Stein: Everything's just ducky
The good ship USS Economy is quickly taking on water, but Captain Ben Stein assures us the worst is behind us.
Long after other neoconnish commentators will have abandoned all pretense that inflation is under control and the credit crisis is a minor blip, rest assured Stein will still rally 'round the flag — as evidenced by his latest screed in the New York Times, cherry-picking evidence to "prove" how right his calls have been.
There would probably not be a recession, said I. If there were, it would not be long or deep. All that was required was for the Federal Reserve to stand by with oceans of liquidity and assurances that it would not let anything big fail.
On that score, the Fed has delivered, in spades. Astonishingly, Stein appears to believe this is a good thing.
There has not been one down year for the G.D.P. in this decade. There has not been one down quarter, in inflation-adjusted terms, since 2001. It’s possible that the G.D.P. will not show growth in the second quarter. So, by the old definition — two straight downward quarters of G.D.P. — we cannot know if we have just entered a recession.
Of course, this is largely on account of the GDP deflator, which is based on CPI, which horribly understates the reality of rising consumer prices for reasons we've documented elsewhere.
There has been only one failure of a large bank, IndyMac Bancorp, and it was federally insured. The venerable investment bank Bear Stearns was sold at a fire sale price I still don’t understand — under federal supervision, a subject that bears much study. Fannie Mae and Freddie Mac were said to be in dire straits, but the Fed has stepped in to make its implicit guarantee explicit, as it had to. While bank failures will surely rise, they are unlikely to approach the thrift failure level of the late ’80s and early ’90s. In other words, we are facing problems, but not the apocalypse.
IndyMac has already eaten up, what, 10-20% of the FDIC's reserve? Nope, no big deal. The Fed extending to investment banks the same sort of guarantees it traditionally made to commercial banks? Had to be done. Fannie and Freddie? Ditto. Never mind that something like half of the Fed's balance sheet now consists of toxic waste the financial sector desperately needed to exchange for Treasuries to avoid Stein's aforementioned apocalypse.
Stein wraps up with praise for Helicopter Ben:
For a good while, it seemed as if Mr. Bernanke were going to make the mistakes that led us to disaster in the Depression. Lately, he has acted more boldly to reassure the financial sector and the nation, with excellent results. Ideological purity has no place in fighting a downturn unless the proposed relief is really, really impure.
Good lord. Well, it's a safe bet Stein will never set foot inside the Agora Financial Investment Symposium, which wrapped up last week in Vancouver. I mean, Doug Casey alone would eviscerate the poor man. To say nothing of Jim Rogers, Rick Rule, and the other all-star speakers who know the dollar is toast and what you can do to protect yourself.
Excerpts from a few of the presentations can be found on the right-hand side of the Agora Financial homepage. And for just a few more hours, you can secure yourself audio recordings of all the main sessions, and a special report outlining all the specific investment recommendations discussed in small groups for a special price — $99 for mp3 downloads, $149 for CDs, or — for maximum convenience — $149 for both formats. Grab 'em now… the price goes up as of Midnight EDT.