Friday, October 28, 2005

We're at a crossroads for the survival of a broad based American middle class

Housing, education and medical costs are so high now they've become strong disincentives for young people to marry and start families. The driving force behind these problems is persistent inflation the result of the Fed's application of an outdated stimulative monetary policy theory. The Fed operates as if 1929 would be just around the corner if we don't relentlessly pump up the money supply.

The effectuate such a monetary policy depends upon a reliance on a seemingly rational economic activity data and statistics. Hence we've developed indicies which purport to measure real economic activity.

Among the critical things I learned in medical school is the good doctor treats patients not lab results, and to always assess each test's sensitivity and specificity characteristics. For example, a very sensitive test with low specificity is worthless.

Our economic data models are the very example of the high sensitivity low specificity problem. While the GDP has been trending upward for decades the economic welbeing of middle class Americans experienced a relentless decline in the affordability of housing, education and medical care.

This is why I'm opposed to Bernanke's nomination to run the FED. He'll simply be the caretaker of bankrupt economic thinking which is bankrupting the American middle class.


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