The latest reason to disregard the AP's "economic" news

"U.S. Homeowner Woes Felt Around World" laments the headline. With phrases like "The latest crisis in financial markets," "fears that Americans are failing to keep up with their mortgage payments" and "a glut of foreclosed homes," you'd think it was the end of the world. After all, we have sources like the prescient "Gabriella Savarini, a 69-year-old shopkeeper in Rome"! Never mind that she's telling us the obvious ("problems on the stock exchange have consequences for the economy of America and of the world"), the fact that the Associated Press quotes her means we must regard her opinion as gospel, right?

Let's go through some of the ludicrous doomsaying in the article:

"The sharp falls in global stock markets obviously affect consumer wealth, which again could dampen spending," said Howard Archer, chief British and European economist at Global Insight.

How can a top economist at any reputable company be so confused about saving and spending? If this is an example of their usual "insight," then Archer and his employer had better stick to providing raw data, instead of analyzing it (let alone making predictions!). The "sharp falls" will have minimal effect on the portfolios of those who meant to save their stock investments. On the other hand, the drops will, as we'll see below, (properly) penalize those who think they can time the market with short-term investments.

The most immediate effect for the half of all American households who own mutual funds and other individual investors worldwide is a decline in the value of their investments, which may or may not be short-lived.

This will require a trifle lengthy debunking, as I'll have to get into numbers. Thankfully, people like Paul Krugman and the AP's "economic writers" (particularly the perma-bear hacks Martin Crutsinger and Jeanine Aversa) are a great indicator of the economy. When they're predicting gloom while there's a Republican in the White House, things are actually going great.

Stock markets across the world have been dipping lately, but as far as the American exchanges, let's look at the facts. As I noted back on April 5th,

Year-to-date, the DJIA has gained only 0.8%. But if you had bought a Dow Jones Industrial Average index fund on February 28th, the day after it closed at 12216.2402, then your purchase as of April 5th's close would have already gained 2.8% (the DJIA closed at 12560.8301). If you had bought on March 6th, the day after the market "tumbled" to 12050.4102, then your purchase as of April 5th's close would have gained 4.2%.

As I explained in that post, I refer to "the day after" because when you buy a index fund, the Net Asset Value is calculated from the underlying securities' prices from the day before. So on February 28th, you're buying at prices determined at the close of February 27 (the day of the first big dip).

The Dow Jones Industrial Average was at 12216.2402 on the close of February 27th, and at 13239.54 on the close of this last Friday, August 10th. So if you had bought into a simple DJIA index fund on February 28th, then excluding fees and taxes, you'd now be up almost 8.4%. If you had bought into the index fund on March 6th, the day after the DJIA closed at 12050.4102, you'd now be up almost 9.9%. (For simplification purposes, when I talk about funds' gains, I'm not counting dividends you may receive.)

Let's look at the S&P 500: 1399.04 at the close of February 27th, 1374.12 at the close of March 5th, 1453.64 at the close of August 10th. So the gain since February 27th is still 3.9%, and the gain since March 5th is 5.8%. For the NASDAQ, the numbers are 2407.8601 at the close of February 27th, 2340.6799 at the close of March 5th, and 2544.8899 at the close of August 10th. The gain since February 27th is 5.7%, and the gain since March 5th is 8.7%.

So what's the lesson, that the DJIA is better? Not necessarily. The first secret to successful investing is to diversify: index funds in each of the three (plus others like the Russell 2000) are a desirable, and even then, they are only a portion of a successful portfolio. Buy into some tech funds, but don't ignore other vehicles like emerging market funds, health care mutual funds, and energy SPDRs.

But, naysayers may argue, what about those who buy at the top of a bull market? After all, the DJIA closed at 14000.4102 on July 19th, the same day that the S&P 500 closed at 1553.08 and the NASDAQ closed at 2720.04. The losses since then, respectively, have been 5.4%, 6.4% and 6.4%. Well, the second secret is that no matter how well or poorly the markets are doing, think long-term. Wait a few years and see how the averages do, considering U.S. stock markets have a consistent historical upward trend. Individual investors should never expect to get consistent short-term gains, but they can have every confidence in the long-term gains of properly diversified holdings.

