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Friday, August 19, 2011

You Decide

The Los Angeles Times ran a piece about poor Obama who has lost all his economic advisers.  I wrote the following piece that they chose not to publish.  You decide.

"Has it not occured to anyone that the reason Barack Obama is in real danger of becoming a one term president is that he took really bad economic advice from all the people you listed.  Everyone of them has great credentials as theoretical economists, but not one of them has any idea of how the economy of the U.S. really works.  Just one example; Christine Romer was extremely proud of her Cash for Clunkers program.  All that the program did was to move November sales forward into October as sensible people took advantage of her gift.  Check the numbers and prove that to yourself.  Anyone with experience in the real working of the economy could have told her that would happen.
In addition, Cash for Clunkers had a really mean spirited side effect.  Romer insisted that the clunkers be destroyed.  But it is exactly those used cars that are the life blood of all those used car lots that supply "new" cars for all the less well off who can't afford new cars.  The result was a large number of those lots simply went out of business and a number of people were denied the ability to "upgrade" their cars.  And all of this was completely predictable.
Carmen Reinhart and Kenneth Rogoff explain exactly how economies in developed countries work in their monumental study, "This Time Is Different", and subtitle is especially pointed, "Eight Centuries of Financial Folly".  There is another, short, clear explantion in "The Great Recession Conspiracy", Taylor and Zetland (ebook only).
It is a great pity for all of us that the President did not read either of these books instead of relying on his "experts".  We will all pay for that oversight for a very long time."

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