Friday, February 24, 2012

Understanding the Clueless Keynesian Data Trackers

As I have been pointing out for some time, Keynesians and econometricians really have no model of the economy that explains how the economy works, that is,  the interactions of an economy.

For them they just watch the economy and "forecast" the changes as they occur. For Keynesians, it's about changes in animal spirits, for econometricians it is total data watching minus the animal howls.

A case in point is a report at CNBC on the view of  Credit Suisse economist, Jonathan Basile:

“[The] bottom line is claims have been improving. The trend in layoffs is improving. That tells you firms are more optimistic about the outlook and they continue to lower the amount of cost cutting,” said Credit Suisse economist, Jonathan Basile. 
While that’s a good sign, Basile said it may be some time before the trend can be trusted as signs of a sustainable jobs recovery.
What is Basile doing here other than saying, "Well the numbers are going up, but this won't be confirmed until the numbers continue to go up."

Fed analysis is pretty much the same.

There is no analysis based on theory. Nothing like, "The Fed has increased the money supply by near 10% over the last year, so there is plenty of money in the economy to create a manipulated boom in the capital goods sector, reduce unemployment and ultimately result in major price inflation."

Only with such theory (Austrian Business Cycle Theory) can you understand the turns in the economy before they occur. That's why Paul Krugman, other Keynesians, and econometricians missed the current upturn. Their models don't  understand the role of central bank printing. They, thus, become clueless data trackers that miss the start of manipulated booms and the start of crashes that are obvious to those using Austrian theory.  See hereherehereherehereherehere and here.  


  1. Why didn't the economy plunge into depression after there was virtually no M2 growth Mar 2009 to Oct 2009?

    M2 was 8470.7 in Mar 2009.

    M2 was 8433.7 in Oct 2009.

  2. In general, people buy high & sell low. When prices are high, the average Joe takes notice, and jumps on. When low, he loses heart, and throws in the towel.

    Keynesian analysis is a reflection of this error. It's a textbook example of the blind leading the blind.