The distress in the markets makes it harder and more expensive for businesses and consumers to get loans and cash, Archer said. If companies cannot get loans, they cannot expand and may have to cut expenses, typically through layoffs.

This is a common logical fallacy: make a questionable statement, and make it seem valid by immediately making a generalized statement that is only generally true. In this case, the current "distress" in the markets does not necessarily make it harder for "businesses and consumers to get loans and cash," whether any particular entity or on average. Such a blanket statement is simply not true, for the very reason that if you are competitive, then by definition, you'll get a loan at competitive rates. So it's more accurate to say, "The current dip in the markets, which some economists and financial analysts explain is a natural correction from recent highs, could further tighten the easy credit of the last several years. If so, it will be harder for less competitive businesses and consumers to ride the coattails of the successful when seeking to borrow."

America faced a crisis similar to the current mortgage fiasco when hundreds of savings and loan companies went belly-up in the 1980s. Back then, the fallout did not spread dramatically to foreign shores because the U.S. government stepped in to bail out the banks and repay depositors.

So is the reporter shilling for Hillary Clinton or John Edwards, that he implies the federal government will need to bail out all these defaulting mortgages? Is he even serious in making the comparison to the S&L scandal? The two situations are completely different. The S&L crisis was borne of government, first because the federal government insured S&L loans (creating the moral hazard of encouraging S&Ls to make bad loans, knowing they couldn't lose if the loans weren't repaid), and second because of certain government officials' participation in the fraud that exacerbated the collapse. What's happening today with mortgages is typically that stupid people get in over their heads by borrowing money they latter cannot afford to repay, allowing smart investors to buy foreclosed properties. Finally, the doomsaying about "foreign shores" didn't apply then or now: foreigners weren't heavily invested in S&Ls compared to other things, and the same applies today. Foreigners love our stocks more than investing in S&Ls or buying mortgage-backed securities, and they especially love U.S. Treasury securities and our real estate.

A steep sell-off in global markets on Thursday and Friday was triggered by distress signals from France's biggest bank, BNP Paribas, which had to freeze billions of dollars in assets in three mutual funds because of the falling value of securities linked to high-risk mortgages taken out by U.S. borrowers.

Incorrect. They were hedge funds that dealt with asset-backed securities, which are different from a mutual fund. Hedge funds are all about investing in very high-risk securities, and with the fact that they require heavy initial investments (US $100K is not uncommon), would-be investors know what they're getting into.

In any case, BNP Paribas only temporarily suspended redemption of three funds, whose aggregate value is about $2 billion (compare that to the, what, $10 trillion today in mutual funds?). Now, the mainstream news would you have think the worst, that BNP was having troubles like American Home Mortgage (which recently collapsed into bankruptcy because it cannot repay loans). But the reality is that BNP didn't have any loan troubles, but that with the latest market volatility, it simply had trouble valuing the funds' underlying securities. Doesn't it make sense that if you don't know how much something is worth, you can't trade it?

Global interdependency isn't a recent phenomenon: The Wall Street stock market crash of 1929 and the Great Depression affected the entire world, and helped create the conditions for the rise of fascism in Europe.

Stock markets were only one portion of the Depression, and in fact, the events of October 1929 was merely a symptom, not a cause. (Click here for my blog entries involving it, they're all worth a read.) Simply, the Depression was triggered by the Federal Reserve suddenly cutting the money supply by a third in the late 1920s, then exacerbated by the Hawley-Smoot Tariff (protectionism that hurt all nations that tried to retaliate against each other), and further by tax hikes that strangled any attempts to invest in business growth (as compared to "public works" that wasted money hiring people to dig holes and fill them back up, or build bridges nobody needed at that cost).

But with faster communications and real-time trading, market jitters in New York race around the world almost instantly today.

And this is undesirable? Information should spread as quickly as possible, because markets work most efficiently that way.

More Americans are failing to keep up with their home mortgage payments, and there are concerns that this could ripple around the globe because much of the debt from mortgages has been packaged into securities sold to pension funds, banks and other investors who were hungry for high returns on investments.

This would be a problem if most or at least significantly more Americans were having trouble, but that's not true.

