Thursday, March 24, 2011

Seven Minutes of Total Globalist Economic Confusion

The IMF is out with a new seven minute YouTube propaganda piece (see below) that stars former World Bank president and globalist Joseph Stiglitz.

I don't think I have ever seen more confusion in seven minutes of presentation in my life. If you want to understand the talking points that the one worlders are currently using, Stiglitz knows them all and is able to spout them out as though they make sense at, as he says, a "high level".

He tells us that a consensus has been reached after the recent financial crisis that "free markets don't work". Since the crisis was caused by Federal Reserve manipulation of the money supply and interest rates, how Stiglitz can believe that we were ever near a free market with this Federal Reserve manipulation is a mystery that may never be answered.

He then says that the crisis proved that inflation at low levels may not be a good thing. Well, actually, he is correct since there should be no monetary inflation. But what he is calling for is more monetary printing than what occurred under Alan Greenspan. Money printing  caused the real estate bubble!

He then goes on to say fiscal policy worked. He's correct here, if you work for Goldman Sachs, but if you are part of the 10% of the nation that is unemployed, or part of the millions who are losing their homes, fiscal policy is not so great.

Stiglitz then states that interest rates are at zero and therefore monetary policy doesn't work anymore. As I have discussed several times, interest rates are not at zero. The Fed Funds rate, the discount rate, the Treasury Bill rate are low, but they are not at zero. It is the interplay between these rates which sets monetary growth. In other words, relative rates have the impact and the Fed can and continues to manipulate these relative rates.

Stiglitz goes on to say that economic models didn't work during the crisis and they didn't predict the crisis. Here again he is partially correct, but he should really speak for himself.

New York Fed economists, McCarthy and Peach who famously argued that there was no housing bubble (just before the housing market crashed) actually based their embarrassing forecast on the theories developed by Stiglitz. Throughout the paper they specifically make clear they are building on the work of Stiglitz.

This was a failure of Keynesian models and, in particular, those built on the theories of Stiglitz. It was not a failure of the complete economics profession. Walter Block has assembled a list of economists who used Austrian Business Cycle Theory to forecast and warn about the housing bubble.

Stiglitz in the clip below also talks about "global growth" as though failures at the national level are not enough. It appears he wants to make the entire world choreographed for one huge business cycle.

He even brings up a new globalist phrase I had never heard of before, "the global reserve system". Is this another signal that the globalists know that the End the Fed movement is picking up traction and it is their start at attempting to co-opt the movement by a future sly slick call for ending the Fed, to be replaced with a "global reserve system"

Stiglitz then disses the dollar and bows before the almighty SDR "currency" which is printed up by the IMF. He suggests is should replace the dollar as the world reserve currency in the new "global reserve system".

He goes on to say that the financial system is unstable and points to the huge concentration in the banking sector. He correctly points out that this is caused by government policies which create moral hazard, which causes few to be concerned about the money they place with large banking institutions, since, as he readily admits, these institution continue to be Too Big To Fail.

But his solution is not to remove the government programs that create the moral hazard, but to call for more regulation limiting bank size and setting limits on excess risk taking at banks. Translation: He wants to protect the elitist large banks from competitors that may grow in size and he wants to direct risk, which means he wants to direct banks to put their money in "safe" near bankrupt government securities.

And there you have it, seven minutes with an elitist global economist.Watch.


  1. May the world never forget the way Hugh Hendry whipped Stiglitz's ass like he was a stupid little schoolboy in this infamous YouTube video:

    Hugh Hendry, never forget!

  2. "He correctly points out that this is caused by government policies which create moral hazard, which causes few to be concerned about the money they place with large banking institutions, since, as he readily admits, these institution continue to be Too Big To Fail."

    Does Stiglitz not realize that his argument that these policies caused the crisis contradicts his assertion that "free markets don't work"? He could at least be coherent in his fallacious arguments.

  3. I heard Stiglitz speak when I was in grad school a few years ago. Considering his advice at the time was to get your money into European sovereign debt, we can all rest assured that at least he isn't getting dumber.

    But this made me shake my head. He could've saved us all six minutes if he'd just said, "I have to keep pretending like the financial crisis didn't expose the intellectual bankruptcy of my life's work, and I have to keep making vague recommendations that sound like I know what I'm talking about. Otherwise people will stop taking me seriously."

  4. Very insightful GSL.

    It struck me that Stiglitz might as well be saying with a straight face that there is a need of a worldwide government force (we'll call it the International Maritime Force or "IMF") to prevent ships from traveling too far from port and falling off the edge of the earth.

