Thursday, August 16, 2007


I follow the paranoid conspiracy theorists a lot, and it always amuses me when they branch into economics. In this case Alex Jones' Prisonplanet website interviews Jerome Corsi, the paranoid right-winger who is spreading all of the North American Union hype. While I certainly agree that the sub-prime mortgage fallout is serious, and there is even a possibility of a recession, his predictions of collapse are bizarre. One thing to keep in mind is that in the post-WWII era, recessions happen on average once every 6 years. The last recession was in 2001, it is now 2007, do the math. Recessions are not the sign of the collapse of western society, they are part of the business cycle unfortunately, until we can figure out how to avoid them entirely, the objective is simply to make them as minor as possible, which basically happened in 2001.

In any case, some of their absurdities:

Corsi urged anyone in the position to do so to quickly pay off any mortgages and get out of debt. Secondly he suggests investment in gold, rather than stocks and bonds which are based on fiat money and are going to decline tremendously in value:

Uhh genius, if you believe hyperinflation is coming, then why would you pay of your debt? Borrow more money, use it to buy assets (like gold), and then repay your debt with worthless dollars.

Corsi, who has a degree in political science, not economics, goes on to claim that this recession will last long because of our lack of exports.

"It's going to last several years, it's largely because we've lost so much of the manufacturing to China, even when our currency tanks, there are no exports we are producing anymore that will gain. The currency is gone, it is being sold off very quietly, worldwide, by the oil producing states, by China, the Euro is increasingly becoming our foreign exchange reserve currency.

This is an often repeated myth. We do not have a trade deficit however, because of a lack of exports, but because of an abundance of imports, as data readily available from the Bureau of Economic Analysis indicates: