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Another Reason Ezra Klein is an Idiot

The opinions expressed by columnists are their own and do not necessarily represent the views of

For listeners of my radio show, you’ll know that most Fridays we do a segment called Ezra Klein is an Idiot. We don’t just call out the fallacies of Klein during the segment, however. We include liberals like Al Sharpton and John Boehner too, who both recently bemoaned the effects of sequester on our economy.

Our real problems of course aren’t the dramatic and manufactured small things like sequester or the “fiscal cliff” that are made up by Washington wonks to keep the gravy train rolling. They are much more complex, and more dangerous.     

It takes a long time to produce weather, for example. I learned this in a geology class that I took back in college at the University of Maryland. It was the hardest class I ever took, because it’s a complex and difficult science with too many variables to be manageable. 

The most reliable forecast of weather events is only about 3-4 days, still, even with satellite technology. After that, forecasts aren’t accurate enough to be functional. As the folks at WaPo weather blog put it: “In the 5-7 day period and beyond, weather details become fairly unpredictable.”

Weather is a very complex interplay of forces- if global warming apologists would be honest- that haven’t yet been adequately modeled or understood.

The same goes for economics.

There are many theories out there about economics, but forecasting economic trends is even trickier than forecasting weather. How does one account for a tsunami in Japan- an unforeseeable weather event- that impacted world GDP in 2011?

Well, the honest answer is that you can’t account for it.

But you can account for the “wonks” at the Washington Post to try to have it both ways.

Ezra Klein has tried to school Niall Ferguson recently because Ferguson has long believed that Obama’s policies will lead to inflation and higher interest rates.

Critics like to point out that interest rates are lower and that inflation remains moderate. To which I would add: So far.

And as to inflation, it’s not all that cut and dried after all.

While wage inflation remains low-which is what primarily concerns central bankers- inflation for things that have intrinsic value like food, oil, metals is actually pretty high.

Need proof? Go by McDonald’s and buy a number 2 value meal.

I did the other day with my son and it cost $7.11. For McDonalds?

Yes, McDonald’s, like the rest of us, has been subject to food price inflation throughout Obama’s term in office depending on how much liquidity has been injected into the financial system. Klein would likely blame the year’s drought, but McDonald’s was already tweaking its menu as a result of inflation back in March of this year.

Or, look at the price of oil.

Despite flattening world demand for petroleum and high production, prices have been going up for oil.

The price increases in food and oil are monetary phenomena, not issues of supply and demand.

If you calculate inflation in the same way that the government did when Jimmy Carter was president- using food and energy- inflation is near double digits, according to


There are three important real-world issues at stake here in this game of unreported numbers.

The first is that your paycheck is buying 9-12 percent less than it did last year. And that’s about 11 percent less than it bought in 2010. That means that for every $100 you earn today, it only buys about $80 worth of stuff versus 2010. And by the way, these calculations only apply to those people who buy food and energy.

All this time you thought you were getting a pay raise and your wages have actually been cut. 

It also means that if you subtract real inflation out of GDP, we are at net negative growth in our economy. This explains why there are no jobs.  Were we looking at the world through the eyes of real people and not government economists, the economy would be in a depression, not a recession.

The final real-world implication is that investors- who know how to do math better than economists do- are willing to pay money to buy into U.S. government securities. If you subtract out real inflation from the interest rates that the government is paying on a 12-month Treasury note- about .18 percent right now- investors are losing ten percent annually just to park money.        

The world is awash in liquidity right now. There are very few hard assets that have not seen their prices chased upward as result of investors looking for safer places to park their money.

And that leads us to T-Bills and interest rates.

Sure, everyone is buying Treasuries right now. They are in such demand that investors are willing to take net negative returns. Isn’t that the very description of “irrational exuberance” for an asset class?

And then what happens when circumstances change? What happens when we fall off the fiscal cliff next time? Or when the system fails to produce a real and meaningful deficit reduction plan- again?

It can’t get much better for the U.S. Treasury market right now. There’s very little upside left at zero-interest rates.

When investors hit the doors, like they did in trhe U.S. housing market, then watch out. Prices for bonds will go down and interest rates will go up- way up.

So, yes, so far, the economic predications of Niall Ferguson have a mixed record. He’s somewhat right about inflation but his thesis on interest rates have yet to play out.

But before Klein and his friends get too giddy, I’m going to apply the same logic to the science of global warming as they have to economics.  

As I said previously, it takes a long time to produce weather and a long time for the first fruits of economics to grow.

Ferguson has predicted some things that could be off by just a year or two.

Global Warmists, like Klein, have been wrong for 25 years and counting.          

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