How A Handful Of Unsupervised MIT Economists Run The World

Tyler Durden's picture

Ever get the feeling that the entire global economy is one big experiment conducted by several former Keynesian economists from MIT with a bent for central planning, who sit down in conspiratorial dark rooms in tiny Swiss cities and bet it all on green until they double down so much nobody even pays attention to the game? No? You should. Jon Hilsenrath, of all people, explains why.

From the WSJ:

Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.

 

The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world's biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world's economic output.

 

Of late, these secret talks have focused on global economic troubles and the aggressive measures by central banks to manage their national economies. Since 2007, central banks have flooded the world financial system with more than $11 trillion. Faced with weak recoveries and Europe's churning economic problems, the effort has accelerated. The biggest central banks plan to pump billions more into government bonds, mortgages and business loans.

 

Their monetary strategy isn't found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.

 

"Will history decide they did too little or too much? We don't know because it is still a work in progress," said Kenneth Rogoff, an economics professor at Harvard and co-author of a book, "This Time Is Different," examining financial crises over eight centuries. "They are taking risks because it is an experimental strategy."

 

Three of the world's most powerful central bankers launched their careers in a building known as "E52," home to the MIT economics department. Fed Chairman Ben Bernanke and ECB President Mario Draghi earned their Ph.D.s there in the late 1970s. Bank of England Governor Mervyn King taught briefly there in the 1980s, sharing an office with Mr. Bernanke.

 

Many economists emerged from MIT with a belief that government could help to smooth out economic downturns. Central banks play a particularly important role in this view, not only by setting interest rates but also by influencing public expectations through carefully worded statements.

 

While at MIT, the central bankers dreamed up mathematical models and discussed their ideas in seminar rooms and at cheap food joints in a rundown Boston-area neighborhood on the Charles River.

 

Over Sunday dinners in Basel, which often stretch to three hours, they now talk of pressing, real-world problems with authority. The meals are part of two-day meetings held six times a year at the BIS. Dinner guests include leaders of the Fed, ECB, Bank of England and Bank of Japan, as well as central bankers from India, China, Mexico, Brazil and a few other countries.

The same BIS, incidentally, which is an employer of "The People Bringing You Currency Manipulation On A Daily Basis" whom we described in April.

The role of the Bank for International Settlements has broadened since it was formed in 1930 to handle reparation payments imposed on Germany after World War I. In the 1970s, it became the center of discussions on bank capital rules. In the 1990s, it became the meeting place for central bankers to talk about the global economy.

It is also the place where the coordination of all the real trading these days: that conducted by central planners of course. Most importantly, it is responsible for perpetuating the status quo.

As for our unsung MIT heroes...

The 18-member group, formally known as the Economic Consultative Committee, has only once issued a public statement: a two-line missive in September, promising to look for solutions in interbank lending markets, responding to allegations that some private banks had conspired to manipulate the Libor interest rate.

 

On Mondays after the dinner, the bankers join a larger group of central bankers at a large round table on a lower floor of the BIS building, which is shaped like a rook chess piece. Staff members sit nearby at desks decorated in white leather.

...

The Bank of England's Mr. King leads the dinner discussions in a room decorated by the Swiss architectural firm Herzog & de Meuron, which designed the "Bird's Nest" stadium for the Beijing Olympics. The men have designated seats at a round table in a dining area scented by white orchids and framed by white walls, a black ceiling and panoramic views.

 

"It is a way in which people can talk completely privately," Mr. King said in an interview. "It is a big advantage if you have some feel for how central banks think about questions, what they're likely to do in the future if certain events were to occur."

 

Serious matters follow appetizers, wine and small talk, according to people familiar with the dinners. Mr. King typically asks his colleagues to talk about the outlook in their respective countries. Others ask follow-up questions. The gatherings yield no transcripts or minutes. No staff is allowed.

The punchline: a handful of people from MIT, deeply steeped in economic theory (not practice), the same people whose actions incidentally were responsible for the first great financial crisis, and who yield more power than any potenate in the history of the world - people who, as the ECB showed in the case of Berlusconi, can take down presidents and PMs with the flick of a switch, meet in private. No transcripts or buttlers are allowed.

