June 7, 2012

By Kevin Michael Grace

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Gold was up (at press time) $28.80 (+1.8%) for the week to $1,591.30, and silver was up $0.83 (+0.3%) to $28.54. Gold fell $42.90 today; the Wall Street Journal attributed this to Bernancus Magnus making cryptic remarks to Congress about further quantitative easing.

On the one hand, “Banking and financial conditions in the United States have improved significantly since the depths of the crisis.” On the other, “The situation in Europe poses significant risks to the US financial system and economy.” The Great One refused to be drawn, remaining gnomic and imperturbable. “If we decide that further action is required, then of course we have to decide what action is appropriate or what communications are appropriate.”

Holbein: An economist meets his nemesis.

So, if Kent Brockman were to ask the Ben Bernanke, “Professor, without knowing precisely what the danger is, would you say it’s time for our viewers to crack each other’s heads open and feast on the goo inside?,” he would answer No.

Martin Wolf of the Financial Times would answer Yes. “Given such uncertainty, panic is, alas, rational.”

Prime Minister Harper, no mean gnome himself, is somewhere in the middle. “Ever since mid-2008, I have been constantly worried,” he told Peter Mansbridge Tuesday. (More on this admission below.) On the one hand, “Our European friends have done a great job of avoiding a catastrophic event over the last four years.” On the other, “We are now four years into this crisis, and we do not have definitive solutions.”

Harper continued, “I don’t want to sound too alarmist”—uh oh!—”but we are kind of running out of runway here.” He argued that in the absence of definitive solutions the Eurozone “will come apart one country at a time. And that will be very bad for everybody.”

Mansbridge was quite deferential to Harper, and this was to be expected, as Harper gives few interviews and won’t abide hard questions. (Not that any other interlocutor would have been tougher; Canada has no Jeremy Paxmans.) Even so, he laid it on pretty thick: “Listen, I’m not an economist, you are…” Mansbridge, like so many others, labours under the delusion that economists possess expertise similar to that of engineers or physicians (or dentists). Lord Keynes once wrote, “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”

Jeremy Paxman would have demanded that Harper explain his extraordinary statements of September 15 and 26 and October 10, 2008: “My own belief is, if we were going to have some sort of big crash or recession, we probably would have had it by now”; “The only way there is going to be a recession is if they’re [the Liberals] elected”; and “This country will not go into recession next year.” Golly, this was well past mid-2008, and yet he doesn’t sound worried, does he?

Keep in mind that Harper’s statements were made concurrent with (but mostly after) the firesale of Bear Stearns, the collapse of IndyMac Bank, the seizure of Fannie Mae and Freddy Mac, the firesale of Merrill Lynch, the collapse of Lehman Brothers, the AIG bailout and the seizure (and subsequent firesale) of Washington Mutual.

Only an economist could have got 2008 that wrong. Of course there was an election October 14, 2008, so perhaps Harper chose the path of least resistance. As for the current crisis, “I don’t think it’s helpful for leaders to speculate on catastrophic scenarios.” So don’t expect the truth about our economic situation from Harper (or Bernanke). They don’t know and even if they did wouldn’t tell us.

In the interim, Harper, who as an expert could not possibly get 2012 wrong, has suggested his definitive solution for Europe (fiscal union) and his “contingency plans” for Canada (even lower interest rates, more stimulus, further free-trade agreements to lower wages): more of the same that got us where we are now. No, the economists are not yet humble and certainly not competent, but they continue to believe that the fool who persists in his folly will become wise.

Stock Tips and Joke of the Week

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