Tuesday, December 07, 2004

Even our Nobel laureates are an embarassment

Or, more precisely, Nobel-Laureate-Who-Is-Also-with-the-Fed-and-Supports-the-Boy-King:

"The U.S. current account and budget deficits, which some analysts see as the cause of the dollar's depreciation, pose no problems for the world economy, one of the Nobel 2004 economics prize laureates said on Tuesday.

Arizona State University Economics Professor Edward Prescott, who also works for the U.S. Federal Reserve Bank of Minneapolis, also said Asian central banks were unlikely to go on accumulating dollars forever.

'The U.S. (current) account deficit, no problem. People that say there is (a problem) are ignorant, they do not understand something called balance sheet, present value, something that a good undergraduate (economics student) learns,' Prescott said.

'I don't see any problems with the U.S. (budget) deficit ... it's for political reasons that people are yelling and screaming about that,' Prescott said.


He said he was not worried about the dollar, which has lost more than 30 percent against the euro, 20 percent against the pound and 16 percent against the yen over the past two years.

'The fluctuations in the value of the dollar are sizeable but they are not huge ... I don't think there's any problem associated with it,' Prescott said."

Just in case you weren't sure, Professor Prescott made his political preferences plain in the weeks prior to the election. In addition to endorsing Bush, he made a few other Nobel-worthy comments in an Arizona Republic piece last October:

"Americans will spend the next two weeks trying to sort through the differences between President George W. Bush and Democratic challenger Sen. John Kerry on many issues.

But on the economic front, especially when it comes to taxes and economic growth, the president's policies are more likely to bear fruit, according to Arizona's new Nobel Prize laureate.

'That's an easy one,' said Edward Prescott, the Arizona State University professor who shared the 2004 Nobel Prize for economics.

'When you cut tax rates, employment always goes up,' he said in a phone interview Monday with The Arizona Republic.

Bush's campaign on Monday released a letter signed by Prescott and five other Nobel laureates critical of Kerry's proposal to roll back tax reductions for families earning $200,000 or more.

In The Republic interview, he said such a policy would discourage people from working.

'It's easy to get over $200,000 in income with two wage earners in a household,' Prescott said. 'We want those highly educated, talented people to work.'"

So let's review the professor's lecture: Record trade deficits, no problem; record budget deficits, no problem; anyone who disagrees with him is ignorant of introductory principles to econ; withering dollar, no problem; tax cuts for the wealthy always lead to more jobs; and it's easy to earn 200K per year.

Um, is it too late to enroll in Professor Krugman's section?


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