Ben Stein Proves George Bernard Shaw Was Right

Ben Stein recently wrote an article in the New York Times where he strongly criticized a piece of research issued by a Goldman Sachs economist. One economist differing in opionion from another is not only not new or rare, it is the normal order of what Rousseau described as the "dismal science". And of course George Bernard Shaw famously remarked that "If all the economists in the world were aligned end to end - they wouldn't reach a conclusion".

There are so many pejorative quotes regarding economists that books could be written from which the masses could derive a great deal of humor. However, with the advent of television, and more recently financial news channels like CNBC, Bloomberg and Fox Business, economists now have a great bully pulpit to shout out their prognostications to the masses.

But listening to these "economists" and "financial analysts" can be quite harmful to your financial well being. I cite as an example the ongoing development of the US housing/sub prime/credit crisis. Well after the start of this mess the vast majority of TV talking heads were still chirping about the Goldilocks economy. Not to worry, they insisted, the sub prime boogey man was confined to a small portion of a small market, the operative phrase was: "it is all confined".

How could so many educated, seemingly intelligent financial gurus be so wrong for so long? During the August, 2007 bout of credit heebie jeebies, Larry Kudlow, aka Mr Goldilocks, asked his guest Wayne Angel, a former Fed member if this development was essentially inflationary or deflationary? Mr. Angel replied it was deflationary. Excuse me, an event of this magnitude and two economists actually debate its eventual consequences? And of course Mr Kudlow switched fairy tale metaphors from Goldilocks to Chicken Little on a dime. All the while we were looking down both barrels of this mess, a very small few actually saw it coming and spoke out. And generally, they were ridiculed by the mainstream TV talking head masses.

While I am not economist, I do have a BS in Business, and with the record of those referenced above I feel an armchair economist of my stature can pontificate as well as the professionals. Here is my take on inflation vs deflation: equities and real estate will find this DEflationary, but for commodities of almost every other description it will be INflationary. And not for just the next few quarters. As a result of poor stewardship at the fed, and a President and congress that have been asleep at the switch, we will find ourselves in the midst of a prolonged stagflation that will ultimately prove very unpopular politically. The recent fiscal and monetary actions by the Fed and congress have one aim: push this mess out past the November elections.

Until the elections, we need only contend with a rapidly falling dollar, seized credit markets, and falling equity and real estate values. Meantime keep an eye on your mail for that big check from Uncle Sam, that should give US GDP a boost for about 10 minutes. And of course inflation will get a big boost with a Fed that attempts to douse the fire by spraying it with gasoline.