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GMO's Jim Montier Destroys Kartik Athreya
Remember the Fed economist who said all bloggers are idiots, and only Ph.D's are smart enough to understand why the market can go up 4% on double dip depression news? Neither do we. But the following obliteration of the Richmond Fed's errand boy by GMO's James Montier, who is once again back to posting on his blog http://behaviouralinvesting.blogspot.com, is completely worth the read.
Barbie does economics!
The sheer hubris of many
in the economics profession never ceases to amaze me. Take for instance a
recent paper by Kartik Athreya of the Federal Reserve Bank of Richmond entitled “Economics is Hard. Don’t let Bloggers
Tell You Otherwise”. In a move that is eerily reminiscent of the
controversial talking Barbie of the early 1990s who fatefully uttered
“Math class is tough”, Athreya’s short paper essentially lays out a
quite staggering claim :- that economics should be left to those with a
PhD in the subject!Athreya describes himself as “a worker bee
chipping away with known tools”. He goes on to say “writers who have not
taken a year of PhD coursework in a decent economics department…cannot
meaningfully advance the discussion on economic policy”. You’ve got to love the ‘decent’ in that
sentence – it wreaks of intellectual snobbishness of the highest order.In
fact, Athreya’s ire isn’t limited to what she sees as uninformed
debate, he seems to object to anyone who attempts to make the policy
issues of the day clear even if they have a PhD. He pejoratively
describes both Paul Krugman and Brad DeLong as “Patron saints of the
Macroeconomic Policy is Easy” movement.He argues that we won’t
expect particularly informed discussion on the causes, consequences and
treatments for cancer from non-Oncology specialists, so why we would we
expect non-specialists to offer any useful debate on economics.However,
the analogy is false. Modern medicine is based on scientific
principles and follows an evidence based approach. Even then some
estimate that the majority of published findings in medical journals are
false!Economics starts from a far worse
place. It isn’t a science, and often seems more interested in twisting
the facts to fit a theory rather than the other way around. In fact, as
Nassim Taleb has pointed out, economics is more akin to medieval
medicine than its current practice, “Medicine used to kill more patients
than it saved – just as financial economics endangers the system by
creating, not reducing, risk.”The idea that what we need is more
‘worker bees’ gaining their PhD’s from conducting ‘angels on a pin head’
like work based on minor alterations to previous research makes me want
to cry. Where were the warnings from the orthodox economics
establishment ahead of the global financial crisis? Oh, that’s right
there weren’t any.
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The Fed employs more economists than perhaps any other quasi government country club.
Yet at least the last two Feds claim they had no idea what was coming in 2000 and 2008.
If all these PhD economists were all laid end to end, they still might not reach a useful conclusion...
[insert rimshot here] Heeyyy-ooooh
LOL
All laid end to end?
I respectfully disagree. Athreya and the rest of the elephant walking Fedsters would go "mouth to ass."
http://www.imdb.com/title/tt1467304/trivia
most of this is true. however the word the original post wants is "reaks" not "wreaks". misspellings are to be avoided particularly when arguing a phd is unnecessary (which imo is true).
+1,000,000,000,000 (because anything less rounds to zero at the Fed)
A twofer. Two chuckles in one thread.
+ 1000 definitely a twofer.
If all Phd economists were laid end to end, they would reach all the way to two useless and contradictory opinions. Barney would chose the one that suited his convenience, and then turn his attention to the economists just laying there.
Who would want to get laid by an economist?
Timmy and Hank have no Ph.D. that I am aware of. I think there is quite a few on the Fed's board that have no degrees in economics if I remember correctly.
Yet, all one has to do is read the Federal Reserve Z1 report that shows the issue, only need basic math skills for that.
I remember what my dad told me, get your degree, think about your Masters... you get a Ph.D. you are qualified for one of two things: 1.) teaching or 2.) the unemployment line.
