Incompetence of economic/financial experts

I just spent 15 hours in a plane, so before taking off, I thought it would be good to catch up and downloaded all the videos from Peter Schiff's EuroPac web site so that I could watch them from 32,000 feet above ground ;-)

One thing is for sure when you watch these people debate on TV, is that many of the so called expert have still not understood anything about the economy (and I am not even mentioning the politicians...)

Here are a couple of statements that were so chocking that I decided to transcript them and post a blog about...

CNBC Reports, on 21st of Nov 2008 with John Browne and Thomas Donladson

Thomas Donaldson, wharton professor of legal studies and business ethics:

"We're talking about the economics of fear and the old rules just don't apply" [...] "there has to be an explanation of what happened, and that hasn't happened yet" [...] "This is 90% psychology and 10% fundamentals, the old rules don't work: the old rules of economics said when you have the price of something like a security or a refrigerator, if it falls far enough, demand will rise to meet supply."

Does it occur to Mr Donaldson that the prices simply haven't droped enough? It's easier for him to dismiss the old rules than just consider that the prices are still super high, for most stocks!

When I think of students and family who pay college tuitions in the hundreds of thousands of dollars to listen to these kind of incompetent people, it makes me sick.

CNN Campbell Brown 20th Nov 2008

Christian Weller, Center for American Progress, University of Massachusetts Professor. He says that it's very important for the US to rebuild the middle class (who can be against that, really?). But his argument is:

"A strong union movement, a strong labor movement, is one of the most proven ways of strengthening the middle class."

This is totally wrong logic and confuses the cause with the consequence. Because the economy was doing well and the industry was in great shape, it lead to the creation of unions. The industry was so strong that it remained strong in spite of the interference and destruction of efficiency and wealth by the unions. It probably got weaker than it would have been without them. It is not because the unions were there that the middle class got strong, it's because the middle class was strong that the unions were born.

He also forgets that what destroyed the middle class is inflation (by the US politicians and the Fed) and the destruction of goods producing jobs in order to move to hamburger flipping jobs. To those who want to understand what is happening to the middle class, I suggest watching this long but very interesting lecture - The Collapse of the America's Middle Class.