Copy of AFF Sentinel V21 #43-Is Economics Objective or Subject to Ideology?
- Steve Dittmer
- Jul 22
- 5 min read
Some Economists Believe TDS* Significantly Affects Some Economists
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 10/30/24
By now, everyone should understand what causes inflation. Too much money chasing too few goods causes demand to exceed the supply, therefore, prices go up. What causes the supply of money to increase?
The government (sometimes the Federal Reserve) injecting way too much money into the economy via giveaway programs, government subsidies to certain segments of the economy, other government spending programs through agencies conducting activities for social engineering programs and government hiring thousands of employees for dubious work -- all pumping money and payroll into the economy.
Supposedly, economists do analysis and issue projections based on hard economic data. But we’re seeing evidence that that is not the case.
Some 26 Nobel prize-winning economists signed a letter recently holding that Kamala Harris’s maybe-policies would be better for the economy than Donald Trump’s plans and first-term record.
Given how Harris’ comments are mostly diametrically opposed to her previous positions, work history and senatorial record, we’re not sure what the “Nobels” were basing their opinions on anyway.
We’ll admit we put more store in economists and commentators of a conservative bent whose record on economics and politics is good. But what are these economist thinking?
Turns out Larry Kudlow was wondering the same thing we were about “the Nobels.”
Scott Bessent, a former economic history professor and now hedge fund manager, said these economists don’t look at history. They’ve forgotten Trump 1.0 already and forgot their claims Biden/Harris policies wouldn’t be inflationary.
Michael Faulkender, finance professor at the University of Maryland and assistant treasury secretary for Trump, tackled the claim by some economists that deporting thousands of illegals would be inflationary. When 10-12 million illegals came in the last 3.5 years, we had the worst inflation in 40 years. Now deporting them would be inflationary?
Faulkender said it boils down to these smart guys believing the economy should only be centrally controlled by people like them to get a better outcome.
These are highly degreed professors and Kudlow said they are long on theory but short on objective analysis. The theory of equilibrium holds that things are always moving in one direction or another and tariffs and prices will adjust over time, he said.
Steve Moore explained that the letter signers believe Trump’s economic policies would lead to higher prices, bigger deficits, greater inequality and, likely, a recession.
Many of this same group have predicted these same calamities before -- when Trump was elected the first time. Moore notes the instigator of the letter was Joseph Stiglitz, who in 2007 flew down to Caracas and endorsed Hugo Chavez’ economic policy.
Undeterred by failed analyses, many of this group signed a letter in 2021 saying Joe Biden’s policies wouldn’t cause inflation.
Moore said tariff discussions make him nervous and he doesn’t like tax carve outs but Trump’s policies worked in his first term. He noted that the average family picked up $4,000-5,000 in income during the period, while losing major ground under Biden/Harris.
John Carney of Breitbart Business Digest concurred with Moore’s comments, agreeing that the evidence plainly proves these people wrong. Carney adds that these economists do not study how policy affects economics but specialize in small areas of study ill equipping them to handle policy effects. He likened it to a heart surgeon delivering babies. It’s out of their area of expertise. Carney said none of them had done any work on tariffs.
These professors just can’t stomach supply-side tax cuts or tariffs, he said. He believes that reciprocity is the new free trade and tariffs are the way to get to tariff-free free trade.
Larry Kudlow has been around long enough to remember when Japan was top dog in the world.
We remember when nearly all the top ten banks in the world were Japanese banks and land in Tokyo was selling by the square inch.
Kudlow said Ronald Reagan negotiated “voluntary restraint agreements” with Japan, similar to Trump’s tariff threats now. Eventually, the worm turned, the U.S. used supply side economics to make growth pop and Japan went into a decades long funk.
Unfortunately, these letter-signers don’t realize their shortcomings and are ripe for someone persuading them to yield to political leanings rather than economic fact.
Carney noted there are around 50 living Nobel economists, they all likely received the letter -- and half of them did not sign it.
The beef industry has seen the effects of negotiations with a number of countries over access and tariffs benefit our industry greatly.
Examples put forth about corn and beans are different but actually bolster Trump and USTR Robert Lighthizer’s contentions that tariffs get a country’s attention and provoke a response. China levied retaliatory tariffs on American corn and beans but since then continues to waive them. A country that needs something as much as China needs grains will not penalize its producers and consumers if the need is great enough.
Will they keep that up long-term? It is hard to tell with a state-controlled economy like theirs but if their animal agriculture needs the feed grains, they could keep waiving the tariffs for a long time.
William L. Anderson is an economist of the Austrian school and he argues Trump’s tariff ideas would harm the economy. He cites a National Bureau of Economic Research – private, nonprofit group -- that found some farm sectors were hurt by tariffs, overall job numbers were not affected and only some manufacturers were helped. However, these statements were based on 2018 tariffs and early 2020 brought the shutdowns and severe supply chain disruptions.
“Agriculture” as a broad industry is certainly segmented, not a monolith, and different segments can be affected differently by policy measures.
Tariffs, especially those used as tools, take some time to effect responses, negotiations and agreements. So we’re taking those conclusions with a grain of salt.
The Federal Reserve is supposed to “manage” the economy to keep Americans employed and keep inflation under control. Part of the Fed’s problem is that it does not control all the levers of power that affect the economy. Congress, with the president’s signature, sets policy and “spends” the money it does not have.
The Fed now has a problem. Ed Yardeni, an economic researcher, pointed it out. People have been trying to figure out how the Fed reduced the federal funds rate in a surprisingly big move but the bond market rate has been going up.
Here’s why. The Fed has released its report on how much money the government is going to have to borrow to keep the ship of state shoveling money the next two quarters. The government will need to “borrow” $546 billion in the 4th quarter of 2024. For the 1st quarter of 2025, it will need to sell $823 billion worth of bonds.
Any wonder why the payment investors want to receive for buying government bonds is going up?
To us, this is looking like the late ‘70s, when the government was soaking up so much of the available capital that there was not enough to go around for private business.
*Trump Derangement Syndrome
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