If you are the Chairman of the Board at the Federal Reserve, your job is simple... keep the lemmings marching in a straight line, when they get out of line you tell them helicopters are coming and to get back in line, when the lemmings stop, again remind the lemmings the helicopters are coming.... if all else fails tell them over and over the helicopters are coming.
Last ditch effort to get the lemmings marching scream, "You are not suppose to be fighting the Fed!".
Robo made me want to find "MI5" Drury's booblation, but all I found was this dude who can't speak good.
"Uh.....uh....uh....uh..."
http://www.cnbc.com/id/15840232?video=1539222552&play=1
PhaileD.
PHD - Piled Higher and Deeper
MS - More of Same
BS
Maybe someone should let them know that Keynes did not have a Ph.D.
When I got promoted to senior management, the first thing my mentor said to me was:
That's also why these guys say some stuff, but never give detailed plans because they don't have a clue what they are talking about.
And about the PhD's: If I had a penny for every time I've heard this in our company, I'd be a billionaire.
We catagorize the people as followed:
The Greens: Factory workers
The Blues: Factory office workers
The Collars : Central office workers
The Kids : Management
Senior Management: us
Les Visa Papa's : CEO's
And the working places:
The Forest: Factory
The Village: Offices
The Palace: Top floor
How did you get promoted to senior management? You don't sound ignorant or arrogant enough.
Give him some time. It's his first day as a senior manager.
I am willing to bet that Kartik Athreya is working here via H1B visa.
i love how phd's are always so pissed off and/or full of shit. But then again if I paid 6 figures for an "advance economic" degree, when 5th grade math will do just fine, and found validation only among my peers, the same ones who dont realize that they have never thought for themselves ("go to school, get a good education, and you will get a good job"), I would probably be disgruntled as well. Funny how the only entities that will "pay" you for your "advanced degree" are the same one's that have been telling you how to think for your entire life.
ECONOMY
n. Purchasing the barrel of whiskey that you do not need for the price of the cow that you cannot afford. – Ambrose Bierce, The Devil’s Dictionary
Robert Ringer, 30 years ago, sounded a clarion call for the personal liberty that created the American Dream, a dream that was all about individualism and the opportunity to achieve success without interference from an iron-fisted, totalitarian government. Here are some of his words on economists:
If one misses the boat on economics, he misses the boat on the issue of freedom…
The truth of the matter is that fundamental economics is relatively simple and can therefore be explained in simple language. Adding technical jargon does nothing whatsoever to change basic economic principles.
I realize that this is heresy in the jealously guarded world of intellectual economists. Many of these economists maintain an unholy alliance with government and serve it well by generating the illusion that economics is an impossible complex subject. These economists keep people both bored and confused (much to the government’s delight) by the use of “insider jargon,” by references to factors which have little bearing on the problems of individuals, and by generally becoming entangled in their own esoteric webs. Beware the economist who cannot explain matters in simple terms. Unclear expression is a sign of unclear thought. …
The wide disparity of opinion among economists once prompted an observer to say that if all the nation’s economists were laid end to end, they would point in all directions. …
What stimulates economic growth—the production of wealth—is voluntary action on the part of individuals trying to improve their well-being. It is unfortunate that the idea of individuals’ becoming wealthy bothers some people. … What is more unfortunate, many of these people are economists who advocate the strong arm of government as the most effective way to interfere with the right of people to promote their well-being.
When such interference occurs, one of the most basic laws of economics—the law of supply and demand—is violated. It is the working of this law which creates a relationship among prices, wages and costs. …
The second fundamental law of economics, one that most expediency-oriented politicians refuse to acknowledge is: There is no such thing as something for nothing.
Wealth cannot be created out of thin air. Only production effort can create TV sets, refrigerators, automobiles and houses. Money (today) can be created out of nothing (actually out of paper), because money is not wealth. --Robert J. Ringer, Restoring The American Dream, 1979
It really is about as simple as what you have posted. It must take a PhD to come to believe otherwise.
Then, once convinced that the basic fundamentals are flawed or are alterable, it becomes easy to adopt jealousy as a reason for implementing something for nothing. It will not come to a good end when the basics are re-established and relearned.
Thank you JR
"something for nothing"- what a toxic elixir drank heartily by airhead PhD's or otherwise.
OUTFRIGGINSTANDING post JR. Thanks for sharing.
Thank you Tyler. The difference between objective v. subjective sciences escapes the members of the Fed and Keynsian morons. They think that because Keynes established a theory it becomes fact.
Much like Marx established a theory on capitalism and thus many in this nation and the world think it is fact and there is no other way or opinion on the matter.
Keynesianism is the opiate of the misses.~ Groucho Marx
I know a Dentist who discovered a cure for cancerous brain tumors. The problem was it was it was a salt compound and therefore not something that you could patent. He went to the American Cancer Society (needed money for testing) and had the door slammed in his face. He went to the FDA looking to get into the orphan drug program. No dice. Went to Mexico and had the compound manufactured as a nutritional supplement. Has had great success with animal hospitals, where in many cases brain tumor surgery, chemo and radiation are out of the question financially. In some instances his compound was used on patients only after everything else (chemo, radiation, etc) had been tried. Unfortunately, radiation and chemo changes the cancer cells in ways that make his compound ineffective (changes cell wall permeability).
Honey, you could patent table salt if you found a novel and useful application for it that was not anticipated by the prior art.
Sounds like he was a victim of the War [for] on Cancer...
God bless Montier. The man swims with sharks, you know. And I'm not talking about the denizens of the Fed plunge pool...
Btw, Paul the Octopus, the best forecaster of the World Cup results so far, has accurately predicted Spain's victory versus Germany today. Unfortunately for Paul, he dwells in a zoo in Germany...
http://www.csmonitor.com/Science/Discoveries/2010/0707/Germany-hopes-Pau...
Today's oracle, tomorrow's appetiser ?
How do you say: "Having your ass handed to you" in German?
Kartik wants us to listen to PhD economists, eh? Fine, let's start with this one, who will explain to us why we will all be better off if the Federal Reserve is abolished:
http://www.hillsdale-econ.com/content/your-money-back
You know its funny. Am currently doing an university economics module on investing and in the last assignment on risk I had the temerity to quote Tyler Durden (!!) and Hugh Hendry.
Jesus. What a shit storm. They couldn't mark me down because I was right but the commentary I got back "These are not academic sources, all you should quote is the course textbook blah blah blah". Under no circumstances should you try to relate what you are being taught to the real world and the people who actually, you know, work in it. Couldn't help but think of Jeffery (I see no problem with Greece being able to service its debts) Sachs getting his ass handed to him by Hugh Hendry.
So a tangent - currently learning about CAPM. The textbook says it is fantastic and not at all shit. Do any professionals actually use it ?
Um, yes. Professionals actually use the CAPM and portfolio theory. That's what all the "Alpha is dead" talk is about. There's no point to "picking" stocks, when stock prices are so tightly correlated. Just cast a wide, random net of selections and you will hedge against unsystematic risks.
I wasn't questioning portfolio theory & markowitz diversification, CAPM specifically. And no you haven't hedged market risk, you've minimised it.
You said that if anyone ever interferes with Project Mayhem, even you, we gotta get his balls.
House Atreides
Credit to you!
Tyler, Hugh Hendry, Joe Saluzzi, Chris Martenson may not be 'appropriate' academic sources but they quote and refer to the necessary and appropriate source material.
I had this problem working with a corporate providing data to banking - 'you're not the client(s) so how do you know if it's right or not' - and a friend of mine left to join another company because of that. I'm not blowing my own or his trumpet but both my friend and I were correct following feedback from the banks.
The Emperor's Clothes...it doesn't require a qualification, just wisdom.
