Washington Post Crashed-and-Burned Watch (Deborah Howell Edition)
Washington Post Crashed-and-Burned Watch (Michael Fletcher Edition)

Sunspots 36000!

Somebody... I don't know if I should call him a "friend," because he sends me to a Kevin Hassett column.

Shorter Kevin Hassett: Markets are perfect! Perfect! Perfect, I tell you! Pay no attention to the evidence of your eyes!!

Yes, Kevin Hassett says that the financial crisis is the fault of... the liberal media!!! And Fannie Mae and Freddie Mac!!. Because they lend to Black people!!!

Kevin Hassett: Don't Let Sunspots or Headlines Make You Panic: Oct. 13 (Bloomberg) -- With the world's attention turned to the financial crisis, a strange celestial occurrence went virtually unnoticed. For more than 200 days this year, the sun was devoid of sunspots. That historic run, the longest since 1954, ended last week when a small spot appeared and then disappeared. That financial events and freakish sunspot behavior are coinciding will doubtlessly encourage nonsensical speculation by astrologers. For the thoughtful, the coincidence provides an interesting parallel to circumstances in the late-1800s that ignited an economic theory based on sunspots. While the early work ended up being a dead end, it led to frontier theoretical work a century later....

High priests of the free market have long argued that government regulation or intervention should be minimal, because the market will inevitably produce the most efficient outcomes.... If stock prices drop, it is always because some fundamental, like profits, has worsened. Cass and Shell showed that an unregulated market is far from perfect in its outcomes.... Suppose... everyone believes... [sunspots] cause business cycles. Then firms might look at the sun, see a bad cycle coming, and begin laying off employees. Workers might look at the sun, see a bad cycle coming, and cut back their expenditures. The action of the firm would reinforce the belief of the worker that sunspots cause downturns. The actions of consumers would reinforce the belief of firms that sunspots cause downturns....

In the current crisis, we are doubtlessly experiencing sunspot equilibrium....

The financial institutions themselves have failed because of their own bad decisions and because of the nuclear bomb set off in the housing industry by Fannie Mae and Freddie Mac. But how did that set off this unprecedented wholesale panic? Liberal pessimism... has likely been a key contributor. The U.S. media have been in a sour mood ever since President George W. Bush took office.... Economist Donald Luskin, one of the few bold enough to publicly stand up against the landslide of negativity, did a Google News search in mid-September of ``since the Great Depression'' and found 4,500 hits in the previous month. The problem is, if you keep telling people that our system is fundamentally broken, they will lose faith in it and run for the exits when real distress occurs.

The influence of the profoundly negative reporting and destructive partisan rhetoric is apparent in the numbers.... [P]olitical bias is apparent in the data as well.... All of which suggests we have two possible paths forward.

On the one hand, we can work to restore faith in markets and provide the government backbone needed to do that.

On the other, we can decide we have learned that markets fundamentally don't work. That belief, like one in the effect of sunspots, would be self-fulfilling.

The choice is ours.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election...)

I think it is long past time that Bloomberg axed this guy--AEI too, and the McCain campaign should retroactively ax him. These organizations do have reputations to preserve, after all... Well, actually AEI and the McCain campaign don't, but they should ax him anyway.

Why oh why canT we have a better press corps?