Taking an ax to prevailing economic nonsense

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© St. Petersburg Times,
published November 11, 2001

I asked an economist friend a couple of weeks ago whether economics was an art or a science.

That's a valid question. Sometimes the practitioners of a profession aren't really clear on it themselves.

Most doctors will tell you they are scientists, until they get sued. Then they will tell you that medicine is an art, not a science, and they only wear the lab coats to look spiffy.

After my economist friend answered my question at some length and in some great detail, I still didn't know the answer, which leads me to believe that either she didn't know, or that maybe she is a doctor.

Everyone everywhere has a theory about what will make the economy get better. I like the one that says tripling the income of journalists will improve the economy because they will be more cheerful and write fewer gloomy stories and will tip bartenders better, enabling bartenders to buy new cars, which will strengthen both the stock market and keep more of the labor force employed.

Laugh if you want to. It's as valid as the prevailing theories that say making the rich people richer will make everything better because then they will keep their plants open longer -- until they find a way to relocate somewhere where union jobs can be done instead by a 10-year-old working 16-hour days.

The one I still can't figure is that cutting the interest rate will help because people who already are overextended can borrow more money that they don't have a chance in hell of paying back.

None of it sells well to someone waiting in line behind a bunch of Ph.D.s and former airline pilots for applications for jobs flipping burgers.

I'm a lot better off than some Americans, but I have taken income reductions this year and had to borrow money to keep some financial commitments I made when things were better. The government tells me that if I take a trip, like the one I had to cancel because I didn't have any money, it will be good for the airline industry, and, as a bonus, a patriotic statement.

It will also strengthen the travel industry so that places like Florida will be able to stop trying to attract people with $400 per night hotel rooms reduced to $50 per night. Of course, if fewer people were up to their chins in debt from paying the $400 last year, they might be more likely to come again.

Another school of thought is equally brilliant: Let's call off all state sales taxes for 10 days and stimulate spending. That way, people who couldn't buy a $20 shirt for $21.20 will suddenly be able to buy it for $1.20 less. And states like Florida, currently calling emergency budget sessions deciding which crucial services it can cut, can afford to lose several million more in forgiven sales taxes.

A refined version of that theory is that the federal government, which has the luxury of printing as much money as it wants to, can reimburse the states for what they lose. And it has the advantage that the resultant inflation will be good for the wheelbarrow industry, because that's what you will need to carry enough cash to buy a six-pack of beer.

So maybe cutting the interest rate really is the way to go.

The important question is, in this great limbo dance of the dollar, how low can it go?

Everyone thought 6.5 percent in January was pretty cushy. By last Tuesday, it was down to 2 percent.

My friends with money tell me that knowing when to get in and out of a market is key. Of course, my friends with money didn't get that way, necessarily, by telling other people the truth about how to get money. Still, with interest rate decreases coming out on a regular basis, why buy in at 2 percent.

I'm pretty sure that, if I hold out for another month or two, the Fed will make it so my bank has to pay me to borrow money, and promise me that if I pay it back too quickly, I'll have to accept even more money as a penalty.

I'll be visiting with my economist friend soon so I can get her opinion.

Which reminds me ... has anyone ever seen an interview with an unemployed economist?

Just wondering.

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