The same mortgage securities in the U.S. that are crumbling in value are a part of bigger holdings that banks from Japan to Germany bought into because of low U.S. interest rates and a good returns.

They're part of overall portfolios, but not a major component at all. Remember that word "diversified"?

Meanwhile, the ability of banks to convert assets to cash quickly was in doubt because some were unable to track how much money they poured into now worthless securities backed by sub-prime U.S. mortgages, or loans made to high credit-risk individuals.

The attempt is to lump all sub-prime mortgages together, and make it seem like they're all in trouble. They're not. But, the liberal media always needs to create some sort of economic Armageddon, at least when a Republican is in the White House.

The rest of the article is historically accurate, but with the same Chicken Little tone. UBS lost $125 million, and Bear Stearns closed two funds that had been worth $20 billion. Yet the companies are still solvent, aren't they? We shouldn't be surprised that they are. Financial giants and their high-risk investors are prepared for such losses: hedge funds' inherently high risks keep them from being no more than a small portion of, you guessed it, a properly diversified portfolio.

Toward the end, it's explained how central banks are intervening, as they've occasionally done in the past, increasing the supply of loanable funds by injecting money into financial markets. Actually, this is the last thing we want: if credit is too easy to come by, why do we want it to continue?

Sleep well tonight: unless you put your 401K into a single individual stock, and barring the Democrats screwing up our economy, things will be fine.

Obama and Geithner's "Money PPIP"

So far, it looks like the White House couldn't make up its mind what to tell Martin Crutsinger about the name of the new bureaucratic boondoggle. This version of his article calls it the "Public Investment Corp." This version calls it the "Public-Private Investment Program."

I prefer "PPIP" because it sounds like the 1986 comedy with Tom Hanks and Shelley Long, so named because the lead characters keep pouring money into a house that's falling apart. The federal government is simply pumping our money into sustaining companies that should be allowed to fail, and propping up asset values that need proper valuation. Once more, the government has been behind everything that precipitated this mess, from instituting mark-to-market accounting at the worst time possible to "rescue" efforts like TARP and PPIP that prevent us from placing true values on these assets.

Few realize how government has sparked the "crisis" and is purposely continuing it. I've written about this across many posts over several months, but I'll put it all here; just follow my explanation for each link in the chain. Right when markets panicked and CDOs and other securities plunged in value, the feds deliberately imposed mark-to-market so that banks' balance sheets would be impacted negatively -- and banks are forced to cease lending if their net assets became negative. The assets are deemed worthless, though, only because TARP and the like are discouraging people from sitting down and determining a real value (as opposed to a bureaucrat's politically motivated guess). Let's say an asset on the market is worth 1 cent on the dollar, and an investor might buy it at 10 cents in the hope it will eventually be worth 50. But the feds are talking about buying it at 70 (easy when taxes always come from other people!), so how can anyone determine the true value? Why would anyone bother?

See, it's all "legal" when the feds create a shadow holding company to hide AIG's bad assets on another ledger, the same fraudulent practice that got Enron and WorldCom in trouble. When it comes to mark-to-market, however, banks must list all assets on their balance sheets, thus assuming all liability for losses! So when one doesn't have positive net assets so it can lend under FDIC rules, the feds so graciously step in with a cash infusion (courtesy of everyone who doesn't make a living via government, in the form of taxes and inflation). Now PPIP will "help" banks by effectively whiting-out these assets, putting taxpayers even more on the hook for the initial purchase plus any future losses. The circle is complete.

I've explained before that "There's plenty of investable money around the world, but no one wants to sink it in *these* securities. They're really that bad. Even Warren Buffett wants the federal government to bail things out, instead of seizing a profit opportunity and jumping in himself. Surely he could put up a 'mere' $1 billion without blinking, but he's smart enough to recognize that the possible returns aren't worth the current asking price." Why do so few see the warning sign that when the private sector is staying away from buying these assets, maybe they're not such great deals? Now, a lot of these assets are worth next to nothing and even zero, but some still have value. Who's to say that a particular security, comprised of notes from such-and-such a neighborhood, isn't a good return in the end? Actually, none of us can -- unless you're well-connected with the government, none of us can really tell if any given neighborhood has people who will get a housing bailout!

