When I started college, I signed up for one of the economics survey classes. The teacher was funny. He let us know right up front that we could buy an A. All it would take was the rest of the money he expected to make in his career, which he then spelled out.
It was cheaper to study.
We laughed. But then he got serious. Economics was a science, he said sternly. It was based on the cold, hard reality of numbers.
I raised my hand. "I read in this newspaper this morning," I said, "that two economists won Nobel Prizes this week."
"Yes!" the professor agreed, all smiles.
"One of them was a Marxist, and the other was a laissez faire capitalist," I said. "If economics is a science, how is that possible? Wouldn't that be like giving the Nobel prize to one scientist who believed in evolution, and another who didn't?"
He stopped smiling. My penchant for asking smartass questions in public is one of the reasons it took me five years to get my first degree. (Another reason was that I was also working as many as five jobs at a time).
I really don't remember his answer, but these days I could probably come up with one myself. The truth is, both Marxism and laissez faire capitalism are entirely theoretical. Neither has ever existed as a real system in the life of a nation. In anything larger than a village, economies are mixed.
But I still think I made a good point. Clearly, it's not just about the numbers.
On the other hand, Lord knows that all that data - stock markets, GDP, currency exchange rates - ought to add up to SOMETHING.
So lately I've been reading up on more modern economic theory.
What caused, I wanted to know, the national, then global financial crisis of 2008 and 2009?
It's a complex system, of course. The explanations are complex, too. But most economists would say the crisis was precipitated by two things: the greed of American sub-prime mortgage lenders, and the use of exotic financial instruments by ginormous investment banks who really didn't know how those instruments worked.
The villains of the piece, it seems, were the very financial institutions that manage our money. Some people blame the government for its failure to watch them closely enough. But that's a little like blaming the police department because some guy decided to knock over a jewelry store.
But then the story gets interesting. Economists also agree that the crisis could have very easily turned from recession to Depression.
It happened before, you know.
During the Great Depression (roughly 1929 to 1940), bank runs and failures resulted in a catastrophic cascade of collapse. Here's just one sign: joblessness hovered around 25%.
Why didn't that happen this time?
The answer may surprise you. While nobody thinks today's national joblessness rate of 10% (9% in Colorado) is great, it was on course to match the Great Depression. Now, it looks like that won't happen.
The reason it didn't is the historical analysis and integrity of just one economist. His name is Ben Bernanke, a Republican, a George W. Bush appointee, and the current Chairman of the United States Federal Reserve.
This man is a hero. He deserves, in fact, a Nobel Prize.
Let me summarize our story so far.
Our current recession was caused by the big money in the private sector, just like the one that led to our last Depression. Blame the overreaching of folks who just didn't think a couple million dollar bonus was enough for a week's work. (And this is work that ruined many lives.)
We were saved from a Depression by the public sector. That's right, the government.
Next week, I'll tell you how.
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LaRue's Views are his own.
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