The first line in Chapter 1 of Carl Menger’s 1871 Principles of Economics states that everything is subject “to the law of cause and effect.” Once again, we have the example of a prominent mainstream economist confusing cause with effect.

The latest dangerous nonsense comes from Martin Feldstein, who claims that unless the government stops housing prices from falling, the economy will be in great peril. While it would take all of the cyberspace in the world to fully criticize his latest piece of idiocy, I will provide one passage to demonstrate what I mean:

We need a firewall to break the downward spiral of house prices. Here’s how it might work. The federal government would offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. This would be available to new buyers as well as those with mortgages. The interest on that loan would reflect the government’s cost of funds and could be as low as 2%. The loan would not be secured by the house but would be a loan with full recourse, allowing the government to take other property or income in the unlikely event that the individual does not pay. It would by law be senior to other unsecured debt and not eligible for relief in bankruptcy.

There are a million ways to attack this stupidity, and I will say that his entire article is full of such gems. You see, Feldstein — like the FDR administration — thinks that the cause of the downturn is falling prices. This is what passes for brilliance in mainstream economics.

No wonder I let my AEA membership lapse years ago: I have given up that the typical economists ever will “get it.”