Note that I was wrong, though, about the source of the funding for all these programs. However, last September I (and most people) just couldn't imagine the initial $750 billion TARP, then the $787 billion "stimulus," the $1.2 trillion the Fed recently announced it will create, and now the new $1 trillion so that the Treasury can buy up "toxic assets" under PPIP/PIC. Every new dollar that the feds are spending can come only from whatever new money the Fed can create. There just isn't enough of a tax base; there just isn't enough money to borrow.

Trillion, billion, the prefix to the "illion" has sadly lost all meaning. This is pure insanity, and with Obama and Geithner accelerating what GWB began, things will stop only with a disastrous crash.

Update: what irony in Christina Romer's misuse of "silver bullet." Over time, it's been twisted into the simple meaning of something that will work effectively. Proper usage refers to killing an otherwise invulnerable creature (like vampires in old pre-Stoker folklore, or Wolfman in modern monster tales). Romer said, "I don't think Wall Street is expecting the silver bullet," so Wall Street had better beware.

Catching the AP in the act: if the news isn't bad enough, they'll rewrite it

Take a look at the original article, which is still on Forbes' right at the moment, but I'm reproducing it here as a screenshot, lest the AP require that it "disappear":



Elsewhere, the article has been replaced by an update. Here's the article on Google News' site (again, a screenshot):



It's now the 11 p.m. hour, so the article was rewritten and republished around 10 this morning. See the differences?

New claims for unemployment benefits dropped unexpectedly last week while the number of people continuing to seek aid rose sharply, the government said Thursday.The number of people continuing to seek unemployment benefits has risen sharply, according to government data released Thursday, indicating that laid-off workers are having a harder time finding new jobs as the recession enters its second year.

The Labor Department >>also<<> to 540,000. T, but the new figure partly reflects seasonal volatility that occurs around the >>shortened<<>>week<<.\

Virtually the same beginning paragraphs. It looks like Rugaber comes from the San Francisco Chronicle and is now at the AP. His editor probably said to him, "What the hell are you doing? We can't report good economic news! At least not just yet, not until Obama has been in office long enough to take credit."

Good lord. At least Dan Okrent at least admitted the New York Times is liberal. Evidently his counterparts at the AP have no shame.

And as if Rugaber's rewrite weren't already laughable, he changed it again!



It's no secret that the mainstream media is so liberal, hoping for a recession while Republicans control the White House, and they'll even try not-so-subliminal imagery to convince Americans of a "bad economy." Usually it's the AP's ultra-bear "economics" writers Martin Crutsinger and Jeannine Aversa, whom I have skewered on this blog, and occasionally Tim Paradis, the AP's "business" writer. I enclosed "economics" and "business" in quotes because the trio regularly demonstrate that they don't truly understand their assigned subjects. I will readily concede that "writer" is far more accurate than "reporter," because in their bias, they're definitely not reporting news. They're just writing bullshit to suit their liberal agendas.

Thou shalt not measure an economy by consumer spending alone

Most importantly, thou shalt not fear economic bullshit.

It's been all over the news that consumer spending rose only 0.1% in February. You'd think it was the end of the world.

"Tuesday's sluggish retail sales numbers may be the first ominous sign that the American consumers' remarkable propensity to keep spending is beginning to wane." - CNN Money

"Sales at the nation's retailers barely budged in February as severe winter weather kept already cautious shoppers away from the malls." - L.A. Times

Of course, liberal media outlets would just love a recession that they can blame on Republicans, particularly Bush's tax cuts.

"Retail sales in the U.S. rose less than forecast as the coldest February in more than a decade kept shoppers home and added to concerns the economic slowdown will deepen." - Bloomberg

That's strange, I thought we were supposed to be in the middle of global warming. In any case, did that many people really stay home because of the weather, and did anyone ever consider that if they did, perhaps they bought things online instead? The CIO of a $30 billion fund recently predicted that "Weakness in the equity markets of housing and autos will be offset by strength in consumer spending and exports this spring." Is he right? He could be wrong, but if he's right, I won't be surprised a bit. If anything, people could easily spend in spring what they had not spent in winter. And as we'll see later on, consumer spending isn't everything, because what people don't spend, they save.

