Top Economists Bewildered by Economy

http://www.reuters.com/article/ousiv/idUSN2342286520080823

This article appeared a couple of days ago, as my wife and I were packing up to leave our retreat in the north woods, so I was too busy to comment at the time, but this was too good to pass up.  The gist of this article is that the Federal Reserve and other top economists from around the world were meeting at a plush mountain resort to contemplate just what the heck has gone wrong with the economy.  They are postively bewildered at their impotence in stopping the downward spiral of economy.  They’re like a group of teenage boys, plotting how to impress their girls with a good time, without a dollar between them.  Lots of great ideas for impressive dates, but no dough to pull it off. 

What struck me most about this article is how it gets to the heart of the question I asked on the back cover of Five Short Blasts.  (Clicking the link will take you to a page where you can view the back cover.) 

Why are Americans’ incomes and net worths mired in a three-decades-long decline?  Why are jobs with decent pay and benefits becoming so scarce?  Why are affordable health insurance and a financially-secure retirement fading from the “American Dream?”  Why, in spite of thousands of economists guiding our nation’s economic policies, is our national debt skyrocketing?  Is it possible that the economists are missing something?

So here they are, all of the top economists gathered in one spot, and absolutely clueless about what is happening and why their macroeconomic models are failing.  How much more clear could it be that economists are, in fact, missing something extremely important?  Why do we tolerate such abysmal failure from this one field?  This kind of performance in any other field, be it the medical field, the high tech industry, or whatever, would result in heads rolling. 

Ben Bernanke seems to be highly respected by fellow economists, but I find the man to be absolutely rigid and unimaginative.  He is a wind-up globalization cheerleader.  Wind him up and set him on the floor and he will run in circles and incessantly babble words and phrases like “globalization,” “open markets,” “recapitalization,” “currency valuation,” “soveign wealth funds” and so on, a bearded version of the Chatty Kathy doll that chanted “mama” and “feed me.” 

Our next president would be well advised to toss these unthinking, robotic disciples of 18th century economic trade theorists back into the toy box and replace them with people who know their way around a balance sheet and can recognize budget deficits and trade deficits for what they are – a huge drag on the economy.  We could get better economic advice from anyone at AccountTemps. 

Following this article, it was reported that Bernanke was advocating some sort of super-regulator role at our major financial institutions – regulators who had a pulse on the broader economy and not just a myopic vision of what was happening in their little piece of the economy.  This is just rich, Bernanke proposing regulators to do for financial institutions what he doesn’t have the common sense to do himself – impose some fiscal discipline.  Not once has he ever been heard to utter a peep of concern about our trade deficit.  If red ink on the national balance sheet doesn’t matter, why should it matter to banks or brokerage houses?

Here’s some key quotes from the article:

“A year ago there was a real sense of uncertainty and confusion. People were perplexed by the turmoil that had come on quite suddenly. I would say the mood this year is one of greater clarity…let’s call it a bit more somber,” said Lipsky, the IMF’s first deputy managing director.

Yeah, that’s great progress.  Somber resignation replaces uncertainty and confusion. 

Fed officials say that it will take a prolonged period for the harm done to confidence by the collapse in the U.S. housing market to wash through the system. Bernanke acknowledged that there would no quick fix.

In other words, they don’t have a clue.

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4 Responses to Top Economists Bewildered by Economy

  1. FJ says:

    Hey Pete

    I haven’t seen him mentioned here, so figured I’d throw Bartlett’s name out there. He’s not an economist but I feel you’ll appreciate his ideas if you haven’t already checked him out. He’s been a professor for over 55 years now in Colorado and has been talking about the simple arithmetic of overpopulation for decades. Just found a lecture of his on YouTube and ordered the DVD.

    Couple of links for you:

    YouTube video – first hour-plus of lecture can be linked in eight parts by going to the below link and clicking on subsquent video responses, each leading to the next segment:

    Albert Bartlett’s website:

    http://jclahr.com/bartlett/

  2. Clyde Bollinger says:

    It has been my contention for several years that:
    If all the economists in the world were placed end to end, they would not reach a conclusion.
    Their being baffled does not come as a surprise.

    You’ll possibly remember the ‘operating on borrowing against growing equity philosophy’ prevalent in Dow Chemical roughly 30 years ago. It appears to have really caught on with the balance of the business world.

  3. Pete Murphy says:

    FJ, unfortunately, since I use dial-up, long videos are impossible for me. But I visited Bartlett’s web site and the first thing I noticed is that he is a professor of physics. I guess it’s not surprising that a mathematician (physics draws heavily on advanced math) “gets” the overpopulation problem while an economist, unwilling to even consider it, never does. I’ll have to take some more time to read more of his stuff. It’s interesting that he seemed to write prolifically back in the late ’90s, then nothing again until about 2006. Also, I continue to find it interesting how concern about the overpopulation problem seems to be dominated by the older generation and not the younger generation as you might expect. Perhaps it’s the perspective of having lived at a time when the world was less than half of our currently population that elevates our concern. To younger folks, everything seems “normal.”

  4. Pete Murphy says:

    Good comment about economists, Clyde!

    Yeah, I vaguely remember that Dow philosophy. It’s caught on big time in the financial world, as evidenced by the crisis it now finds itself in, a crisis that won’t go away any time soon!

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