When Economists Fail, or How I Learned to Stop Worrying and Love Stimulus
Don't worry, America -- Europe and the global economy will be just fine within a few years.
This was the final message heard by a group of over three hundred financial professionals, delivered in a presentation by a chief economist of a very large and respected firm that shall go nameless here.
But suffice it to say that given the daunting challenges facing Europe and the dire reality its nations are enduring, I was among many in the audience puzzled by the prediction.
Now, it is worth mentioning that this bit of confusing optimism was purposefully the last item discussed, intended to leave the listeners with pleasant anticipation about the economic year 2012 -- "The Year of Positive Surprises," as the presentation was titled. But it was nowhere near the beginning of the confusion.
The production was riddled with curiosities, particularly in regard to inflation that could potentially result from past stimulus. The speaker's contention, presumably shared among many economist colleagues, is that inflation should not be a primary concern for Americans. In the interest of time (and, undoubtedly, convenience), questions were not taken, though the speaker did feel obliged to address the one most likely on everyone's mind, and that is how the inflation outlook could be so positive given the rapid increases in the price of gasoline and food we've seen recently. These things are not true inflationary indicators, it was explained -- increases in food prices can be explained largely by unusual weather patterns, and as for fuel prices, the speaker offered the Jay Carney obfuscation, citing "a variety of factors on the global price of oil" -- issues that are just too complex and chaotic to be properly accounted for in terms of economic policy.
This may sound all well and good, and it makes for a much better economic outlook on paper, but it fails to explain how this low inflation will be recognized by Americans visiting the pumps and grocers on Main Street, or how intricacies in oil pricing should be excluded from more practical measures of inflation in our consumer-driven market, which are often based on the Consumer Price Index that is directly impacted by -- you guessed it -- this "variety of factors" that influence supply and demand.
I suppose it was at this point, with the speaker's proud admission to spurning automobiles and embracing public transit to avoid feeling the sting of gasoline price spikes, that the last semblance of nonpartisanship left the stage. But the speaker's credibility still had fathoms to go before hitting rock-bottom, which was handily reached by touting subsidized industry here and green energy reform there, culminating in the outrageous reasoning behind the prediction of the forthcoming and almost immediate European recovery.
In the concluding thoughts, the speaker assured the audience that Europe is not going it alone, citing section 14-b of the Federal Reserve Act:
Every Federal reserve bank shall have power: To buy and sell, at home or abroad, bonds and notes ... fully guaranteed as to principal and interest by, a foreign government or agency thereof[.]
The point, of course, is that it is well within the power of the Federal Reserve to appropriate wealth from public sources in order to bail out the European Union, should the latter require such assistance. Implied here is that Americans shouldn't worry about an implosion of global markets -- a European fiscal Armageddon will be ultimately averted at all costs, as we, the taxpayers, are positioned as a fiscal backstop. Bleak? Maybe. But it'll probably never come to that, the speaker boasted.
To demonstrate why, the speaker referenced Thomas Jefferson. The speaker related Jefferson's many accomplishments in service to the United States of America, including his role as ambassador of the United States to France, and his tenure as the second vice president and third president of our nation. Yet his gravestone does not reference these achievements, but rather his identity is portrayed as that of a Virginian first, not an American.
The speaker then presented John Quincy Adams, Henry Clay, and John Calhoun as yin to Jefferson's yang. They were practitioners of "The American Way," an early 19th-century direction rooted in Hamiltonian values such as a strong central bank, stern protectionism through tariffs, and federal subsidization of industry rather than the antiquated Jeffersonian notions of limited government and uniform federalism.
Europe will recover from its economic woes, the speaker claimed, by taking a lesson from American history. Today, they stupidly cling to their "state" identities, be they German, Greek, or French, rather than committing to the wholesale acceptance of the European Union's collectivist stew -- as our founding father Thomas Jefferson clung to his Virginian heritage rather than embrace Virginia's more essential role in the endeavors of the greater Union. In the coming years, though, European states will embrace the need for centralized European governance, just as American states have embraced the need for centralized American governance.
What was not discussed, however, is the fact that Americans did not embrace this change willingly, and it certainly did not happen in a few years. In fact, the divisiveness of localized state governance versus centralized federal governance was the root issue of the bloodiest war in American history that took place over eighty years after our founding, and the speaker wants to believe that Americans have now accepted Hamiltonian notions over Jeffersonian ones. But to believe that Europeans will just wake up this year or next, forego the historical identities that have existed for centuries, and accept a unified fate with one another as equals (despite their varying levels of success and dependence) is a notion so fallacious that no number of Ivy League diplomas can lend it credence.
Yet as ridiculous as it all is, this has become the prevailing direction of Western elites and academics. Failure is to be averted by exploiting the successful, and a collectively funded "stimulus" has become the global panacea to financial inefficiency.
So sleep tight, America. Europe will right its ship through forced collectivization and the application of unsubstantiated money, as we have. And if that doesn't work, the global markets will be stimulated to induce growth, even if it takes every one of your future dollars to do it.