Tuesday, July 22, 2008

Eleven Reasons Journalists Should Know More Economics

This article comes courtesy of Agnes. It's basically a poorly-written, off-target rant about how our society has become scarcely better than socialism. Well, besides the fact that income has diverged over the period in question, the government also actually provides fewer public services, does less for the poor, poses less of a burden on businesses (sometimes to a fault), has generally been measured to have moved to the right ideologically, and if there has been a move in the way the government directs economics, it has been rightward towards fascism (favoring special private business interests) rather than to the left (favoring direct state control). Other than THAT, let's try to be fair to this guy's "11 reasons."

1. "Dumber than a fifth grader with cognitive dissonance" He explains that this just means that we've become ideologically narrow-minded. This one's just funny because the guy obviously idolizes Milton Friedman and Ronald Reagan and dare I say, exhibits the "cognitive dissonance" he's accusing us of.

2. "Where did all the leaders go with their moral character?" Basic idea: "Absolute power corrupts absolutely." Problem is, that quotation comes from the 19th century. So, I guess this guy was around in the 1800s, and can testify to the moral character of Thomas Jefferson (diddling houseservants), Andrew Jackson (murdering a guy over a woman), or Alexander Hamilton (getting killed in a duel)?

3. "Fed and U.S. Treasury adopted Enron accounting tricks" Here he just starts making stuff up, like that the Man "dumped" Bear's Fannie's & Freddie's liabilities "onto the taxpayers' 'balance sheet'." I think this is just his "grumpy old man" coming out, but he's showing a total lack of understanding of what happened with the loans extended to help keep these companies from going under. But Reagan was this guy's hero - didn't Reagan get us into the deregulation, Savings & Loan mess and other misadventures in malfeasance. Be fair. Are you on the rolls of NewsCorp?

4. "Deregulation creating new socialist housing system" Raise your hand if you know what this means. I don't. Deregulation did a lot of horrible things to make the mess we're in, but it didn't creata a socialist anything. In fact most of the foreclosures and price bubbles (which have begun popping) were on those lower-value homes. So, thankfully for the author, those beneficiaries of the socialist housing policies are again renters in miserable slums. Chalk one up for the rich old white guys.

5. "Trade deficits outsourced more of America's wealth than jobs" This is just false. At best he has the tail wagging the dog, and the initial culprit of both was an unusually strong dollar (based on so-called fundamentals. The theoretical causal relationship between trade deficits and outsourcing in a flexible exchange rate economy is that the trade deficits will eventually depreciate the currence, thus turning investment inward and retaining both wealth and jobs domestically. A handful of other policies by the US Treasury, Fed, and IMF kept the dollar high and the normal correction process for trade deficits was stifled.

6. "Banking system in meltdown, minting penny stocks" He starts with something off-point about Shumpeter and "creative destruction, and then, to quote, "You don't have to be smarter than a fifth grader to figure out that our leaders are clueless about the reality of our crumbling banking system, with many banks trading as penny stocks, while the Fed still panders to conservative pre-election politics rather than getting serious about inflation." Really? Ever had a conversation about finance with a fifth grader? And Meltdown? Ok, times are tough but I would propose that our banking system has seen worse times, and the JP Morgans of the system manage to survive. Also, banks aren't the ones issuing these "penny stocks." If they are then I have even less of a clue what he's talking about.

7. "Ideologues preach savings, but still push spending" This is a fair point, but that's just politics - politicians run on 2- to 6-year election cycles and savings really doesn't do much in the short term to get them reelected. But is this guy actually proposing a "President for Life" like they have in Zimbabwe? And is this anything new? Nixon ... NIXON said, "we are all Keynesians now," but that's not even the best part - the original quotation that ran in Time in 1968 (?) comes from (wait for it) ... MILTON FRIEDMAN, or author's other hero!

8. "Warning, the market's under 2000 peak, losing money" Yeah. I checked the data and he's not wrong about this, but he is being a jackass. The facts he cites hasn't a damn thing to do with the current market, banking crisis, or so-called recession. Two major crashes hit that were waaaaay worse than this one but nobody really got out of whack: 1. 9-11, and; 2. The invasion of Afghanistan. Since the invasion of Afghanistan the market's up about 40%, even with the current turbulence. In a volatile climate you can usually pick your reference point and find a way that you can scare people. Good one, buddy. He goes on to compound his douchebaggery by exaggerating inflation: he says that the 10% drop was more like a 50% drop, inflation-adjusted. Uuummm, sorry, the prices have not nearly doubled in the last 8+ years.

9. "Inflation and dollars: Is Zimbabwe the new model for the U.S.?" First, I'm surprised if you're still reading. Second, I hope you're not my mother. Comparing the two countries, he says, "Things may be worse in America, psychologically." I don't think there's any words for this other than "ARE YOU FUCKING KIDDING ME?" This is even douchebaggier than the previous nonsense about the DOW.

10. "Free-market health care failing 47,000,000 Americans" I don't get it. He laments the fact that America is becoming "socialist," but he almost sounds like he's calling for the governmnet to get its mitts in the health care sector. Or, maybe he's just bitching and moaning.

11. "Conservative free-market policies inflated oil 300%!" I'm not sure where he's going with this. While it is market forces that are driving the rise in oil, most of it is demand side, some of it is supply-side, some of it is market structure, some of it is political risk (Venezuela, Iran, Iraq), some of it is speculation, and it has little to do with conservatism. A smart conservative would notice that certain gaps in the regulatory structure have been exploited (smartly) by speculators - but these speculators will get theirs when (not if) the price falls again in real terms (which, by the way, I've already called and is already playing out).

Basically all I can conclude from this is that this dude belongs on his porch drinking PBR and yelling at the g.d. kids running across his lawn. His facts are often wrong, his analysis is often off-point, and his writing style is poor (and if I can tell you that you know it's bad...).

1 comment:

  1. Mrs. Plum23/7/08 21:26

    Here here!!

    I found his use of "big words" to cover up the facts that he was basically removing himself from all blame. Maybe if we all played nice (and that means those suits too) we wouldn't be in this mess. Not sure just one group is to blame, nor should we blame. How about some solutions very finger pointing? Just my two cents.