    How can this man be so damn stupid?

  5. With guys like this imparting knowledge onto the bureaucratic elites, its going to get easier and easier to make a buck off of policy driven unintended consequences. Believing governments can control markets is as absurd as believing governments can control mother nature.

    Sad to think people are paying good money to take courses from this twit.

  6. This point of view is incredibly dangerous and unfortunately the Austrian side of the coin is getting zero representation in central banks or presidential offices around the world. We are all in a lot of trouble.

  7. They (the state) will never accept the Austrian view since it tells them exactly what they don't want to hear. They are like the scientist that starts with his desired outcome and goes in search of the data to support it. People like Krugman and Stiglitz have made themselves very prominent and modestly wealthy by feeding government the information and models that they desire to support their policy goals.

    AE's following will always be the financial and economic community that is outside of the government's inner circle.

  8. i can barely watch this stuff, makes my blood pressure rise...

  9. Haha the comments on the video are funny. So many Krugmanite cultists.

  10. With guys like this imparting knowledge onto the bureaucratic elites, its going to get easier and easier to make a buck off of policy driven unintended consequences.

    Well, until it becomes illegal to short sovereign debt. Which is probably down the road.

  11. The background music is so inspiring.

  12. I'd rather not watch the video as I think you've explained enough - and as someone else pointed out, enduring such things is bad for the blood pressure.

    I agree though that 'global reserve' is a new one. And a very disturbing one at that.

  13. And now of course Alan Greenspan is pontificating on remedies for the crisis!!!

    I think GSL hit the nail on the head - these guys have devoted their lives to theories demonstrated to be fallacies. Years of cumulative confirmation bias and universities churning out graduates spouting the same rubbish.

  14. Austrian Economics always makes me smile a little on the inside. I suppose it would be more fitting to brand it "Austrian Philosophy," because that is what it was- founded by political philosophers mostly, predominantly Hayek.

    It truly is the dogmatic liberal-art wing of the discipline. Rejecting the more modern scientific and mathematical metrics, there is scarce agreement to be found between them and most mainstream or even other heterodox schools of Economic thought.
    The one agreement they seem to have found, which many ignore, however- is the agreements between Austrian Business Cycle theory and Keynesian macroeconomic theory. Both directly imply inherent sub-optimality in markets, particularly financial markets. Although Austrian theory is less supported by the empirics.

    Were ABC theory the accurate picture, we would simply need to re-allocate the resources of the homes in the Florida swamps, and in the New Mexico desert. There is no conceivable way, however, to make the ABC models fit with the sheer volume of crap that the economy spewed in 2008. There was simply too much damage for ABC to be a helpful model.

    Furthermore, the traditional stock defense of the Austrians is fairly weak in this case. The Federal government had very very loose control over CDOs and Mortgate-backed securities, and on top of that regulatory power of the government over Fannie Maw and Freddie Mac was waning alarmingly.

    Empirical failures such as these are sadly more common than I have let on within Austrian schools. Others more eloquent than I have highlighted these.

    I sincerely hope folks won't take any of this personally or offensively. I know that like many other dogmatic systems, Austrian adherents tend to be more personally invested and identified with the ideas of their forerunners. I hope that like some of the fine folks at Marginal Revolution, people here are capable of such civil intellectual dialogue.

  15. Baron, why do you believe that "Austrian Business Cycle theory" implies "inherent sub-optimality in markets"?

    What counts as "sub-optimality"? What counts as optimal? Are there objective criteria for optimality? Or only pseudo-objective criteria, such as popular opinion, of what counts as optimal? In fact, what counts as "markets"? The term is mealymouthed, to say the least.

    Perhaps you are an Austrian wearing a sockpuppet, but I tend to doubt it given the tone and content of your message. Nevertheless, for a person like myself who does NOT identify as an Austrian, your remarks tend to undermine whatever little credibility that competing schools have, in proportion to the scientism which infects those schools.

    In fact, your use of an old buzzword, "science", alongside "mathemtical" and "metrics" was just one of several clues to that you lack understanding. Economics has never been scientific in the sense of the term that, say, a physicist uses the term (so your use of "empirics" is scurrilous). Economics performs no repeatable experiments. It has no control groups, such as which even the most amateurish of biologists and college students might use when experimenting with Pisum sativum.

    What you are is an advocate for scientism, and your remarks underscore that fact, just as your use of "modern" underscores the fact that you wish to trade on pejoratives and innuendo rather than to engage in "civil intellectual dialogue".

    And then there was your transparent touting of "Marginal Revolution", the bias of which is easy to predict before visiting it.