Monday, October 17, 2005

Thank You Brian Wesbury

Brian Wesbury is the Chief Economist at Claymore Securities in Chicago. He is a frequent contributor to the Wall Street Journal and other publications. I think you could describe him as a supply side economist. I have followed him for years and find that he offers a very fresh voice in a world too full of the weary dronings of the prophets of gloom and doom. His most recent weekly investment letter is so right on that I am sharing it in its entirety. Risk-Phobia and Faith Throughout history, adventure and risk-taking have led to great progress and wealth. Early explorers risked their lives sailing rickety ships, negotiating mountain passes and experimenting with new medical procedures. Of all countries, the United States has most embraced this model of progress. The results have been nothing short of miraculous. In the past 200 years, the number of people living in freedom, and not tyranny, has grown exponentially. US life expectancy has doubled over the past 100 years, while others have seen life expectancy grow more. While relative poverty is still with us, in most industrialized nations the lowest incomes still afford a lifestyle better than royalty had in the past. Technology allows us to see storms before they make landfall. Helicopters rescue terrified citizens from rooftops afterward. Computer-based risk management systems allow companies to find workers after a calamity, re-open businesses faster than ever before and move essential supplies to people who need them. While we will never conquer calamity, all of this saves lives and reduces risk. Despite four major hurricanes in 2004 and two monsters in 2005, the US economy continues to grow as it absorbs the damage. On the other hand, attempts to use government to reduce risk have not succeeded. The levees in New Orleans did not work as they should and intelligence systems failed at detecting the plots of 9/11. At the same time, Sarbanes-Oxley did not stop the CEO of Refco from doing immense damage to the firm he was supposed to shepherd. This does not mean we should not work at improving government. But nothing will quell the sinful nature of man or stop the immense forces of nature. These things, we will always have to live with. This brings us to the seemingly limitless fear of recent months. Volatility indices have climbed sharply, equity prices have fallen, new tropical weather systems boost oil prices, and fears of bird flu generate hundreds of thousands of words of warning in national news sources. We have no way of knowing whether or not these fears will come to fruition, we do know that history is a story of overcoming such events. We also know that these fears are most often overstated. Despite these facts, many people continue to look toward government for some reassurance that it can stop bad things from happening. They are succumbing to riskphobia and lack faith that a flexible and free market economy is an efficient shock-absorber. Looking back at the past few years should give pause to excess fear. The US economy remains robust. Jobs, incomes and profits continue to climb. Keeping faith, while others doubt, leads to progress and wealth. Brian Wesbury