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Guest Post: About As Scientific (And Effective) As Bloodletting...

Tyler Durden's picture





 

Via Simon Black of SovereignMan blog,

Many years ago, back when I was a fresh second lieutenant straight out of the academy, my battalion executive officer summoned me to his office one day saying that he had a ‘mission’ for me.

I hurried over, wondering what this special mission might be. Several members of our intelligence unit had just been deployed to South America, and I thought it might be my first field assignment. So I hoped.

When I arrived, the Major explained that the unit’s budget forecasts were due, and he was assigning me the responsibility of completing our long-term projections.

He said someone had told him that I was ‘smart’, and so I shouldn’t have any problems getting it done. And with that, he handed over a stack of binders and dismissed me from his office.

I wheeled a smart about-face on the backs of my heels and marched off, stunned at what had just transpired.

Aside from the disappointment of not being assigned to something more exciting (I would end up getting more than my fill later in my career), I couldn’t believe that I had been handed something so momentous.

Essentially, I was responsible for requesting how much money my unit would need to operate… 2, 3, 4, 10 years down the road. It seemed heady. So I went to a friend to ask if he had any experience with such things.

“Oh yeah,” he told me, “just keep adding 5% each year. It’s easy.”

That was my introduction to government forecasting.

I think about that story as this ridiculous ‘fiscal cliff’ charade drags on in the United States, because the same fundamental flaw underpins both sides of the debate.

Have you noticed, for example, how both sides continually reference the ‘nonpartisan’ Congressional Budget Office (CBO) to make their case?

They’ll go on TV and say ‘according to the non-partisan CBO, increasing taxes on the rich won’t impact the economy…’ Or, “the CBO says that by 2019, our tax plan will reduce the deficit by 60%…” Etc.

This tactic of quoting CBO predictions was a constant during the Presidential campaign as well.

But does anyone remember how utterly flawed CBO projections are? These guys never, ever get it right. Ever.

In January 2001, for example, the CBO projected a cumulative budget surplus of $5.6 trillion over the next ten years (from 2002-2011). That same 10-year period actually ended up being a deficit of $6.1 trillion… an error of $11.7 trillion. This is more than the size of the entire US economy at the time they made the prediction. Oops.

The following year, post-9/11, the 2002-2011 projection was still off by $7.7 trillion. They further presumed that the US federal debt would be $1.27 trillion by the end of 2012. They were only off by a factor of 10. No biggie.

Look, I’m not trying to pick on the CBO. It’s like what Yogi Berra said– “Predictions are hard, especially about the future.” There is no crystal ball, so any long-term economic calculation is absurd no matter who divines it.

But the CBO’s long-term track record of constantly missing the mark seems pretty obvious to anyone paying attention. It’s like a weatherman in Seattle who tells you that every day is going to be sunny. At some point, a reasonable person just stops listening.

The problem is that people have been deluded for so long into believing that economics is an actual science… and so it must be true. Well, for a time, so was bloodletting. Or the ‘ethnic sciences’.

We know all of these things are nonsense today. But for some reason, people still haven’t figured out that an economist with a forecast is no different than a medieval fortuneteller.

The whole argument is a clever deception, all to conceal a simple truth: that the US has long since passed the point of no return where they’re borrowing more money just to pay interest on money they’ve already borrowed.

There is no victor in the debate. Only an entire nation of losers, and a tiny handful of people who see the writing on the wall and take steps now to prepare.

Which are you?

 


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Fri, 12/14/2012 - 14:42 | Link to Comment tooriskytoinvest
tooriskytoinvest's picture

Another 2007-like credit bubble waiting to implode? Companies aggressively raising debt to fund dividends and buybacks! Jack Ablin, CIO of BMO Private Bank, of the recent batch of corporate deals: "Not only are yields low, but the covenants are pretty lenient, It certainly was a bubble we saw several years ago. I think we're probably creating a credit bubble again, but that's by design."

http://investmentwatchblog.com/another-2007-like-credit-bubble-waiting-to-implode-companies-raising-debt-to-fund-dividends-and-buybacks-jack-ablin-cio-of-bmo-private-bank-of-the-recent-batch-of-corporate-deals-not-only-are-y/

Fri, 12/14/2012 - 15:25 | Link to Comment klockwerks
klockwerks's picture

Thank you, I come up with this stuff after hearing it and wait to see if anyone comes up with the same conclusion. I have heard over and over about companies paying out large dividends or doing stock buybacks. When I hear it I'm thinking, this can't be good, unload your stash so you don't have to pay taxes and then go out and borrow money. Doesn't seem like a good idea for anyone to unload their stash and then borrow money. I know you they can borrow at a very low rate but the way I understand it if interest rates, as in 2004, start to rise quickly, when it comes time to roll it over it will cost them dearly. Not based upon anything just common sense. If it starts to unravel next year they could find themselves in a pinch

Fri, 12/14/2012 - 14:54 | Link to Comment HoofHearted
HoofHearted's picture

This guy is typically Walter Mitty, and he does throw in that tidbit that he has led an ultra-exciting life from his days as an office...but he has a point here. If they keep playing Calvinball, we know what is going to happen. I can tell you exactly who will win. "It's a great big club, and we ain't in it." That guy knew a thing or two... 