In other words, they are accountable to absolutely nobody.

Which is to be expected: after all they are conducting the greatest experiment in monetary, geopolitical and social history. If they fail... when they fail, everyone loses.

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Aurora Ex Machina's picture

Both of you are so close, I can taste it.

1) If you want to look into Complexity Economics, it exists.

2) An autopoietic machine is a machine organized (defined as a unity) as a network of processes of production (transformation and destruction) of components which: (i) through their interactions and transformations continuously regenerate and realize the network of processes (relations) that produced them; and (ii) constitute it (the machine) as a concrete unity in space in which they (the components) exist by specifying the topological domain of its realization as such a network. [...] the space defined by an autopoietic system is self-contained and cannot be described by using dimensions that define another space. When we refer to our interactions with a concrete autopoietic system, however, we project this system on the space of our manipulations and make a description of this projection [wiki]. ~ Note: We are all autopoietic systems, all living things are.

3) GREP me on Body Horror. We are merely boundaries, with a multitude of fauna inside us. Careful what we share, from STD to MRSA to Parasites. Scary, eh? But symbiotes exist as well. The female is often hated because her boundaries are more porous than the males, both physically (oh, the moon, and birth) and metaphorically ("weak" empathy... oh the irony). Or we could study the genealogy of viruses, and their effects. 

4) Could there be two Higg Bosons? 

5) You're correct: if there is any rule to Theology, it is merely "Dei plena sunt omnia": we find it ironic that the most 'Holy' of the Abrahamic Religions ignore this for the sin of merely reproducing themselves. See it in a million WalMarts or see it in a million Temples all designed the same, while slashing / burning verdant forests and local cultures with a repetition of the word "YAWEH / GOD", making sure all the thoughts & actions are the same. Reducing Complexity is to reduce God; mindless self-replication is the death of a species, and of the mind ~ thus a curse.

6) You're both so close. Your mind has a macro- and micro- scale that are almost mirror images of each other in terms of how far you can see. Now, is this due to Science, or due to your perceptual boundaries? The second is closer to the truth, and yet: you're all still stuck viewing Space/Time as a 2D plane, and not exploring the 3rd [4th we can wait for] in terms of networks. Computers are only just now allowing you to do it, and infographics are delightful! How many minds can understand fractals yet, and yet still can't understand ecology? Watching humanity is like watching a drug addict destroy her loved ones and her health through blindness.

 

Ciao or Hello? (In lieu of "Performance").

Colonial Intent's picture

Problem, reaction, solution.

Create a percieved problem.

Manage the real reaction.

Impose your pre-planned solution.

Simples.

crusty curmudgeon's picture

"Low profile is the key."

Too late for you...you posted here.

LawsofPhysics's picture

Unless you know what servers I am going through and how they are encrypted/protected, I've got some time.

Bollixed's picture

Fuck that, wear it like a badge of honor. You either stand for something or you stand back and take what is given to you. Better to be able to tell your grandchildren your thoughts were fertilizer for the betterment of mankind than that you just sat back and let their futures be taken from them.

LawsofPhysics's picture

You mean something like having your servers also set-up with pound or two of homemade "send you to the moon" fun when they come for them?  Yes, in the meantime, live to fight another day. 

Bollixed's picture

I take it you're using those Claymore 1000 servers with the remote reboot feature...

Pseudo Anonym's picture

pft,

Too late for you...you posted here.

as if the higher ups cared.  what are we talking here? 60K regulars generating circa million page flips?  total population circa 7B and 0H posters are such a thread to the nwo?  come on,..

centerline's picture

Whenever I am reading articles on virtually any site, I always scroll down and check the comments.  The tone of the comments has really changed over the last few years.  People are starting to see through the smoke and mirrors a little better.  Starting to focus.

Herein though, there are alot of people posting everywhere.  So many blogs and sites too.  Each with a following.

