Peru and Other Menaces

Still, crude oil prices have been here before (in 1981 they reached $93.48 per barrel, in 2007 dollars), and a long expansion began the next year. Today the U.S. economy uses half as much energy per unit of output as it did then. Furthermore, today's rising oil prices are driven not by politically motivated restrictions on supply but by surging worldwide demand, which is a reflection of a healthy global economy. Disparaging lenders has been a favorite pastime down the centuries, and not long ago American lenders were being faulted for not lending enough to borrowers who were only marginally qualified. Today those borrowers are called "subprime" and the lenders who gave them loans are called "predatory." The Wall Street Journal reports, however, that about 80 percent of subprime loans are being repaid on time and another 10 percent are only 30 days delinquent.

GM seems to have seen a tunnel at the end of the light. Its $39 billion loss was partly the result of an accounting decision. It shed deferred tax credits because they were to be used to offset taxes on future profits, and it now seems to think that profits may still be far in the future. So, the economic picture is mixed. So what?

Presidential elections are always epidemics of economic illiteracy and hysteria, for two reasons: The party not holding the White House has an incentive to talk gloomy nonsense, and the media, for whom the phrase "good news" is an oxymoron ("We don't report the planes that land safely"), love crises. In 2004, Democrats spoke of "the worst economy since Hoover" and "Benedict Arnold CEOs." Republicans will, in time, have their wilderness season for spouting nonsensical pessimism.

That can, however, be self-fulfilling: Worried people curtail consumption, wary businesses defer investments. Everyone should remember the witticism that the stock market has predicted nine of the last three recessions.

© 2007