Fri, 12/14/2012 - 14:54 | Link to Comment youngman
youngman's picture

"The whole argument is a clever deception, all to conceal a simple truth: that the US has long since passed the point of no return where they’re borrowing more money just to pay interest on money they’ve already borrowed."

I think this is correct.....there is not one politician that can or will fix this....a Dictator maybe....

Fri, 12/14/2012 - 14:55 | Link to Comment LongSoupLine
LongSoupLine's picture

CBO  just another full of shit propaganda tool of the fucking establishment

Fri, 12/14/2012 - 15:17 | Link to Comment JustObserving
JustObserving's picture

CBO had projected a 3% of GDP surplus for 2009 and we got a 10% of GDP deficit.

CBO had also projected that the US debt would be paid off by 2009.  They were wrong by about $13 trillion.

Lies, statistics, CBO projections.

 

Fri, 12/14/2012 - 16:51 | Link to Comment SkottFree
SkottFree's picture

Is this the same CBO that projected the HCRB would generate a budget surplussssssssssssssss in just few years?

Fri, 12/14/2012 - 15:01 | Link to Comment Flakmeister
Flakmeister's picture

Never fails, give someone a ruler and anything resembling a trend and this is what you get....

Fri, 12/14/2012 - 15:10 | Link to Comment Flakmeister
Flakmeister's picture

BTW, was the thumbnail on the front page the forcast for Amarillo?

Fri, 12/14/2012 - 15:37 | Link to Comment redeals
redeals's picture

The basic concept was always low fixed rate financing and let inflation help the payback with devalued dollars.

With taxes set to rise it may be cheaper to borrow anyway because borrowed money is tax free.

Fri, 12/14/2012 - 16:12 | Link to Comment SkottFree
SkottFree's picture

"In January 2001, for example, the CBO projected a cumulative budget surplus of $5.6 trillion over the next ten years (from 2002-2011). That same 10-year period actually ended up being a deficit of $6.1 trillion…"

The projection as I recall was based on the dot.com boom lasting another 10 years. Where the 100 point gain/day up tick on the dow would continue until it hit 10,000,000 at the end of 10 years S&P would be at 80,000. Gold would be used to pave the streets and diamonds would be the new oral crowns!

And all the ne'er-do-well-liberals claim that there actually was a budget surplus until Bush took office where that projection evaporated just like the BP oil spill!

Fri, 12/14/2012 - 18:13 | Link to Comment TimmyB
TimmyB's picture

Can anyone ask the obvious question "Why did the CBO's prediction turnout so wrong?"

The answer is telling. Bush the Lessor was swon in as president after the Supreme Court Coup of 2000. He then passed massive tax cuts that many know nothing's said would pay for themselves. They didn't.

He then led us into two disastrous and unfounded wars.

We also got an unfunded Medicare drug company cash injection.

Finally, Bush the Lessor's shitty non-regulation of our financial system lead to the worse financial depression since the 1930s.

If you want to blame the CBO for failing to predict the Supreme Court would install a complete incompetent as president of the United States, along with the damage Bush the Lessor could do, then go ahead. But if you actually want to learn a lesson about how to avoid disasters in the future, we should look to Bush the Lessor's policies, and what we can do to avoid such shitty policies in the future.

Fri, 12/14/2012 - 17:18 | Link to Comment GottaBKiddn
GottaBKiddn's picture

Does the name "Greece" come to mind??

Fri, 12/14/2012 - 19:07 | Link to Comment Winston Churchill
Winston Churchill's picture

I wish it was going to be as 'nice' as the unfolding Greek tragedy.

Fri, 12/14/2012 - 17:52 | Link to Comment TPTB_r_TBTF
TPTB_r_TBTF's picture

.

There is no victor in the debate. Only an entire nation of losers,

 

The 1% are victors and 99% are losers. You lose.

Fri, 12/14/2012 - 20:38 | Link to Comment Radical Marijuana
Radical Marijuana's picture

"deluded for so long into believing that economics is an actual science… and so it must be true."

