available for hire, “Kelli” will be a transvestite…

  7. Mr.K
    January 25th, 2010 @ 2:22 pm

    I have a feeling, by the time “Kelli” is available for hire, “Kelli” will be a transvestite…

  8. Change: Obamavilles Expanding | The Lonely Conservative
    January 25th, 2010 @ 2:39 pm

    […] the number of homeless in America could increase dramatically if the so-called experts are wrong or lying about the economy and the national debt. I hope they’re right, but plain old logic tells me […]

  9. Danby
    January 25th, 2010 @ 8:21 pm

    The thing to remember about the experts is that they are working for their own advantage. Nothing wrong with that. You do it, I do it, everybody does it. But the pertinent thing to remember is that an economist is going to tell you what makes him the most money, and what makes the most money for an economist in a down economy is selling hope and recovery.

    Who’s going to pay an economist to tell their viewers that we’re in this one for the long haul, that actual recovery isn’t happening any time soon, that jobs aren’t coming back, that the stock market is up because the FED and the banks have been pumping money into the equity markets, and we’re on the verge of an all-out bond market (and hence currency) collapse? Who wants to hear that the large banks are all insolvent, and only the suspension of mark-to market accounting has allowed them to keep their doors open?

    When I hear an economist talking about recovery, I ask if he was able to predict the current economic crisis. If not, why would I think he has any expertise at all?

  10. Danby
    January 25th, 2010 @ 8:21 pm

    The thing to remember about the experts is that they are working for their own advantage. Nothing wrong with that. You do it, I do it, everybody does it. But the pertinent thing to remember is that an economist is going to tell you what makes him the most money, and what makes the most money for an economist in a down economy is selling hope and recovery.

    Who’s going to pay an economist to tell their viewers that we’re in this one for the long haul, that actual recovery isn’t happening any time soon, that jobs aren’t coming back, that the stock market is up because the FED and the banks have been pumping money into the equity markets, and we’re on the verge of an all-out bond market (and hence currency) collapse? Who wants to hear that the large banks are all insolvent, and only the suspension of mark-to market accounting has allowed them to keep their doors open?

    When I hear an economist talking about recovery, I ask if he was able to predict the current economic crisis. If not, why would I think he has any expertise at all?

  11. Danby
    January 25th, 2010 @ 3:21 pm

    The thing to remember about the experts is that they are working for their own advantage. Nothing wrong with that. You do it, I do it, everybody does it. But the pertinent thing to remember is that an economist is going to tell you what makes him the most money, and what makes the most money for an economist in a down economy is selling hope and recovery.

    Who’s going to pay an economist to tell their viewers that we’re in this one for the long haul, that actual recovery isn’t happening any time soon, that jobs aren’t coming back, that the stock market is up because the FED and the banks have been pumping money into the equity markets, and we’re on the verge of an all-out bond market (and hence currency) collapse? Who wants to hear that the large banks are all insolvent, and only the suspension of mark-to market accounting has allowed them to keep their doors open?

    When I hear an economist talking about recovery, I ask if he was able to predict the current economic crisis. If not, why would I think he has any expertise at all?

  12. Buck O'Fama
    January 25th, 2010 @ 8:44 pm

    Now that you ask, I wonder how the Lightbringer did in math and economics (assuming he deigned to even audit these courses.) How about Pelosi and Reid? My guess is they’d make the average journalist look like Euclid.

  13. Buck O'Fama
    January 25th, 2010 @ 8:44 pm

    Now that you ask, I wonder how the Lightbringer did in math and economics (assuming he deigned to even audit these courses.) How about Pelosi and Reid? My guess is they’d make the average journalist look like Euclid.

  14. Buck O'Fama
    January 25th, 2010 @ 3:44 pm

    Now that you ask, I wonder how the Lightbringer did in math and economics (assuming he deigned to even audit these courses.) How about Pelosi and Reid? My guess is they’d make the average journalist look like Euclid.