DavidC
CAPM- Fama forced to admit empirical defeat of CAPM in 2004
See 'How data killed CAPM' http://www.debtdeflation.com/blogs/lectures/
I've known some smart people and some highly educated people. They are not necessarily the same. But when I hear someone say credibility is directly related to the number of years spent in school I know I am listening to a numbskull.
+ 100
Diogenes
Spot on.
My Mother left school at 14. She had to walk about 4 miles to school. She taught herself computers, with some occasional help from my sister and me, in her early 70s and goes from strength to strength.
A friend of mine left school at 17 because his girlfriend told him she was expecting his child (not true). He is VERY highly regarded in the field of technical analysis.
Both exceptionally (naturally) gifted intelligence wise.
Some of the brightest people I've EVER met have been people with no formal qualifications.
All a quailification does is show that someone has the necessary tenacity to obtain said qualification.
DavidC
Kartik Athreya destroyed himself.
I detect a tone here. It smells like antiintelectualism.
Going to consult wif the Justice Department on this one.
http://www.foxnews.com/politics/2010/07/06/ex-official-accuses-justice-d...
Nothing wrong with intellectualism. You just have to be smart about it.
There is a wide chasm between intellect and intellectualism.
Anyway, wisdom always trumps technical tautologies.
The Hubris of trying to provide linear solutions to non linear problems.
In a tiny nutshell...Bravo!
Yes I remember him, his name is Kartik Athreya.
Sorry? His name's in the article? Oh bum!
DavidC
You may be an intellectual if you wish. But you can only claim it if you have paid for enough credit hours.
Geez, I think many people missed Kartik Gupta Gupta Athreya's sequel paper,
"If Economics is hard, why can't I get a hard on?"
And double geez, to think that Bernanke still doesn't understand securitization. But then, I guess securitization must be hard....for Bernanke.
And since the only two (and real) economists I'm aware of who fully comprehend that the securitization process led up to the Great Crash of 1929, was suspended then began again in the latter part of the 20th century are Prof. Michael Hudson (living) and John Kenneth Galbraith (deceased), there would appear to be a gargantuan abundance of "economists" out there who simply don't know jackshit!
Anybody care to correct me on this?
hey Sarg
Ya wouldn't be offering up some conventional wisdom now, would ya ??
It's not that I don't respect economists with Phd's, ...it just that I have more respect for weather forecasters and find them more useful and entertaining.
THE BALLOONIST:
http://williambanzai7.blogspot.com/2010/02/risk-mangement-story.html
Montier says:
Where were the warnings from the orthodox economics establishment ahead of the global financial crisis? Oh, that’s right there weren’t any.
Well, there were a few. Roubini and a handful of others.
But it's true that it was bloggers that got it right in contrast to the PTB and that continue to get it "righter". Think ZH and some other independent thinkers . . .
Before we lionize Montier, however, anyone who gets Grantham's letter knows that GMO is more bullish on "high quality" US stocks than virtually any other asset class on Grantham's 7-year basis. Whether Montier is in accord w this view, we are not told.
While this guy Athreya is a jerk, he has a point. There is a lot of chatter about the market that is based on whim, rather than facts. I prefer to listen to Niall, or Chanos, or my favorite Mauldin, simply because their arguments seem well grounded in facts. Sometime when I try to get the inside stuff on climategate at the climate blogs, I realize that the level of math and statistics is so big, I just can't get it, and I could easily be misled. And, like economics, the climate stuff is massively corrupted by money and self interest.
I remember sending letters out a few years ago to some friends who were as well versed as Athreya, and I asked if the quarter quadrillion dollars of derivatives were going to be a problem, and no one really knew...
Ok, i've decided i can't put it off any longer - here it is ...
Scary DOW monthly chart.
http://stockmarket618.wordpress.com
Many thanks - really nice website. Gonna keep me occupied for a while.
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