Understanding the science of economics is similar to understanding the science of warfare. The oldest book on the Art of War starts by saying that success in war depends on deceits, and ends by saying spies are the most important soldiers. Those are the basic realities of how human conflicts actually get resolved.

WARFARE IS THE OLDEST AND BEST DEVELOPED SOCIAL SCIENCE.

AND ECONOMICS IS A SPECIAL CASE OF THAT OVERALL WARFARE.

Economics is a very specialized system of organized lies, operating organized robbery, which has an elaborate coded language to be able to conceal its basic nature from itself and others, as much as possible. Economics IS "an actual science." However, economics can not be properly understood outside of understanding that the oldest and best developed of social sciences is militarism, whose success is based upon triumphant deceits. Our entire economic system is run by professional liars and immaculate hypocrites, whose primary goal is to trick other people. THE FOUNDATION OF THAT ENTIRE SYSTEM TODAY IS THE PRIVATIZED LEGAL COUNTERFEITING OF THE MONEY SUPPLY.

The same processes that made War King then made Fraud King. Our economy is controlled by the best organized gang of criminals, who were able to apply the methods of organized crime to take control of governments, to enable those criminals to legalize their own crimes, and force everyone else to accept those crimes, and to adapt their whole lives to living in the context of those organized crimes being the basis of economic realities.

IF ONE THINKS THAT ECONOMICS IS SUPPOSED TO BE A SCIENCE THAT DISCOVERS AND DEMONSTRATES THE TRUTH, THEN ONE DOES NOT UNDERSTAND IT AT ALL, AND THEREFORE, ONE WILL FAIL TO APPRECIATE HOW "SUCCESSFUL" A SCIENCE ECONOMICS IS.

Economics is a branch of militarism, and it is "successful" on the basis of how deceitful it is. Economic "forecasts" cannot be taken at face value. They are moves in a game where tricking other people is the primarily real objective.

This "SovereignMan blog" over and over presents a silly and superficial view, which I expect would be reflected in its definition of "sovereignty." Sovereignty is based on the power to rob. The power to rob and to kill is distributed, but those can be assembled and channelled. "Sovereign states" are organized crime gangs, which operate on the basis of organized robbery, backed by murder. An individual is slightly sovereign, inasmuch as they too can do some robbery and murders. However, the point of building armies and police forces was to develop the best possible organized groups that could kill other people and destroy things. The success of those groups were the basis for all the rest of organized economic activities.

Ordinary people like to think that economics is somehow voluntary, and should be governed by voluntary contracts. However, those are very superficial views, which only exist inside of the bigger contexts of involuntary contracts, that people are forced to accept. All the basic natural resources are ALREADY circumscribed by systems of staking claims and backing those claims up with violence. Only those who take that for granted can then believe that economics is somehow a productive enterprise, and believe in "free markets" or "capitalism" and so forth. In fact, those are all very special cases, which only exist within the bigger contexts which were achieved by the history of warfare, resolving conflicts in ways that benefited those who were the best at being dishonest, and backing that  up with violence.

All private property is fundamentally based on that real history. All economics takes place within that overall context. That becomes plainly obvious if one simply follows money to its SOURCE.  While most people struggle within the domain of economics to make money, by working, and so forth, the money supply itself is based on privatized and legalized counterfeiting of fiat money, made out of nothing, as debts. That entire process can only be historically understood as the result of the best organized gangs of criminals, following the principles of organized crime, to take control over governments, that are simply more organized crime, on a larger scale, over a longer period of time.

Economics IS a science, and a very well developed one, just like militarism is a science, and a very well developed one. That is WHY there can be one extremely wealthy individual for every million extremely poor people, and WHY that can be constantly getting more extremely unbalanced. Social sciences work well to do what they are actually designed to do. Human sciences are real sciences. Social engineering is extremely effective at doing what it is designed to do, which is primarily to trick people to believe in lies, so that they can be controlled and exploited.

The basic problem is that that has already been way, way too successful. Most people are already almost totally brainwashed to believe in bullshit social stories, promoted by the biggest bullies, to benefit those bullies. Economics works within that real context, and therefore, economics forecasting also works within that context.

http://www.cbo.gov/publication/43539

As this article points out, does anyone remember how utterly flawed CBO projections are? These guys never, ever get it right. Ever.

The Congressional Budget Office works for professional liars and immaculate hypocrites, in order to assist them with their real agenda. The way that the real systems work is that there are layer after layer of organized criminals. The puppet politicians, and the muppet masses, are outer layers, whereas there are inner layer after layer, of those who control more and more, because they were even better at being dishonest, and backing that up with violence in the past, and thereby became even more wealthy and powerful than the government.

