The Naked Truth
columnist: EJ Moosa

Topic: Economics
The Magic Number

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The Fed is after it, the environmentalists are after it, the politicians are after it. The only problem is, it does not exist.

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by EJ Moosa
(libertarian)
Tuesday, July 15, 2008

We are in one helluva mess these days. When I listen to the media, or read the reports on-line, they all have one thing in common: there is a number that measures something and someone or some group thinks that number should be different. That if we hit the "Magic Number" all of our ills would be cured.

I am going to tell you we are wasting our time. There is no "Magic Number".

Yet here we are spending billions of dollars in so many directions that we cannot keep track of all of them. Let's look at some of the "Magic Numbers" we are chasing:

Perfect Climate Temperature(Global Warming)

Perfect Mix of CO2 in our environment(Global Warming)

Unemployment Levels

Real estate Valuations

Tax Rates on the Rich

Tax Stimulus checks for the rest of us

The correct price for the barrel of oil, and of course a gallon of gas.

The perfect interest rate to balance the cost of oil, real estate valuations, and unemployment numbers to the "Magic Number" for our economy.

I implore you to look at the expenses that we are enduring in pursuit of "Magic Numbers".  What price are we willing to pay for the planet to reach the perfect temperature?  Better yet, who is going to decide that perfect temperature?

The US government wanted a higher level of home ownership.  Lower interest rates brought that about.  It also moved up home prices.  At the same time fuel prices were rising.  Consquently, the "Magic Number" for inflation was exceeded.  So, in their wisdom, the Federal Reserve  acted to address inflation and raised rates.  Home values have been devasted while fuel prices continued skyward.  Thus we are still missing the "Magic Number" for inflation.  

Showing us that the "Magic Number" for real estate was more important than the "Magic Number" for fuel, the Fed cut rates.  

 One does not have to go far to see the chaotic mess we have now. All in pursuit of some "Magic Number" for rates or performance that makes everything perfect.

They do not seem to get it.  Numbers in the types of relationships I described above are not absolutes.  Rather, they are relative.  And it takes a level of intelligence that we are not seeing in our positions of leadership to grasp this idea.  Until we get that sort of leadership, we are going to continue paying a heavy price chasing all of these "Magic Numbers"

We will have to endure a lot of absolute pain in the meantime.  Beware the man that says "Give me more power and I can get us to the "Magic Number"(Treasurer Paulson and Fed Chairman Bernanke for starters), for they do not know what they are doing.  Giving them more power will cause more problems in the long run.

The "Magic Number" today will not be the "Magic Number" tomorrow.  It may not have even been the "Magic Number" to begin with.  Only we are too ignorant to know so, or too arrogant to say otherwise.

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©2008 EJ Moosa, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Tuesday, July 15, 2008
Last modified: Tuesday, July 15, 2008

The views expressed in this article are those of EJ Moosa only and do not represent the views of Nolan Chart, LLC or its affiliates. EJ Moosa is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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