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Opinion: Loose lips sink economies

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William R. Broz, vice president and general manager of CTG Forensics Inc., responds to an article in The Times. If you would like to respond to a recent Times article, editorial or Op-Ed in our Blowback forum, here are our FAQs and submission policy.

Steve Fraser’s recent jeremiad ‘Symptoms of an economic depression’ calls to mind the aphorism, ‘It ain’t what he don’t know that scares me. It’s what he does know that ain’t so.’

Fraser fairly salivates at the GOP‘s demise in the forthcoming general election, and he invokes the specter of financial collapse to buttress his view. Let’s take a peek under the hood.

His contention that ‘there is precious little left of the regulatory state’ doesn’t come close to passing the giggle test. Take a look at the size of the Federal Register, Mr. Fraser, and actually talk to a few businessmen, big or small — then try to tell us that again with a straight face.

Fraser decries the rise of the FIRE (finance, insurance, real estate) sector of the economy at the expense of the industrial heartland, which Fraser claims has ‘withered away.’ To be fair, Fraser here repeats a common misconception. In the 1950s — generally acknowledged as the zenith of America’s industrial might — the proportion of gross domestic product generated in the heartland may have been high. But the decline has come more from gains in productivity than from offshoring, which has only had a recent and relatively slight effect. It’s the same thing that happened in our agricultural sector, which today feeds the world utilizing only about 2% of the U.S. labor force.

Let’s keep the sub-prime meltdown in perspective. It is causing real pain, but in reality it directly affects a relatively small percentage of a sector that itself makes up a relatively small percentage of our economy. It is cause for concern, not panic.

Fraser alludes to a ‘very sick economy.’ Let’s see. We’ve had years of economic expansion and currently have under 5% unemployment, with inflation running around 3%. I’ve lived through a sick economy (the stagflation of the late 1970s). I have to wonder if Fraser ever has. For a ‘very sick economy,’ it might be instructive for Fraser to speak with anyone who remembers the 1930s.

We could dismiss Fraser’s silliness without much concern were it not for the fact that psychology drives markets. The quickest way to a depression is for the people to start believing it’s coming and act accordingly. A recession is just part of the business cycle, which to my knowledge no one has repealed. Let it come and wring some of the real problems out of the economy. But let’s knock off the loose talk about depression.

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