Guest Post: Crisis, Contagion, And The Need For A New Paradigm

Tyler Durden's picture

Submitted by Gary Evans of Global Macro Monitor

Crisis, Contagion, And The Need For A New Paradigm

In his lecture at the Latsis Symposium 2012 “Economics on the Move” in Zurich,  Nobel Laureate Joe Stiglitz nails the fundamental problem and crisis of modern macroeconomics, which failed to predict the financial crisis.

If you say…what is good science is prediction… and you can’t predict the most important event in 75 years, what good are you?  In particular, it might be very nice you can talk about the likelihood of an one tenth increase in GDP growth rate…and you miss a major economic downturn….or worse, they said the things can’t happen…

Here are the money quotes,

We all know the shock in this crisis…was a credit bubble and we have had those credit bubbles since the beginning of capitalism…So it was remarkable the intellectual bubble led people to believe there were no such thing as credit bubbles when there was 200 years of history of that…..How could people be so stupid?


…The theory was with well functioning financial markets, spreading risk, diversifying risk, risk is contained.  They came to believe the models and that’s always dangerous.

Say it ain’t so,  Joe.  Say it ain’t so!

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prains's picture

I did not take EPO, NO no no no you fat crazy bitch




in other words America is based on lies, for those that missed the analogy

IBelieveInMagic's picture

Sorry. TPTB perfectly knew what was coming but they dare not acknowledge it. You are misleading and underestimating the Feds to believe and to state otherwise. This is not a statement of support for their misdirection but there is a behavioral aspect of economics that the TPTB prefer not to trigger.

All these blog writers suggesting that the Feds did not see it coming are just trying to dine off the superficial statements put out by the Feds and other TPTB.

true brain's picture

Two scenariors: 1)Fed and Wall street economics, universities economists including many Nobel winners are idiots who didn't see the biggest crash in 75 years. Similarly  they're blindly trying to get out of the depression now.

or 2)They did see it, but that the crash was planned for a greater, far more sinister purpose, a great re-engineering of world economy for a new world order; all masterminded by world bankers and minions. Evidence, many world banking elte families got out of market before the crash in 2008. All the things they do now are parts of that plan.

Take your pick.

TahoeBilly2012's picture

Bingo! Stop treating these people like bumbling idiots and start treating them as the master planner satanists they are. Whats it hurt if they turn out to be bumbling idiots...



Seer's picture

On choice number 2 you have to include the possibility of benevolence.  It's possible that this is a coordinated liquidation of a BAD system (one that's premised on perpetual growth on a finite planet).

By ignoring this possibility/angle we lose sight of the flaw of striving for perpetual growth on a finite planet.

This isn't to say that there's some sort of universal mindset going on here.  Just as their are idiots and non-compassionate folks at the lower echelons of society, so too are their at the top-levels.  No one has the correct answer for how to hedge on all of this.  As such I think it naive to think that TPTB would willingly destabilize a system that has given them their position of power.

michael_engineer's picture

The crash wasn't planned. It was likely just baked in due to resource constraints changing the nature of the economy, and if you could still get to this link :

that would have helped some people understand it better.

Omen IV's picture
The FBI began warning of an “epidemic” of mortgage fraud in its congressional testimony in September 2004. It also reports that 80% of mortgage fraud losses come when lender personnel are involved in the fraud. (The other 20% of the fraud would have been impossible had these fraudulent lenders not suborned their underwriting systems and their internal and external controls in order to maximize their growth of bad loans.)        THEY ALL KNEW ! eliminating the WS partnership organizational structure meant no personal liability for Fraud - all that was left was to  eliminate "go directly to jail card" which the control of the regulatory agencies  agenda and co-opting politicians accomplished - stage was set for systemic large scale failure
prains's picture

There is a far bigger dynamic at play than just the Fed and its master plan whatever that may be and has to do with the cultural dynamic of American excess and the many falsehoods which surrounds this pursuit. This cultural pursuit of excess is analogous to so many of the problems in American society that until this is questioned at a DNA level nothing but the built in paradigm of divide and conquer used so effectively by TPTB will work to change this foregone conclusion.

unrulian's picture

never believe the models, Bitchez

qqqqtrader's picture

Do you believe in this?