Furthermore, what economic slowdown? GDP growth is not as robust as it has been, but it's still very moderate, with moderate inflation and historically low unemployment. That's an economic slowdown? France should be so lucky to have such a one.

"The Deloitte Research Leading Index of Consumer Spending fell this month, due to continued weakness in the housing market." - PR Newswire

If you examine the components of the index, you'll realize that it's meaningless. Tax burden and real wages are important, but factoring in only home prices is nonsensical when it's such a small portion of consumer spending. (Even then, money spent on housing is typically mistaken for consumer spending, when most of the time it's actually investment spending.) Now, the real stupidity is using unemployment claims, which is merely multiplying by 1. Unemployment benefits are an increase to someone's income but are also an equal decrease to another's, because of taxation. Finally, what does the final result mean? A drop in housing prices is related only very, very indirectly to consumer spending, yet one downturned housing market in the U.S. can make D&T's index fall. Why don't I create a index based on sunspot activity combined with my bamboo plant's growth and the cloud cover percentage at 2 p.m.? That would be as significant to the economy as John Kerry's nonsensical "misery index" of the 2004 presidential race.

"Sales at the nation's retailers barely budged in February as bad winter weather kept already cautious shoppers away from the malls. The Commerce Department's report, released Tuesday, raised fresh concerns that consumers could tighten the belt further, causing economic growth to slow even more than anticipated.... On Wall Street, stocks tumbled as the weak retail sales report and troubles with risky mortgages added to investors' fears about the country's economic health. The Dow Jones industrial average plunged 242.66 points, its second-biggest drop of the year." - Associated Press

Martin Crutsinger and Jeanine Aversa are so reliably prophets of economic doom that I can never seriously consider anything they put out. "Tumbled"? With the DJIA still over 12000, Tuesday's drop was nothing. One day is nothing. It can easily be erased with a day's rally, or a week's steady gains. The important thing about investing is to think long term, and not tear your hair out because stocks overall (because not all stocks were losers) took a hit one day.

"Analysts at ING Financial Markets say that US consumers have started to control their spending, which is likely to result in a slowdown in growth in 1H07." - Newratings.com

There's no problem here, none whatsoever, so long as the economy grows. While the first half of 2007 may experience slightly slower growth, such growth and quite possibly a little more will be spread out through the future. That's because whatever money today is not spent is therefore saved, which eventually becomes investment spending. Consumer spending is two-thirds of the U.S. economy, but don't let pseudo-economists and Chicken Little journalists fool you into forgetting this: people may spend less today, allowing businesses to borrow more money today, which creates more jobs in the future.

If I still earn $X per year, it doesn't matter if I spend 60% on consumption spending and save 40%, or spend 80%/20%. What matters is that total economic growth remains the same: if consumer spending falls because of a recession, that of course is bad, but we're not in a recession. GDP and personal income continue to grow. What also is important is that interest rates are left free to adjust so that economic participants can, on our own, find the optimal level of savings. We don't need a central bank that by definition skews our choices, most notably the incentives behind producing scarce goods and services.

So the lesson tonight: don't be so focused on only one economic indicator. I don't even look at inflation-adjusted GDP growth so much as unemployment, which right now at 4.5% indicates a strong job market. Mildly positive GDP growth, like in France and Germany, cannot overcome the bad news of high unemployment that is structural in nature.

Does the latest jobs report means a recession? Hardly!

A little note I sent to Don Luskin yesterday:

Leave it to the AP's "economic reporters." I basically ascribe zero credibility to anything Martin Crutsinger or Jeannine Aversa write, like this. http://news.yahoo.com/s/ap/20080606/ap_on_bi_go_ec_fi/economy

So this article says:

The 5.5 percent rate is relatively moderate judged by historical standards. Yet, there was no question that employers last month sharply cut jobs in manufacturing, construction, retailing and professional and businesses services. Those losses swamped gains elsewhere, including in the education and health fields, government, and leisure and hospitality.

As you and I know, this unemployment rate is normal by historical standards. During the Carter years, 5.5% would be called a "boom."

