Wednesday, January 15, 2014

Mainstream Economists and Their March Toward More and More Government Interventionism

By Chris Rossini

In 1954, Henry Hazlitt wrote in Newsweek:
Forty years ago practically every economist of repute supported the gold standard. Most of the merits of that standard were clearly recognized...The result was in effect an international currency system. Gold was the international medium of exchange. (my emphasis)
So an "international currency system" existed. But the bankster megalomaniacs decided to create an "international currency system" of their own, and one that would not limit their ability to create as much money as they desired.

The craziness caught on quick.

Henry Hazlitt noted the ideas that had taken over by the early 1950's:
The assumption seems to run through most public discussion today that we must never tolerate or permit a recession or a readjustment in anything. The reason so many of us talk this way is that we have become convinced that we now know how to prevent depressions or recessions and there is no excuse for not doing so. This explains such statements as President Eisenhower’s: "Never again shall we allow a depression in the United States."
So not only did the megalomaniacs create their own money-printing paradise, but the economists shed their common sense and decided to ride the wave as well. This bankster-made contraption would contain no downside. All the booze you want...without the hangover!

This "international system" now has a number of years behind it, and most present-day economists have been bred like puppies to stand loyally by the heels of the megalomaniacs. Concomitantly, they're always ready to bark like a rottweiler whenever someone dares point out the truth.

Then came 2008, a year when the "international system" shook...and shook hard. The common man was hit very hard, but he's always hit hardest by the "system." The difference with 2008 was that the tremors spread beyond that of just the common man. Very elite and prestigious financial institutions didn't merely "readjust"...they completely disappeared!

But even the fall of some of Wall Street's biggest names couldn't stop the operations of the "system". The megalomaniacs would show reality who the real boss is. They would fight back by unleashing record amounts of booze into the system. The printing party is just too good to end. Lehman Brothers & Bear Stearn may have overdosed, but there are still plenty of party animals who want and think they can handle more "stimulus"!

And, like obedient servants, the mainstream economists still bark like crazy to this day. They didn't lose faith in their masters yet.

However, after 2008, the barks starting falling on deaf ears. As Noah Smith, one of the supporters of the "system," says:
[E]conomists have fallen out of favor with the public since 2008. First they failed to predict the crisis, or even to acknowledge that such crises were possible. Then they failed to agree on a solution to the recession, leaving us floundering. No wonder there has been a steady flow of anti-economics articles.
Now Smith, of course, is talking about the megalomaniac-trained economists. He conveniently ignores the group of economists who do not bow to power, and snuggle up with a master. Smith ignores the economists who belong to the oldest school of economic thought on the planet - The Austrian School.

The Austrians did not fail to "predict" and "acknowledge that such crises were possible". Just the opposite in fact. And Austrians do have the solutions. But the solutions show that Emperor Has No Clothes, so those solutions aren't allowed to count.

Smith thinks that public should ease up on the "economists". Heck, look at all the things that are going on:
The people you are mad at are only a small fraction of the economics profession. When people in the media say "economists," what they usually mean is "macroeconomists."...The problem is that it's hard to get any usable results from macroeconomics...

Meanwhile, there are many other branches of economics, doing many vital things. These other fields — sometimes dismissively referred to as "microeconomics" — actually employ many more economists than macro. Many of these quiet, unglamorous researchers turn out a steady stream of useful insights and new technologies. While their headline-grabbing macro cousins duke it out in the press, the silent majority of "microeconomists" is plugging away at improving various pieces of the economy...

All of these subsets of economics — from Game Theory to agricultural economics — have received an enormous boost from the digital revolution. The flood of new data and the development of new statistical and computational techniques have vastly increased economists' ability to understand the world.
What a mess!

No one explains the reason why better than Ludwig Von Mises:
Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of mans human existence.
Smith then puts in the final nail:
The days when economists sat around spinning theories are on the way out — the percent of top-rank econ papers that are mainly theoretical has declined from about two thirds in the 1980s to less than one third in 2011...
And that right there, shows how far into the abyss these economic "scientists" have fallen. They may as well try to jam a round peg into a triangular hole. Economics is a deductive science. Economic knowledge arises from theoretical analysis.

Here's the good news:

A HUGE opportunity exists for those who really understand economics.

The megalomaniacs are now fighting against time. How much time do they have left? No one knows. But what we do know is this: their barking rottweilers will never have the answers. If they think they have it bad now, wait until the next financial crisis hits, and then the next!

Their solution has always been "Print more and consolidate more power!.....Print more and consolidate more power!" Well, what happens when that doesn't fly anymore?

That's when the opportunity arises for those who do have the answers. It's also when the economics profession can start to climb its way out of the abyss. The fact that today's "economists" are married to the megalomaniacs can turn out to be a stroke of poetic justice in the end.

They'll all be able to go and search for real jobs together.

Chris Rossini is on TwitterFacebook & Google+


  1. Here are GMO's "Lessons Learned in the Decade".

    Lessons Learned

    The Fed wields even more financial influence than we thought.
    Low rates have a more powerful effect on driving financial assets than on driving the economy.
    The Fed is capable of being extremely out of touch with the real world – “what housing bubble?” – plus more doctrinaire – “no, the low rates had no effect on housing” – than anyone could have imagined.
    Congress is nearly dysfunctional, primarily controlled by large corporations, and hamstrung by the supermajority now routinely required in the Senate.
    Government administrations can be incompetent for long periods.
    Poor leadership can really damage a country’s hard- won reputation in a mere 10 years.
    Obama is not a miracle worker!
    The two time-tested investment tools, value (P/E ratios and P/B ratios) and price momentum, are now much more heavily used and not so reliable as they once were, say from 1977 to 1997.
    Asset classes really are more inefficiently priced than individual stocks on average, and therefore offer greater opportunities for adding value and reducing risk.
    Developed countries, including the U.S., are past their prime compared with developing countries: it is indeed a new world order.
    Education and training are the keys to increasing wealth on a sustainable basis and the U.S. is in danger of losing its once large edge here.
    We all live on an island, which can be overexploited and turned into a barren Easter Island if we are not careful. Resources are finite and biodiversity is fragile, and both must be protected. Carbon emissions are the single greatest threat.
    Being a global policeman is expensive, and somewhere between difficult and impossible.
    The Fed learns no lessons!


  2. Who cares what Hazlett says?

    WE have Jerry Wolfgang.

    So we got that going for us.

  3. Hopefully someday most mainstream economists, relative to economics, will be regarded the same way by society as the way we now do with alchemists relative to chemistry.