Economy will be better in 1994, my 'adviser' says

January 24, 1994|By ROGER SIMON

It seemed like a good time to call Jeff Levin, who is my Council of Economic Adviser, and find out how bad 1994 is going to be.

In the past, I have never been able to determine whether Levin is a pessimist or just whether the economy has not given him very much to be happy about.

Back in 1990, when I first interviewed him, Levin accurately predicted the recession of 1991 and also accurately predicted that white-collar workers would be hit as hard or harder than blue-collar workers.

Levin has an M.B.A. and law degree from Columbia University, but I listen to him anyway. That's because he is also the general manager of Fields of Pikesville, which has been there since 1892, and still serves malteds in large silver containers, the only way malteds should be served.

Levin has a serious understanding of economics and is foolish about only one thing: trying to make me understand what on earth he is talking about.

Which is why when I called he tried to explain economist Milton Friedman's theory of the money supply to me.

"Let's say you and I have 100 peanuts," Levin said. "You and I are the only consumers in the world and we divide up the peanuts. The limit of what we can spend is 100 peanuts. Let's say there are 100 objects in the world that we can buy for the 100 peanuts. What is the average price per object?"

First of all, I said, what kind of peanuts are they? Salted or unsalted? And if salted, are they salted in the shell?

"The average price per object is one peanut," Levin said, ignoring me. "The peanuts have not expanded. And the amount of things we have supplied does not decrease."


"So Milton Friedman has established you cannot have inflation under such circumstances!" Levin said genuinely excited. "It is only logical that if you don't have an increase in the money supply relative to the goods and services available, prices in general cannot go up. You can only get inflation when the money supply increases!"

I thought writing a column was easy, but Milton Friedman has even a better dodge than me: He got a Nobel Prize for figuring out how much 100 peanuts are worth.

"It is infinitely more complex than that," Levin said. "And I have not yet explained the effect of velocity."

Don't bother, I said. How are malted sales?

It is my economic theory that when times are good, people buy malteds. This is why I require Levin to keep track of monthly sales.

"The latest complete figures I have are from August of 1993," Levin said. "We sold 459 malteds in August 1993 compared with 394 in August 1992."

That's an increase of 16.5 percent! I said. The nation is saved!

"There are plenty of clouds out there right now," Levin said, "but the economy is definitely growing. Retail sales are going up, though some, particularly softgoods -- clothing -- are not doing well at all. There is no serious inflation cooking right now and, contrary to what some believe, you can have outstanding growth without inflation."

So we're out of the recession?

"Technically, we are out of the recession," Levin said. "But do you feel richer? Most people don't. But there should be continued progress in the areas that are already doing well -- housing, automobiles, large appliances."

I was not used to such wild enthusiasm from Levin.

Are you really saying 1994 will be better than 1993? I asked.

"It should be better than 1993," he said. "Prospects are pointing in the right direction. But plenty of things can go wrong. The thing that immediately comes to my mind is the power problem this country is experiencing. A couple days of very difficult temperatures in winter time is enough to kill the whole Eastern power grid. This indicates a very bad shortage of electric power in our region. And a shortage of electric power limits economic growth.

"So what our state should be subsidizing in the future is new power plants and not football stadiums where only eight games a year will be played."

Don't be so gloomy, I said. In the future, people will still buy malteds.

"In the future," Levin said, "there will be virtual reality. And people will be able to have a malted and not get fat."

Some people you just can't cheer up.

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