Now, there's absolutely NO WAY that a loss of 49,000 jobs could account for 0.5% unemployment. That implies there are only 9.8 million jobs in the whole country, which is absurd. A mere 49,000 jobs compared to the U.S. workforce is barely over 0.03%. So clearly the dramatic increase in unemployment is from an influx of new workers who can't find jobs, NOT because the economy has shed jobs. It's graduation time, right? So this is perfectly expected. In fact, for being so "bad," the economy has gained jobs overall for the last 12 months:

The government said the number of unemployed people grew by 861,000 in May — rising to 8.5 million. The over-the-month jump in unemployment reflected more workers losing their jobs as well as an increase in those coming into the job market — especially younger people — to look for work, the Bureau of Labor Statistics said.

A year ago, the number of unemployed stood at 6.9 million and the jobless rate was 4.5 percent.

The "year ago" figures imply there were 153,333,333 jobs -- 6.9 million divided by 4.5%, right? The present figures imply 154,545,454 jobs. So the economy has gained 1.2 million jobs, year-over-year. Not terrific, but not bad, either.

So when the article says this,

So far this year, the government said, job losses have totaled 324,000.

I know what the truth is. Hey, if people think our economy is really doing so bad, let them move to France and pray their car doesn't get torched overnight. Or Germany, whose present 8% unemployment is a 15-year low!

I sent that to Don during my lunchtime. I'm not sure when Don gave his remarks on the unemployment report to Larry Kudlow, but he says the same thing too.

It just needs a little clear thinking, folks, and maybe a little bit better perspective than the average bear. Think about it: how can 49,000 people be equal to half a percent of the workforce? Ergo, there's another explanation for it.

Alan Greenspan, just shut up already

File this under "Physician, heal thy goddamn self." Greenspan says that the Federal Reserve has the power to contain inflation, if it's willing to act. And he says that as if it were some miraculous revelation! He caveats that, saying,

"One of the lessons of the last 20 years especially is that low inflation is the major contributor to economic growth overall, and that fundamentally, inflation must be suppressed," he said. "It's ultimately the Federal Reserve in this country which is the key architect of doing that, and it's critically important that the Federal Reserve is allowed politically to do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer term period."

He's so completely dishonest and misrepresenting here that there must be a special place in hell, a tenth circle Dante couldn't see, reserved for Greenspan, Bernanke and other bad economists.

First, it's a Keynesian myth that inflation is necessary for economic growth. I explained in this post describing how an economy works, with each person producing and trading with others, creating wealth without subtracting in any way from what the others produce. My principal point was to explain why Tiger Woods earning another $1 million does not take away $1 million from the rest of us, but rather creates new wealth, because the rest of supply goods and services to, eventually, provide him with his $1 million. However, in describing the basic workings of an economy, I extended that to the observation that economic growth does not require inflation, let alone a central bank to regulate the money supply.

Greenspan's apologists might say he was talking about relative inflation, that high inflation hinders economic growth, but that an economy can grow if inflation is kept low. That doesn't wash in the least. First, inflation in any amount hinders an economy from growing at its full potential, because it skews market forces by which people know what to produce and how much of it. Moreover, Greenspan said, "low inflation is the major contributor to economic growth overall," ignoring that economies grow more from productivity and trade, not some clique of balding men in pin-striped suits who decide how much more to debase our currency.

Second, Milton Friedman taught us that "inflation is always and everywhere a monetary phenomenon." Inflation comes only from the central bank creating money. The Federal Reserve is officially not part of the United States (meaning "federal") government, but it is very much a full-fledged entity. Congress, warping its power to "regulate the value thereof" of our national coin (as proscribed in Article I of the Constitution), gives unconstitutional power to the Fed: to regulate our money supply and act as a lender of last resort. Most people believe it's in a sort of limbo between the private sector and government, when in reality there's no such thing. If something isn't 100% in the private sector, it's part of the government. There is no in-between. The private sector might be the major player, but it's still ultimately controlled by the government, because the government can always use force to steer things in the direction it wishes.

