Ben Stein Says "Chill" Over Market Dips
Comedian Ben Stein speaks at the Republican National Convention in the First Union Center in Philadelphia Monday, July 31, 2000. (AP)
Now for a few words about the turmoil recently in financial markets. I'll just put my economist's hat on and tell you what's going on.
First of all, they're called "markets." They're not called "granite slabs." They move around. In the last few years they've moved mostly up, but history tells us it's also common for them to move down for a while. Even so, the long term trend is up, and I don't see a lot to change that (except nuclear terrorism, God forbid). That's point number one: it's not the end of the world if the markets go down for a while. Machines do most of the trading nowadays anyway, and eventually the machines will figure out to buy instead of to sell — and the markets will go up.
Second, subprime mortgages. They're called subprime because they are more likely to default than mortgages from more solid borrowers. Sure enough, they're defaulting. But they are not defaulting in huge numbers, and the total number of defaults in the entire U.S. mortgage market is tiny. The whole amount of subprime that's defaulting is a tiny portion of the nation's credit markets. A few people have been hit very hard, and newspapers like to print bad news. But overall, the losses are very small compared with the total wealth of the nation.
Next, problems with private equity and hedge funds. Frankly, who cares? These are terribly rich people who have been making out like bandits for years now. If a few of them have problems and cannot do their deals, that is a problem for the Martha's Vineyard and Gulfstream set; it's not really big news for the rest of us. The economy can absorb the demise of a number of hedge funds without real danger.
We have an alert federal reserve that will keep the ship righted. We have an extremely robust economy, which may well weaken but will still be strong. Housing revival will take a good while, but it will eventually recover. Wall Street will periodically go crazy with anxiety. But if we plebeians stay calm for a good long while, this turmoil, too, shall pass away.
In money, as in everything, patience is a great virtue.
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