Thus, the American people, and their political representatives, are in debt to private banks, that get to make their money supply out of nothing, as debts. The REAL history of that economic system was simply runaway triumphant frauds, because the whole system was, is, and always will be organized lies, operating organized robberies, with murder being the most extreme form of that robbery, and militarism being the science of that murder system, while economics is the science of the robbery system.

We are rushing forwards into a greater and greater degree of severe contradictions between other sciences that have made some progress towards discovering the truth about how nature works, and therefore, being able to develop awesomely powerful technologies, based on those understandings. However, meanwhile, all of the progress in science and technology has been primarily applied to enable the dominant social groups to become even better at being dishonest, and backing that up with violence.

Human sciences are quite well-developed and excellent sciences, AFTER one allows for the central role of deceit inside of the application of those sciences, which requires a radically different paradigm regarding how those sciences operate. That central role of deceit in social sciences, unfortunately, is also now driving many other "sciences" to become more fraudulent, and thus, unscientific, due to the way that the money/murder systems really operate, and therefore, how the funding for the research and education, and the heavy thumb of prejudice on the balance scales weighing evidence, are working to distort things.

The irony of the title of this article amuses my macabre sense of humour, since it does not appreciate just how true what it says IS! Indeed, economic forecasting IS as effective and scientific as "bloodletting" because the foundation of economics was upon militarism, and thus bloodletting IS the basis of economics.

Fundamental economics was killing other organisms, to consume them for food. That partially involves some groups of humans cooperating in order to do that better, however, it more crucially involved some groups of people organizing to rob or kill other groups of people, in order to do that better. Economics was hunter/gatherers, developing a civilization based on organized lies, operating organized robberies, on a now astronomically amplified scale. However, the basics are still killing and consuming other organisms, and killing other groups of human beings who get in way of some other groups of human beings doing that. It was ALL layer after layer of bloodletting, and both militarism and the monetary system were both basically those things, that were very well developed, through civilization, to become thousands, then milllions, then billions, then trillions, and now quadrillions of times bigger than they originally were. However, they are still fundamentally the same things!

Sat, 12/15/2012 - 04:45 | Link to Comment prains
prains's picture

Everybody has a meme to describe how or why, but nobody has an answer that doesn't involve "bloodletting" it is the lowest common denominator. This dude called Jesus showed us this 2013 years ago

and nothing's changed since.

Sat, 12/15/2012 - 15:20 | Link to Comment Radical Marijuana
Radical Marijuana's picture

Well, prains, the various religious memes of letting the bullies dominate the world are usually the most practical rationalizations for most of the people most of the time. The problem is that if there is any group in society that will use violence to get what they want, then everybody else is forced to adapt around that fact. Of course, this article is implying that "bloodletting" was unscientific medicine, while I am using the greater meaning of that term. I am using "bloodletting" in the general sense of bloodshed. After any group in society does that, then there are automatic selection pressures that drive civilization through the stages of militarism, based on triumphant deceits, to the point where we are at now, with Fraud Kings controlling the world through a fundamentally fraudulent monetary system, where the official economic statistics become distorted, because the Fraud Kings ACTUALLY dominate the political processes behind the statistical analysis.

Sat, 12/15/2012 - 22:00 | Link to Comment prains
prains's picture

We're arguing the same point, regardless I disagree that religious memes in their true form DO NOT perscribe to bullies dominating the world ergo your point goes off track. Nit picking aside, you still have no answer to my point that the lowest common denominator will always prevail, unless we......?? I don't know the answer either all I know is I'm tired of the "here's the how and why things are wrong meme" it's pointless because there are as many valid and invalid reasons which once mixed together in a confusing mess become a dog chasing its own tail meme. Which is exactly what TPTB want. You are simply adding another story to the tail chasing without providing a clear path to an answer

Mon, 12/17/2012 - 04:36 | Link to Comment Radical Marijuana
Radical Marijuana's picture

Yeah, sorry prains, I do not have any practical solutions. We are stuck muddling through the madness ...

Sat, 12/15/2012 - 03:52 | Link to Comment Urban Redneck
Urban Redneck's picture

"non-partisan" and CBO shouldn't be used in the same sentence, because the CBO is filled political partisans.  The work product isn't supposed to be partisan (unlike the Executive Branch forecasts), but it is supposed to ENABLE to pigs to continue feeding at the public trough, which is why there are required bizzaro-world assumptions and restraints on analytical methods.  

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