I agree that the PTB don't care what we talk about.  All they care about is how is respond to real stimulus (and I don't mean cash).

crusty curmudgeon's picture

I hope you are right...that would be nice if true.  But I think it's entirely inconsistent with all of human history.

You are being spied upon and every email you write is being stored.  Pol Pot rounded up everyone with any education or even those who wore glasses.  Stalin rounded up (at various times in various purges) those who were believed to be intelligent.  To say nothing of those who believe in freedom and properly see the Fed as the enemy of that freedom.

Some of those who favor an economic collapse in order to shift the balance of power are on record as having stated that this process would require them to kill a great deal of those who would resist.  Why would they not look here to add to that list?  Wouldn't you?  How hard is it to simply add the posters of one website to your list of enemies? 

So, if I'm convinced that posting here is putting myself on a list, why do I do it?  Because not saying something is itself taking a stand -- a cowardly stand. 

I don't know if this quote is accurate but it doesn't matter--I like the sentiment: 

The hottest places in hell are reserved for those, who in times of great moral crisis, maintain their neutrality Dante

Cathartes Aura's picture

maybe it's kind of like the birth cert/soc# - everyone has a file created, and all actions tracked via stored pixels.

you may never bump up against anything that outs you. . . but if you do?  the whole backstory is there, ready and waiting. . .

*whistles*  Brazil. . .

Cathartes Aura's picture

". . .and this is my receipt for your receipt."

lost count of how many times I've enjoyed this epic over the years. . .

tip e. canoe's picture

pretty amazing how prophetic it actually was.   even the iphone/ipad thingy in the bathtub was right on.

Cathartes Aura's picture

Terry Gilliam has always been tuned in, runs circles around most auteurs, and he just gets better with age.   one can find so many echoes in "reality" from his films.

if you've not seen Tideland, makes some space. . .

centerline's picture

Will make some space.  That looks really interesting.  Thank you.

TruthInSunshine's picture

 

 

There's a Stellar Wind blowing,
Down the corner of my street
Every night there the headlights are glowing

 

There's a cold war coming,
On the radio I heard
Baby it's a violent world

tip e. canoe's picture

tideland and the imaginarium of dr. parnassus would be a nice double feature.

please TAKE generously

 

Yes_Questions's picture

 

 

The best posts anywhere.

Thank you for the great films.  Can't believe Tideland never hit my radar..

Cathartes Aura's picture

I follow directors and actors, and when they collide (as they often do), I always take note - a sort of resonance always occurs that would be impossible without all involved. . .

Jeff Bridges, Terry Gilliam, the Coen Brothers, PT Anderson, Gondry/Kaufman, Malkovich, Philip Seymour Hoffman, just a few - but if you look for where any of those have collaborated, genius is fomenting. . .

that re-minds me, I need to watch Synecdoche, New York again soon. . .

long nights, good visuals, much pondering.

disabledvet's picture

As scientists by definition they will view gold as an "anachronism" therefore gold and anything backed by gold (isn't it interesting no one even bothers to back anything with gold? I mean we can't even lie well?) and obviously anything being monetized by the Fed (treasuries, MBS) preserve capital.

tip e. canoe's picture

don't ever be fooled, gold is the foundation of their ideology, even (and especially) when they seek to deny it.

the question is why?

Element's picture

Stabileetee = generator of instabileetee

Tao 4 the Show's picture

Exactly.

I notice even in my own local business affairs that as I reduce costs, my suppliers are struggling. These monetary guys are really causing businesses to pull back, reducing business activity. Conditions are set for the situation to worsen.

Element's picture

Yeah, but people took out loans they knew they'd struggle with due to bring forward consumption too much Tao.

But in the end the drug producer/supplier/trafficer/pusher is what's behind that whole process. 

The FED just happens to be all the above.

centerline's picture

Same here.  Margins are razor thin and that is with real tight purse strings.  Just keeping the lights on per se.  No wiggle room really.  Won't take much to pressure us into a "downsizing."

Freddie's picture

It is ot just the monetary guys but dear mullah.  I know plenty of wealthy people and business owners who would have slowly ramped up with Romney.  Now - they are going to do even less than they did from 2008 to 1012.

