Wednesday, October 20, 2010

David Malpass, WSJ & CNBC

David Malpass, the economist and former Deputy Assistant Treasury Secretary, wrote an excellent editorial in yesterday's Wall Street Journal entitled How the Fed Is Holding Back Recovery.

Malpass contends that Bernanke's easy money, low-interest rate policy is destroying US jobs and causing significant, difficult-to-reverse shifts in the US economy.

Specifically, he wrote,

"Corporate and government jobs are faring better than small business jobs, another major structural change that Fed purchases will exacerbate by channeling cheap credit to big entities.

Jobs are moving to Asia as Washington's weak-dollar policy causes trillions of dollars to move abroad to protect against the risk of U.S. inflation and dollar debasement. Investors put their money into foreign factories, mines and workers, creating a boom there. They avoid long-term job-creating investments here, instead buying short-term IOUs from our government.

The damage is substantial. Near-zero interest rates are hammering savers, while transferring hundreds of billions of dollars annually to bond issuers- mostly governments, banks and bigger corporations. The weaker dollar is pushing risk capital away from this country and toward Asia and emerging markets."

No longer a candidate for the US Senate, from New York, Malpass is once again appearing on CNBC, and he did so yesterday in support of his Journal piece. As usual, he articulately advanced his theses.

The comedy, to be charitable, came when the co-anchor introduced CNBC's senior economic idiot Steve Liesman to debate Malpass' recent editorial.

It would be different if the network had retained the services of, say, Alan Reynolds, Greg Mankiew, Joseph Stiglitz or some other well-known and -respected economist for these sorts of discussions. Even hiring a lesser-known economist who at least has a PhD, has published some relevant macroeconomic research, and perhaps worked at the Fed, Treasury or for a major corporation or economic consultant would make sense.

But Liesman has no economics degree. He's a journalist with a misguided interest in economics.

Having Liesman debate Malpass would be like me, with my interest in physics and mathematics, debating some physicist with an endowed chair from MIT, CalTech or a similarly well-regarded institution. While I might be capable of understanding the physicist's remarks, and asking some questions, I would be out of my depth advancing a separate explanation for some phenomenon under discussion.

And that's pretty much how it went for Liesman. He babbled nonsensically, using a variety of terms and measures which he evidently thought mattered. The worst was when he summed up his differences with Malpass, using language to the effect that 'in his opinion,' blah blah if anyone cares what that would be.

To return to my analogy, if I were to be debating a physicist, I would probably have prepared by asking other noted, well-regarded, perhaps prize-winning physicists what they thought of my opponent's ideas. That way, I wouldn't be presuming to put my own undegreed, untested physics ideas on a par with the real physicist, but, rather, I'd be standing in for other physicists of note and representing their questions, concerns and rebuttals.

But that wasn't what Liesman did. He has been in the job with CNBC for so long that he apparently believes he's an economist, and capable of advancing his own independent economic constructs against real economists with Phds and experience in responsible, real-world positions in the field.

The longer CNBC employs Liesman in any economics-related capacity, the longer it damages its own credibility on economic matters.

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