Sunday, November 20, 2011

Komplete Keynesian Konfusion

How bad are Keynesian economists and analysts missing the manipulated upturn in the economy? Really bad. A below expectations number, for example, has been reported occasionally, such as for Sears and Walmart, and so I have been accused of cherry picking my numbers. But that is not the case, overwhelmingly economists and analysts are underestimating the strength at individual companies and the economy overall.

Both Sears and Walmart are part of the S&P 500's Consumer Discretionary sector. While Sears and Walmart earnings came came in below expectations that wasn't the case for the sector overall.

According to FactSet, of the 479 companies that have reported earnings to date, 73% have reported earnings above expectations, which is consistent with the 74% average recorded over the past four quarters.

As for the overall economy, the Citigroup Economic Surprise Index, which measures whether Keynesian economists are underestimating or overestimating the economy in their forecasts, has been climbing since September. The Keynesians and the econometricians have simply been underestimating the strength in the economy for months. Bottom line: They don't have the proper business cycle theory that would clue them in about the turning economy. They are simply trend watchers and it will take months for their trend watching models to detect the turn in the economy.

Above is the Citi Surprise Index which shows that  Keynesian economists are completely surprised by the strength in the economy, even though Fed money printing should have clued them in that a manipulated boom is on the way

On the other hand, since early this year, Ben Bernanke has been printing money at very aggressive rates. For anyone who understands Austrian Business Cycle Theory, this would be major evidence that a manipulated boom is on the way, as indeed the numbers are beginning to show.


  1. How do economists test their theories?

  2. "How do economists test their theories?"

    They become head of the Federal Reserve and manipulate the economy.

  3. Ken,
    They create impenetrable mathematical models that per the Ricardian Vice are designed to do nothing but support their respective interests (central banks, commercial banks, labour unions, bureaucrats, politicians etc) and then publish the models for review by their friends, only mathematical proof is considered acceptable to modern economists even after the real world proves them wrong (such as stagflation in the 70s debunking Keynesian theory of insufficient demand).

  4. I would not say that Ben Bernanke has been printing money. Rather I would say there has been a demand for US Treasury bonds, and a demand for US Dollars.

    Nor would I say a boom is underway.

    The numbers are showing something. The numbers reflect an increase in the M2 money, which could be do to the increase in value of US Treasuries, and the numbers reflect an increase in credit.

    From all news reports, there is a parabolic turn lower in projected corporate earnings growth.

    Doug Noland writes in Q3 2011 "Flow of Funds", The bottom line remains that the U.S economy continues to tread water, staying afloat by a historic expansion of federal debt. I have maintained that the explosion of federal debt was a Bubble, and that our fiscal train wreck would not be avoided through a resumption of private-sector debt growth. The U.S. Household sector does not want to add debt, and the corporate sector does not need to. I have as well noted the disturbing parallels between the eruption of subprime and the Greek debt crisis. From my perspective, at this point it is only a matter of time before the markets begin to impose discipline upon Washington.

    Credit metrics such as the TED spread, the 2Y Euro Swap Spread, the 3M Euribor-OIS spread, the 3M EUR/USD Cross-Currency Basis Swap, and the Libor-OIS spread as reported by Gary of Between the Hedges, reflects that he European banks are experiencing a funding freeze and are insolvent. The periphery European nations have lost their debt sovereignty as their interest rates have soared beyond 6% and are thus insolvent sovereigns.

    Sovereign armageddon, a credit bust and global financial system collapse is imminent.

    Singing of the Herman van Rompuy designed Fiscal Compact by EU Leaders, reflects that a political and economic coup d etat is underway, and that a New Europe will emerge and be led by an EU ECB IMF Troika, with the result that totalitarian collectivism is the EU’s future. The seigniorage of fiat money is ending, and the seigniorage of diktat is commencing, as reflected by the emergence of a fiscal union and technocratic government in Italy and Greece. Soon coming Eurozone default will be the nail in the coffin for the Banker driven Milton Friedman Free To Choose floating currency regime. It is being replaced by the Beast regime of regional economic governance, as called for by the Club Of Rome in 1974.