Tuesday, September 09, 2008

Dave Ramsey = Idiot

Now... let me preface this public flogging. Dave is not wrong about personal debt. By all means... work to become debt free. Cut up your credit cards. The spanking I'm about to administer is purely related to his column... a mailbag of sorts... where in he responds to a question about inflation. A woman emailed him and ask him to explain what inflation is. This is his answer:

"Basically, inflation is the increase in the cost of something. For example, if the inflation rate of gasoline is 10 percent, that means the cost of gas went up by 10 percent.

There are a lot of variables involved when the price of a product increases. One of these is simple supply and demand economics. This means that if there's a shortage of a product, it's perceived to be more valuable. The result of this is almost a bidding war of sorts, and it will cause prices to go up.

The opposite is true if there's an over abundance of a product or item. If you've got 10 people wanting 100 items, then you've got a soft market, and the prices will go down. That's called "deflation."

That's a pretty simple factor, but the variables can get complicated and interconnected. If you're buying food from another country, that particular country's economic situation affects our economy because it's a component of our economy.

Or let's say you're building a house, and shingles for the roof are more expensive than they used to be. Well, there's oil in singles, and the price of a box of shingles may have gone up because the price of oil went up. So then, you're looking at a scenario where oil caused housing prices to rise."

Ridiculous. Utter idiocy. Pure unadulterated bunk. Ramsey describes perfectly natural and normal changes in supply and demand and then calls it inflation.

This confusion is pure Keynesian stupidity.

Prior to 1930 everyone knew that inflation had nothing to do with individual prices. Inflation is related to money supply. Price increases are symptoms of inflation. They are not the cause. When governments print to much damn money... that is inflation. Yes... prices go up... because the individual dollars in your bank account are worth less... because... as I said before... The government printed to damned many of them.

Ramsey has an enormous audiance... and its made up almost completely of the economicly illiterate. They trust him implicitly. So when he writes stupid crap like this... they believe him. They now know that any time a price goes up... you call that inflation... and any time a price goes down... its deflation.

No doubt they are all scratching their heads wondering why on earth massive deflation would be a bad thing. After all.. if everything were cheaper... they could buy more right?

Dave should be punched in the face for writing this. He is perpetuating a deadly ignorance. He is fascilitating the fiscal suicide of the nation he claims to love, by disarming the public of the information necessary to prevent it.

Not that preventing it is necessarily desirable of course.

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