The Political Whore

By Al Coryell
PoHo correspondent

RECESSIONOMICS

Question: The government economists are telling us that the economic crisis is over and things should slowly get better now. Should I believe them?

When I first heard the doom and gloom talking heads being trotted out onto the daily money shows like CNN, FOX financial, Bloomberg or CNBCs Squawk Box, I took them with a huge grain of salt like everyone else. Their arguments simply didn’t seem plausible to me. At the time (2005-06), the economy seemed fine. In fact, we were gloriously bouncing back from the 2000-03 recession caused by the “dot-com” bubble. However, the reason they didn’t seem plausible, I have reluctantly come to admit, is because I was ignorant.

Not only was I ignorant, but I simply didn’t want to believe that things could get as ugly economically as they predicted. I have finally come to accept the harsh reality that confronts us. But so many of the people around me, certainly many of you, still haven’t accepted it and understandably so. For the vast majority, what is happening to us, even as we live through and witness it first hand, just doesn’t seem real. It is so surreal, in fact, it often seems like we are living inside a Salvador Dali or a Picasso painting.

In the past two years, I have read and studied more about banking, money and financing, and particularly economics, than I could ever have guessed I would in my wildest dreams. I have become obsessed with it because the more I learn the more I realize how preventable was the magnitude of the current crisis (though not the crisis itself), and unfortunately, how inevitable is the bleakness of our future.

There are three men today whose voices I trust when I hear them speak.

For years, their voices were used as the comic relief for the talking heads shows that touted the Goldilocks economy of the ‘new economic era’. The three men are Rep. Ron Paul from Texas, Peter Schiff and Robert Prechter. Ron Paul has been calling for the abolition of the Federal Reserve System since the early 1990s. Robert Prechter, socionomics expert, wrote a book in 1995, Tidal Wave, which predicted the inevitable economic tsunami and explained in detail how it would take place. Economist Peter Schiff has been an economic advisor to Ron Paul for many years. He wrote his most popular book, Crash Proof, in 2002. So there have been people for over a decade that not only told us what was coming, but why it was happening and how and when it would happen. Nobody listened to them back then. Nobody believed them because nobody wanted to believe them, including me.

As early as 2006, Peter Schiff was on CNBC as the cartoon character put up against Art Laffer. Some of you may remember Laffer was an economic advisor to Ronald Reagan. He was extremely respected as a Keynesian economics expert. (By the way, all three of the gentlemen I admire above are Austrian School free market, sound money advocates. I will talk more about Austrian School economics in the near future.) Watch this youtube video of Laffer and Schiff debating Schiff’s prediction of both the housing and financial crisis we are currently experiencing. Keep in mind this was in 2006, before most of us even knew there was a housing bubble and well before the housing market, financial companies or the stock market had started to collapse.

Of course, Laffer never paid Schiff his penny. He has become something of a laughing stock in certain economic circles because of this video. But, then, his Keynesian friends at the Fed didn’t see this coming any better that he did so the laughter is somewhat muted. Ironically, Laffer co-authored a book in 2008, called The End of Prosperity, in which he claims to have seen the crisis coming and blames high taxes for the economic collapse. Sad but true.

Schiff’s point that real wealth in this country has steadily declined since the 1960s, as evidenced by the fact that it was only necessary for one person in a household to work to support a family back then, pretty much got lost in the working women discussion. But his point is well taken. One person, man or woman, could more easily support a family then. My father supported a wife, six kids and a dog on $80 a week in 1962. The wealth effect, our perception that we are wealthier because we make more money or because the price of our house increases, is a false perception. Price inflation, caused by the Federal Reserve’s intentional suppression of interest rates and inflation of the money supply since the early 1980s, is the primary cause of the decline in the true wealth of Americans since then. Today it is often necessary that two or more family members work to support it. We have come to accept this as normal. What we fail to realize is the toll it takes on families with a single head of household, particularly women, who still today tend to make less than men. And it will, unfortunately, get much worse before it gets better.

So who should you believe?

The people who never saw this coming, continue to deny that it is really happening and arrogantly advise us to ignore the “doom and gloom” prognosticators?

Or, The people who saw this coming years ago, warned us what would happen if we didn’t listen and who are now being vindicated by the events unfolding just as they predicted?

You decide.

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