Friday, July 23, 2010

The Sad State of Our Political Affairs

There is not much to say. I fired up my computer and was confronted with this story about Charlie Rangel's Ethics Committee problems. ( my home page is the NyTimes) There isn't any commentary necessary. It's another sad example of a "Public Servant" who really isn't a public servant--- shame on me, I always respected Charlie.

I thought I'd take a quick peak at Mish's site to see what I missed in the economic world. It was Opening Day at Saratoga after all. Right after reading about Rangel I come across this about the political operatives in Bell, Ca. and all I can offer is that it is almost impossible to have any faith in our current structure. I am open to any suggestions. Maybe it's possible to label these two stories as "bad apple outliers" but I fear that that is wishful thinking.I quoted the Psalms last post, why not Ecclesiastes this time:

For with much wisdom comes much sorrow; the more knowledge, the more grief."

I might not put Hemingway in the same category as Scripture, but this line sums it up just as well:

"Was there ever a people whose leaders were as truly their enemies as this one?" - Ernest Hemingway, For Whom the BELL Tolls, Ch. 13

Monday, July 12, 2010

Paul Krugman's Latest-- A Misplaced Faith in the System?

Paul Krugman has a Nobel Prize for Economics and I don't. The argument could be made that he knows a hell of a lot more about economic issues than I do but after his Op-ED piece today lambasting the FED and Ben Bernanke I am wondering whether Professor Krugman and his economist brethren have an overblown faith in the economic system and in the powers of Central Bankers and policy makers to effect the economic system.

Krugman's article criticized Bernanke and the FED for not going the extra mile in combating the problems in the economy. Krugman believes and he points out that Bernanke also clings to this belief that the FED does have extra tools at its' disposal to fight the deflationary spiral the economy is facing. For example.

" It can buy longer-term government debt. It can buy private-sector
debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.
Nobody knows how well any one of these actions would work. The
point, however, is that there are things the Fed could and should be doing, but isn’t. Why not? "

I stopped "officially" studying Econ after my sophomore year at Colgate. A semester of Macro and trying to get my head around the Edgeword Box Diagram drove me over the edge. Economics is called the "dismal science" but labeling it a science is inaccurate and an attempt by those who practice it to elevate the intellectual importance of their craft.

It really isn't rocket science. Our economy went through a multi-year process whereby all we did was stimulate it. We went from .com boom to post 9-11 zero % financing to house flipping, to house as ATM consumption. We stimulated ourselves to "pull-forward" demand for probably the next decade. I don't know what these prize winning economists don't get about that. We are in a spot where there is nothing left to stimulate. A substantial % of US homeowners owe more on their home than it is worth. We have a debt hang-over on a personal level, a local government level, a state government level and the Federal government level yet somehow good Professor Krugman is looking to convince us that borrowing more is the answer to our problems.

Krugman and his crew worship at the altar of a false god. For whatever reason they have "faith" in the wisdom of policy and policy-makers. As he stated in today's column:

Like other economists, myself included, Mr. Bernanke was deeply disturbed by
Japan’s stubborn, seemingly incurable deflation, which in turn was “associated
with years of painfully slow growth, rising joblessness, and apparently
intractable financial problems.” This sort of thing wasn’t supposed to
happen to an advanced nation with sophisticated policy makers

King David had something to say about this many years ago. Krugman's misplaced faith reminded me of it--Psalm 146:3-4. We might all be better off keeping the giant slayers' words in mind as we continue to listen to prescriptions offered by our monetary princes.

Put not your trust in

nor in the son
of man,
in whom there is no help.
His breath goeth

he returneth to his
in that very day his thoughts perish.