Ben's Stein Way: Another Econo-missed Playing the Wrong tune.

Hope Floats a Loan

Doug Noland's most excellent post on his blog on Prudentbear.com, the CBB, last week was entitled "2014 vs. 2007", and starts with a quote from that idiot, even for an of economist, Ben Stein, writing for the NYT's in another of his Neo-con flag-waving rah-rah's for the Bush Regime's cadre of Oiligarchs' Secret Energy plan of destroying the world economy by waging war in Iraq in order to push oil prices up to stratospheric levels and make the enormous investment in horizontal drilling and fracking, made by Vice President Cheney's Halliburton, whose payroll he was still on well into his first term of office, despite the enormous conflict of interest it represented, economically feasible, spouts the same garbage all of the economists, as the bought toadies of government they are, were selling at the time:

 “The job of an economist, among many other duties, is to put things into perspective. So, because I am an economist, among other duties, here is a little perspective on the recent turmoil in the stock and bond markets. First, when the story of this turbulence is reported, the usual explanation mainly has to do with some new loss in the subprime mortgage world… Here is the first instance in which proportion tells us that something is out of whack: The total mortgage market in the United States is roughly $10.4 trillion. Of that, a little over 13%, or about $1.35 trillion, is subprime — certainly a large sum. Of this, nearly 14% is delinquent, meaning late in payment or in foreclosure. Of this amount, about 5% is actually in foreclosure, or about $67 billion. Of this amount, according to my friends in real estate, at least about half will be recovered in foreclosure. So now we are down to losses of about $33 billion to $34 billion… The total wealth of the United States is about $70 trillion. The value of the stocks listed in the United States is very roughly $15 trillion to $20 trillion. The bond market is even larger… This economy is extremely strong. Profits are superb. The world economy is exploding with growth. To be sure, terrible problems lurk in the future: a slow-motion dollar crisis, huge Medicare deficits and energy shortages. But for now, the sell-off seems extreme, not to say nutty. Some smart, brave people will make a fortune buying in these days, and then we’ll all wonder what the scare was about.” Ben Stein, “Chicken Little’s Brethren, on the Trading Floor,” New York Times, August 12, 2007

Now, of course, anyone who has to state that he's an economist, is so by name only, and such is the case with Ben Stein, as anyone who ever saw his juvenile, self-adulating Comedy Central fiasco, "Ben Stein's Money", in which he challenges contestants, of which he's purportedly one also, to answer a set of questions designed to his advantage, for paltry, even pathetic, amounts of cash (from his own pocket, supposedly), will attest to. But parsing the story as if he were one, it quickly becomes obvious that it is merely a series of nonsensical articles, although but one in a series of them, that the NYT would dutifully print each week, despite the fact that all they ever demonstrated was a complete lack of even the rudimentary knowledge of anything but a sycophant's take on the reality our dire economic straits.

 Disregarding his claim to some kind of "duty", since obfuscation and rationalization are the only ones any economist has actually ever demonstrated, let's move on to the moronic perspective that his beknighted duty calls on him to offer his poor readers. He starts with, "First, when the story of this turbulence is reported, the usual explanation mainly has to do with some new loss in the subprime mortgage world…" Now, if you or I submitted an essay to the NYT with an opening sentence this sloppy and meaningless, they would simply go no further before rejecting it, not for its economic failings, which are rampant enough, but for the footloose treatment of tense, as he states, "When it is reported ...", as though he's talking about some future event, although he's commenting on it in the present tense, because it happened in the past. He then qualifies every single word, as he continues: with, usual explanation, mainly having to do with some new loss in the subprime mortgage market. Stein then reels off a bunch of stats regarding the size of the housing market vis-a-vis the size of the amount of it that's subprime, and then states that the economy is strong, so these few losses are minuscule and, "USA! USA!", everything's cool, and those questioning the Supremacy of the Almighty dollar are just, well, nutty.

There's not a mention of Ameriquest, and the others, (FAMCO, Countrywide, Wamu, Prudential, MBIA, New Century, to name but a few), nor of their selling of fraudulent products; not a whisper about Countywide, nor a sound made regarding Bear-Stearns, Lehman, shadow banking, Mortgage backed security, CDO's (never mind CDO's-squared), covenant-lite loans, SIV's, SPV's or the swelling federal deficits that, BTW President Bush was responsible for, there was just no Tea Party then, because, of course, "(Republican-imposed) Deficits don't Matter", right?, nor of the monolines, all doing the same thing that AIG was doing, raking in piles of cash by taking on enormous liabilities with absolutely no resources to pay for the risks they were insuring against (usually referred to as fraud, when you don't have an administration in power intent on waging war while shoveling huge piles of money onto the already enormous mountains of cash of the "haves and have-mores" it snidely counts as its supporters.

Now, unlike Ben Stein, I am not an economist. Nor, of course, was I at the time he wrote this tripe. Yet I was not only cognizant of all of  the above perilous "products" of the Shadow banking system but was also aware of the fact that when such so-called products are conceived of and foisted on the public in the first place, and then extended to the least credit-worthy of its citizens, via complex "securities" that are, by design, engineered to hide risk, it is not a sign of an "extremely strong" economy. When Enron-style accounting is used on a globalized basis, it is not a sign that, "The world economy is exploding with growth"; nor that "Profits are superb", but instead tells the story that  "terrible problems" don't "lurk in the future", as BS proclaims (a strange statement, given the sanguine view he presents to readers), but were at work then (as they are now) to plunder the economy of its productive assets and, having taken the true driving force of the economy away, leave it running on the fumes of financial shenanigans and trumped-up confidence in wealth that no longer exists but has been systematically looted. This persuades the scammed populace to continue to take enormous risks, that they don't understand, with the financial resources they think they have, while the financial sector feeds at the trough of government largess and complicity in the FIRE economy's self-serving schemes.

And it is to this Confederacy of Putzes, (those "smart, brave people" making a fortune in those days, among whom was Madoff, who, while BS wondered, "What all this scare was all about",  was still raking his clients over the coals), to whom Ben Stein had the Duty he referred to in the opening sentence of this essay. It was the Madoffs and the other shysters that Stein was insisting we continue as a country to give free rein to as they skimmed off everything of value from our economy and sold deliberately designed weapons of mass economic destruction, called derivatives, to the rest of the world, all dutifully stamped triple AAA.

 And now, in the form of Sovereign debt and a myriad of newer scams, we continue along the same path. So, although the Stein Way has since been proven to play a Pied Piper tune that leads us down a path that ends in a Thelma and Louise-style debacle, we still dance to the same tune, and still refer to the Fed's repression of interest rates as "leaving out the punch bowl", as though our pensions, savings and economic future were all just some High School Prom. So we should not be surprised (although, of course we will be) that when it is taken away next time (and there is always a next time, Capitalism is nothing if not cyclical, Central Bankers  notwithstanding), the ones who'll be left standing in this game of Musical chairs, is not the banksters, who will be comfortably ensconced in their barcaloungers, but the rest of us who failed to hear the sour notes being played and parlayed.