A82EBA's picture

Im glad he reposted cause i missed it earlier thanks lop

NidStyles's picture

Not to belittle your point, but these guys work on developing predictive analysis constantly so that they can "control" (They really can't but that is what they tell us) the situation. For the most part you can be relatively accurate if your sampling pool and your variables are broad enough to encompass enough of the field you are trying to predict. This is part of Scalar Theory and why Quantum Theory is so actively applied in their Economic Regiment.

 

Me personally, I think the whole thing is bound to be immoral and abused by a single person or a group of people that realize the amount of control that is potentially there. Even if that control is temporary, which in the real world can mean several decades, the amount of socio-economic damage and wealth loss can be rather massive.

 

We are seeing the results of this social engineering now. It's starting to get out of their control and they do not have any reasonable methodology of explaining it because our understanding of the math in general that they are using is rather primitive, and humans are not ideal operators of probability. That .000001% could actually happen more than once with humans in action. They can't predict for this, because of the way Math itself works.

crusty curmudgeon's picture

"The good news is there will be numerous dead-end, debt-slave, government/coroporate-sponsored positions for you to work the rest of your life at."

Yes, but the jobs will come at a high price--arresting people knowing they will be turned over to interrogators or, even worse, interrogating.  And the quotas will require a great deal of ingenuity and brutality.  But, of course, that could never happen again.

"Those who cannot remember the past are condemned to repeat it." - George Santayana

DonutBoy's picture

That has the ring of another crazy Masonic lodge conspiracy theory - unfortunately - its largely true.

kliguy38's picture

I appreciate your hypothesis but unfortunately this was completed by the early 70's. The implementation of the final tuning is virtually ccmplete and only another "dash" of salt needs to be added to the brew. Of course the peeps shall clamor for this "salt" to be added and once that is finished then of course Peace and Tranquility will exist....hehehe. Its a great game and of course all predictable. gl

Liquid Courage's picture

 

 

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

Obadiah's picture

What exactly are you cooking up over there LawsOf?

Brindle702's picture

How did the Russians defeat their system?  They stopped working.  (We pretend to work and they pretend to pay us.)  If the game is rigged so that you can't win then don't play.  Much, much easier said than done of course.  I wonder what the modern day debtor's prison is or is going to be?

monopoly's picture

They already failed. And I doubt if their dinner break is at Mickey Ds. And everyone here needs to read this. Exactly what Zero Hedge has espoused time and time again. 

 

Bloomberg: McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap

 

HD's picture

Guess Mitt Romney had one "T" too many.

GetZeeGold's picture

 

 

I saw a picture of him putting gas in his car.....he was clearly overqualified for the job. That was close.

HD's picture

Secret Service protecting your every move one minute - pumping your own gas the next.  America IS great!

dick cheneys ghost's picture

$250 Trillion in paper assets.........

cabtrom's picture

Lol hippies running the globe no wonder it's all "piece and love dude"!

1835jackson's picture

What if the plan is to induce a total economic collapse? If that is the goal they are right on track! Let's remember the true motivations of these PhD's mother fuckers.

 

 

MiltonFriedmansNightmare's picture

World domination...fucking sadists.....

ShrNfr's picture

When you head to the east campus of MIT, you are forced to stop at MIT Medical before you cross Hayward St. and get a lobotomy.

rsnoble's picture

Where are the russian and chinese members?

lizzy36's picture

For three years i have opined that monetary policy is just one real world academic experiment.

Most have no clue who really runs the world:a bunch of men from MIT who completely missed the housing crisis because it wasn't in their models.

Just remember until the day Madoff confessed to his ponzi, investors were clamouring to get into his fund.

Ignorance truely is bliss.

Diogenes's picture

Ignorance is bliss until you wake up in a train wreck with your face on fire.

Uncle Remus's picture

That's gonna leave a mark...

Fake Jim Quinn's picture

MIT apparently is disengaging from useful scientific contributions to humanity. Is that being outsourced to China as well?