The Federal Reserve has authority over our money because it has the backing of the federal government, especially in forcing us to accept Federal Reserve Notes. Well, tyrants keep power in one of two ways: they force people to submit, or they make people think they should submit for their own good. The latter is worse because you willing accept such slavery, and most Western people believe that central banks are necessary. The Fed doesn't need to use physical force to make us accept it, because it justifies its existence by telling us that we need inflation for economic growth, and enough people believe it.

Third, Greenspan talks about inflation as if it's hard for the Fed to maintain. Don Boudreaux pointed out in November 2005 that

Because the Fed largely controls the supply of U.S. dollars, the Fed's role isn't to "tame" inflation. Rather, the Fed's role simply is not to generate it. It can achieve this goal very, very easily -- namely, by not increasing the money supply.

This is no difficult task.

But the popular account of inflation still portrays inflation not as something caused by excessive monetary growth but as some alien-like demon, or animal spirit, that visits us from time to time and needing "taming" by smart and brave central bankers.

Too often, things that are simple -- for example, not causing inflation -- are treated as though they are challenges of the first rank, while things that are impossibly complicated -- for example, government provision of health care -- are treated as though they are quite easy to achieve.

That last paragraph is especially telling. Greenspan and other Fed officials are like a spendthrift who laments, "Oh, we need to do something our spending." And the American people are like a patient spouse who shouldn't have to put up with it, but Americans instead convince themselves that they, too, are part of the problem, that somehow by creating wealth we distort the value of our money. Nothing could be further from the truth!

As Don Luskin pointed out way back in February 2006, Greenspan kept inflation in check when the Fed raised or lowered interest rates: a "virtual gold standard" that did work pretty well, because gold prices are a historically excellent barometer of the availability of dollars. You can find historical Federal Funds Rates here, which presently goes back to 1990. Side note: some time ago I pointed out to a friend the 8 percent FFR of July 1990, asking if it's any surprise that we had a recession. The Federal Reserve engineered it, just like it did with the Great Depression.

That leads to my fourth point. Greenspan, once upon a time, was a good economist and Ayn Rand acolyte who talked about gold and sound money. But power corrupts, and his speeches, like that on "irrational exuberance," often demonstrated how much he came to love the limelight. He's been called the first "economic superstar," being far more visible than any of his predecessors, and even now, he has to prove that he may be gone from the Fed but still has power. He has to prove that he can still roil financial markets with his mere words, and Americans are stupid enough to think he's prescient enough to predict a recession. How would he know if the odds are actually 50% that we'll have a recession, or that they really should be 60% or 70%?

Also, when will we have that recession? It's an old joke, sadly true, that "Economists have forecasted ten of the last three recessions." There's been a resurgence of punditry, absurd as ever, about a looming "recession," particularly from Economy.com's chief "economist" Mark Zandi, whose soundbites have started to litter a lot of AP articles. This is a guy who has continually predicted recessions since at least 1997, which as I've said is like Red Sox fans predicting every year since 1919 that their team would win the World Series. Keep predicting it, and certainly it will happen eventually, but that doesn't mean the person has any analytical or prophetic ability.

With Greenspan, Zandi and "AP economic writers" like Martin Crutsinger and Jeannine Aversa, who needs Democratic presidential candidates to tell us how bad things are? But the truth is that this economy is incredibly robust and growing. The economy grew 4.9% in the third quarter of 2007, which in France or Germany would be an economic miracle, yet Aversa lamented the expected lower performance of the fourth quarter. So what? Salesmen live all the time on such expectations, that you'll have a very good season followed by a leaner one. And for heaven's sake, the economy in November added 94,000 jobs to payrolls, yet Reuters is still talking "recession."

The media, naturally, wants to make the 2008 presidential election a close remake of 1992: the American people are stupid enough to elect a Clinton, after being deluded into thinking George Bush wrecked the economy. Though the 1990-1991 recession (as I wrote above, engineered by the Federal Reserve) had ended in March 1991, NBER didn't reveal it until December 1992, allowing Bill Clinton to get elected after campaigning on the supposedly bad economy. In the next several months, expect to see the news talking about "recession" everywhere we you turn, just as it's been hammering us with the mythical housing industry collapse and the need for government to save us.

Now, besides getting his name in the news again, I don't know what Greenspan's angle is -- but he can shut up already.