Hail the Credentialed Economist

e-con-o-mist (i kon'a mist), n. one who
philosophizes about other peoples' money.


In case you haven't heard, it's now official. America can avoid a depression. The program offered by Dennis F. Paulaha, Ph.D. Economics, spokesman for RemortgageAmerica, is simplicity itself. The Plan: The federal government offers every U.S. citizen a 30-year mortgage loan of $500,000 at 11/2% fixed rate of interest.

As Dr. Paulaha explains, the plan will stop falling home prices, create jobs, and increase tax revenues, because "it will let everyone save and spend more." Acknowledging probable losses by lenders during a process where government oversees mortgage refinancing, the program is nonetheless justified for its likely economic stimulation. Apparently, simply spending money from whatever source is considered by proponents as beneficial, in keeping with a popular adage: spend yourself into prosperity.

The one question not addressed is where the money comes from. If only fifteen percent of America's 300 million citizens avail themselves of the promised loan, a sum of $22.5 trillion must materialize. With controversy concerning disposition of a $700 billion bailout appropriation, how might the economic community react to a sum 32 times greater? There is, of course, one way Uncle Sam can come up with this amount. He can simply turn on the printing presses and create cash out of thin air. This method is not novel; it's been tried before. During 1922-23, Germany's Weimar Republic resorted to printing money as a means of bailing itself out of its World War I reparations obligations. By November 1923, when the currency exchange rate reached 4.2 trillion marks to the dollar, the economy collapsed, taking with it the entire wealth and stability of the middle and lower middle classes.

Be aware, bizarre plans such as this one by RemortgageAmerica show up from time to time. It's endorsement by a credentialed economist is unsurprising. The economics profession is rife with absurdity, as is any field based upon intuition and supposition rather than upon observation and documentation. Anyone who actually places faith in economic pronouncements need only reflect on the performance of former Federal Reserve Chairman Alan Greenspan, the nation's most celebrated financial authority, as he testified on October 23, 2008, before the House Committee on Oversight and Government. Badgered by lawmakers, he admitted his error in opposing regulation of derivatives and acknowledged financial institutions didn't protect shareholders and investments as well as he expected. Under questioning, he recanted his prior assurances that banks will act to protect their shareholders and institutions, conceding the meltdown revealed a flaw in a lifetime of economic thinking that left him in a "state of shocked disbelief."

If there's a lesson to be learned from Dr. Paulaha's advice on how to avoid a depression, it's reaffirmation of the basic rule of the skeptic: Ninety-five percent of everything is nonsense.

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