Congressional ignorance

Based on this listing of the educational background of each member of Congress, out of 535 members, there are 14 who have a degree in economics. In this category I'm including such degrees as a BS in "Food and Resource Economics" and a BA in "Agri-economics." There are an additional 16 members with an MBA and perhaps 25 or 30 with a bachelor's degree in business, accounting, or similar. Note that bachelor's degree information is missing for a number of members of Congress.

So, a rough estimate is that about 10% of Congress has had formal training in some aspect of money management or theories about money. However, most of the money-related education was focused on the nuts and bolts of business management or accounting. Only 2 members of Congress have master's degrees in economics, and none has a PhD in that field. (I don't mean to suggest that a degree is required for understanding, however; the two members of Congress with the best understanding of economics would seem to be Ron Paul and Dennis Kucinich, and neither has a degree related to money. But this gives us some indication.)

Money, as they say, makes the world go 'round. If you want to get to the bottom of something, you "follow the money," don't you? Wars are caused by economic factors, though that isn't quite how they tell the story in high school history class. Empires rise and fall because of economics. Domestically, the standard of living of constituents, and to a large degree their overall quality of life, is dependent on the economy in their district. Voters pay more attention to the economy than perhaps any other factor. As Clinton (re)discovered, "It's the economy, stupid."

In short, it's important for the people running a country to understand money, but almost none of our leaders have that knowledge. I don't think the Washington cocktail party crowd knows that the GDP numbers are bullshit, the job loss numbers are rosy-colored, or that inflation has been routinely understated for a couple of decades. It's safe to presume that most of them don't understand bear-market rallies, or why derivatives are a looming problem, or that the existence of the FDIC does not make everything hunky-dory in bank-land. They're smoking their own green shoots because they simply don't know any better. (And hey, Paul Krugman says that everything will be just fine! And he has a PhD so he must be right!)

We all know that Wall Street gives enormous campaign contributions to members of Congress, and that Washington is crawling with lobbyists, and that (more to the point) no legislator ever reads the bill they are voting on. But even if a member of Congress were trying in earnest to do their level best for the American people, they wouldn't be able to ask the right questions on the subject of finance. Someone should show up to a town meeting and ask their member of Congress: "How will confidence in the dollar be affected if the CFTC limits futures positions in gold?" Unless you were talking to Ron Paul you'd get the big, blank stare. And yet, a change in regulations by the CFTC could derail the gold price suppression scheme, thus impugning all fiat currencies as the price of gold rises swiftly, thus accelerating Chinese purchases of tangible, non-dollar assets, thus eroding purchases of Treasuries, thus devaluing the US dollar and making most things we buy much more expensive. It's rather important, yet 99% of Congress can't assess such issues because economics & finance are not their specialty.

Actually, stating that finance & economics are "not their specialty" is a bit charitable. As I wrote about yesterday, many politicians seem to lack basic common sense as applied to economics. Mandating artificially low prices in order to combat a shortage is just plain asinine. Giving $24 trillion to banks when you cannot pay your bills is also plainly idiotic. Nor does anyone in Congress seem to be alarmed that 4 out of 5 workers are in the "service" sector, or that we are having to buy our own Treasuries because there aren't enough takers, or that we are in the hole for somewhere between $70 and $100 trillion if you include future promises (as corporations must do, by law). These things are not sustainable; something has to give.

It's too bad that we cannot look to Congress (or Obama) for good ideas about how we get through this. I think we'd better assume, like the people of New Orleans after Katrina, that we're on our own.