Wednesday, February 18, 2009

"...a woolly-eyed, low-grade political hack."

Battling Krugmania

We, the people, have been subjected to an almost non-stop economic debate by those who would lead ever since last September. An endless barrage of unfamiliar terms like subprime, liquidity crisis and systemic failure has been used to instill fear and confusion, often with great success.

The rhetorical charge in the MSM has been led by newly minted Nobel Laureate Paul Krugman, who plies his trade in the reality vacuum known as the New York Times Opinion page. The most tragic outcome of the demise of print media will be the fact that we can no longer enjoy watching puppies and birds crap on the drivel that is regurgitated by the opinionistas at the Times. It’s about the only thing that ever freshens up the stale hippie babble that is offered forth there daily.

Krugman’s academic credentials are impressive. B.A. from Yale, Ph.D. from M.I.T. He teaches at Princeton. So he knows, like, everything, right?

Not so fast. Francis Cianfrocca gives a nice little rundown on what may be the biggest shortcoming of the august Krugman: his people smarts.

"Paul Krugman knows how mathematical models work as well as anyone. His problem is that he has a much more pedestrian understanding of how people work. This problem typifies the whole Obama Administration, which pays close attention to Krugman at his perch in Princeton, and professes to revere data rather than ideology."

A man wrapped up in Ivy League and Manhattan media frames of reference being out of touch with the way people work?!?!? What are the odds?

About the same as the odds that cosmetic surgery will be performed in Beverly Hills on a weekday.

Mathematical models that would predict human behavior must factor in the vagaries of that behavior, which is almost impossible to do, even for those of us who make a living observing people. Krugman and his ilk don’t even consider it, however.

"Let’s note that Krugman is a sober, first-rate economist, but also a woolly-eyed, low-grade political hack. He firmly believes that government is better qualified than private actors to direct the country’s economy."

A Nobel Prize in Economics does not a political genius make. Krugman is a knee-jerk pundit who spouts opinions that often only make sense inside the aforementioned Ivy League/Manhattan Media cocoon. When it comes to politics, we’re all merely spouting opinion, that’s the nature of the beast. Some opinions are more informed than others, to be sure, but this isn’t an exact science (despite the fact that it’s taught as such).

"It’s hard to escape the sense that the best economists and the President of the United States are blaming ordinary people for the economic crisis. If only we’d spend our money instead of save it, we wouldn’t be in such a big mess."

"This is where devotion to mathematics gets the better of those who would do better to try to understand people. Krugman is very concerned that the liquidity trap we’re arguably in will degenerate into a sticky and persistent deflationary spiral, with far lower output for years to come (an American “lost decade”)."

"The President faces a different trap. By believing the mathematics and not the people, he’s come out in favor of a huge spending plan that runs deeply counter to what nearly every American now feels deep in her marrow: that this is a time for saving, not for borrowing and spending. "

Ah, there’s some sense being made and it’s not the same as what our leaders have been saying. Several months of them screaming that the financial sky is falling haven’t exactly put us in a spending mood, right? These people really should pay closer attention to what the ramifications of preaching panic can be. Again, an inability to understand people comes into play. Hey, we’re just the ones who have to live out this theoretical circle-jerk, why pay any attention to us?

Now they can reap what they’ve sown.

"But the people don’t want higher GDP. They want stronger balance sheets, amid a sense that hard times are ahead. If anything, the stimulus debate has exacerbated this sense. Why? Because the people want to save more money, but they see their elected leaders proposing to borrow and spend more, and they think: “these people have no idea what’s really going on.” "

Panic desired, panic preached and panic delivered. If you run into a room and scream that there’s a bomb that’s about to explode the people in the room might, just might, run the hell out of there. You shouldn’t be surprised because they didn’t follow the calm evacuation plan you spent months working on.

We’re an odd lot, we humans.

I don’t know whether to buy Cianfrocca’s conclusion but it’s worth noting because it’s disturbing.

"The economic wizards are so intent on following their models and ignoring the people, that they will waste tremendous resources trying to postpone a reckoning that is fated to come. What we really should be talking about is mortgage finance. We have to figure out how to reduce the burden of mortgage debt on millions of people (including people that can perfectly well afford their payments, but are unaware of the creeping effects of deflation on their purchasing power)."

"That’s going to be a mean and ugly problem, requiring a socialized solution that will put bank nationalizations to shame and totally disgust the American people, who care about moral hazard in a deep way that mathematics can’t hope to model."

"My fear is that, having botched this stimulus so badly, our political leadership won’t have the credibility to solve the mortgage problem. And that would seal the deal on a deflationary future."

In the end, the problem isn’t really that our leaders don’t pay attention to us, it’s that we let them ignore us. The American electorate should forever be cursed for giving our legislators job security. And, no, it’s not all about term limits. It’s about voters getting off of their asses before a crisis point is reached and voting out under-performing, incompetent idiots. Watching Barney Frank and Christopher Dodd presiding over hearings to help “fix” a crisis that they were complicit in creating was the most nauseating thing on television last year. Shame on anyone who votes for these wastes of Capitol Hill space again.

If you open the front door for the armed bandit don’t be surprised when he comes in and makes your life miserable.

No comments: