Economic Recovery Education

Whoa whoa whoa…feelings…

— Morris Albert

Our plane got delayed. This left us in a small waiting room for longer than we wanted to be there. The two large TV screens were inescapable.

Who watches this stuff? Poor schmucks.

The more they inform themselves by watching TV news, the less they really know. If they watch long enough, their brains must become like a zombie city, populated by zombie characters they’ve seen on TV…animated by the zombies’ fictions…and dominated by zombie emotions from their two-dimensional personages on the LCD screen.

Yesterday morning, the most important event in the Atlanta area was the death — apparently by suicide — of a well-known football player. We never met the man; we had no particular reaction one way or another. But the tube requires feelings. One reporter after another…one interview following another…all zap the reader with easy emotions. After a while, if you are still unmoved, you think there must be something wrong with you.

But it’s probably always been that way. The popular media stirs group feelings and mob emotions. The crowds at the arena…the thousands at the coliseum and those in the stalls at the theatre — they need heroes and villains, not complex ideas and ambiguity.

Of course, ideas can be made accessible by the masses. But only by stripping out the complexity and nuance, making them so barren and so remote from the whole story that they are rarely more than collective fantasies, shared as feelings…

The masses don’t want to think. They just feel. Every flack…and hack politician knows that feelings sell. Not ideas.

That’s why Ron Paul…an idea guy…is trailing Mitt Romney at such a distance.

The masses form their opinions…choose their candidates…and spend their money on the basis of feelings. Real thoughts are banished.

The presidential race is really little more than a contest to which line of guff most voters will take…that is, how they will feel about the candidates and their themes.

If you watch TV you’re tempted to believe that…

…the US was hit by some kind of economic firestorm. Maybe it was caused by Wall Street greed. Maybe the regulators made mistakes. Or maybe it was just a natural thing, the way things work.

Thanks to the wise decisions of its leaders, the US economy is now recovering. Europe is having a rougher time; its leaders are not fully in charge of the situation.

But even in America the damage was so severe that recovery will be difficult. More help from the federal government may be needed. Perhaps more legislation — targeted tax favors, aid to young people, more spending on education…and so forth.

Of course, it’s not just TV that encourages this kind of non-thinking. In The Wall Street Journal (!) this week, for example, was another editorial explaining why education is necessary to GDP growth.

“Education is the key to a healthy economy,” say George Schultz and Eric Hanushek. They show that societies with the highest test scores in math — notably Taiwan and Singapore — also have had the highest GDP growth rates. Well, surprise, surprise. Math is the common language of engineering and science. And engineering and science are what it takes to make the stuff of GDP growth. Little wonder, that the people who work the hardest at math are also those who make the most stuff.

The authors didn’t mention that when people from Taiwan and Singapore come to the US, they continue to work harder at math than native born Americans. Whatever the defects of the school system, it doesn’t keep them from getting advanced degrees in science and engineering and going on to earn a lot of money.

And they don’t mention that the US already spends much more per student on education than either one of them.

So, the reasonable question is not what’s wrong with US education…but what’s wrong with Americans.

Are they lazy? Or just stupid?

But instead of really analyzing why the US spends so much on education and gets, relatively, so little…

…or even wondering why anyone should give a damn…

…the authors call for “reforming” our K-12 system. What do they mean by that? How would it make anyone any better off? And if it were such a good idea, why haven’t people already “reformed” the schools?

The typical reader doesn’t think about it. He merely feels it is the right thing.

Back to the ‘recovery’…a typical ‘news’ consumer would also believe that the Fed plays a vital role too. Ben Bernanke looks like the kind of guy who might know something about economics. He was head of Princeton’s Economics Department after all. So, if the recovery doesn’t continue, the Fed will probably put in more money.

Everybody knows that money is what makes the economy go!

But is it?

The only presidential candidate with his thinking cap on, says no.

The Financial Times allowed Ron Paul to voice his thoughts on central banks in yesterday’s issue. They are “intellectually bankrupt,” he says.

His argument will be very familiar to Dear Readers:

The gist of it is that central banking is a fraud. Honest economists…and thoughtful people with real jobs…know that central planning is an ineffective way to add wealth. If you could get rich by printing money, every central bank on the planet would run the printing presses night and day.

But they don’t. Because it doesn’t work that way. You only know what real wealth is by allowing buyers and sellers to set prices. The prices tell you what things are worth…providing a measure of the goods and services that people actually want. Real money represents real savings. It — and the interest rates people ask for lending it out — tell investors how much capital is available, and at what price. You can print up all the pieces of green paper you want. It will only distort the picture, mislead investors, and cause them to misuse capital. The more central planning, the more mistakes.

The Fed determines the quantity of money available to the market…and the price of it (at least for short term loans). It creates “money” apparently out of nothing…that is, counterfeit money…money with no resources or savings behind it. Then, it dictates interest rates. Investors err; that is how they created the housing bubble in ’05-’07, for example.

And now the Fed is compounding its failures of the past…leading to even bigger errors…even bigger bubbles…and even bigger blow-ups.

“Printing unlimited amounts of money does not lead to unlimited prosperity,” says the congressman.


Bill Bonner
for The Daily Reckoning

The Daily Reckoning