6280 People in the US do... out of 300,000,000+, seems we could get a just a few more signatures...

eddiebe's picture

 You ever hear the term' Futility'?: Even if there were 299 million signatures on that petition nothing would happen. The fuckers would have a good laugh about it and then happily go fondle their own stash. 

Popo's picture

It may be futile.  But I think in the end you sign these things to make a point.  Because when (not "if") it is revealed that the gold is not there, and everyone throws up their hands in surprise, you can point to this document and say, "No.   25,000 Americans knew and I was one of them".

All that is necessary for the triumph of evil in this world is a few good men to do nothing.

qqqqtrader's picture

I don't know if the gold is there, who does?

But, I really think if there were 299 million sig's on that petition this country would get/be better. Probably more than 90% of the US citizens just go about their daily routine and don't try to make themselves better, much less get involved in what their country is doing to them. These bastards running our country don't give a shit about the average citizen, their trying to get as much of the american pie as fast as they can and if it means suppressing knowledge on anything, they'll do it. Each person, each neighborhood, each city, one by one should get involved and try to make a change. Every ounce helps, every statement helps, every article on ZeroHedge helps.

Check out these peeps that made a change, In 1982 the city passed an ordinance [Sec 34-21]

Quinvarius's picture

As long as that petition is not signed, people are still asleep and gold has a long way to go.

grid-b-gone's picture

If you're done stacking, sure, go ahead and support an audit. For most of us, the current lack of transparency lowers our cost of preparing.

sgorem's picture

i'm a signer! i couldn't just ignore the fact that i could in some small way, ie. 1/25000th, state the fact that i'm pissed and fed up with this bullshit. who gives the right for our fraudulent government to keep lying to the people who put it there? who works for whom here? yeah, i signed it and would sign it a thousand more times if i could. eventually, this whole masquerade is going to end in a bad way for us all. i want to believe that the best is yet to come for my family, and yours, but from what i perceive is there will be blood down the road, somewhere, sometime.

Room 101's picture

I haven't signed this and don't plan to.  And there are several good reasons for NOT signing the petition.

First and most obviously is why send your name in for added scrutiny by TPTB?  I mean, if you really want to get your taxes audited and end up on a terror watchlist then why not just send your name directly to the IRS and DHS and avoid the middleman?

Second and I think more importantly is that getting this audit performed is at best an exercise in futility and at worst something that will harm those who post here.

Many of your fellow ZHers BENEFIT for now from the price of PMs being kept as low as possible. Why would they want the price of PMs to go through the roof while they're still stacking? 

Then there is the futility side of all this.  Let's assume a worst case scenario and the assets in question are all illusory.  So what?  Does knowing change my perspective?  Because if criminality is not so much a problem here, then it's handmaidens of stupidity and incompetence will surely replace it. What makes any of us think that any audit would be executed in a straightforward manner anyway?

Finally and most importantly we don't need the audit.  So who do we think is more knowledgeable of the inside story of central banking?  Is it someone passing around petitions or the CB's of China and Germany? They aren't going to tell us of course, but we can already see what they're doing.  


shovelhead's picture

Personally, I prefer my uselessly futile, feel good gestures to be a touch more grandiose.


Hey, how about we levitate the Pentagon again?

MeelionDollerBogus's picture

Great way to get aboard the FEMA train. Not smart.

legorf's picture

You are bang on Joe.

 The good thing is, at least, one of them is getting it.

Too bad that those at the government, at the Fed and in major universities are not.

nmewn's picture

So we can infer Rubinomics is officially dead? ;-)

Kayman's picture

Only when the looting is finished.

Charles Wilson's picture

"So we can infer Rubinomics is officially dead?"


"But Comrade Chairman, the people are eating DIRT!..."

"No, my friend, they are eating Socialist dirt..."

The Left never learns. Class, Party, Race/Sex...That's all that matters.  When Truth is Class functional, there is no truth.


"...And Comrade friend, your support for distressing to me.  Have you forgotten the support I give you to maintain YOUR position?"

"No Comrade Chairman..."



nmewn's picture

Yes, one see's it in everything they tries to group people instead of allowing for their own individuality.

You see I can't find empathy for my fellow man's plight (and thus provide charity) because I refuse to allow the state to come between him & I. By doing this, I am "greedy" in their eyes, I am set apart as "one of those" because the state (as everyone is much more efficient at providing for them.

And so it goes ;-)

tooriskytoinvest's picture

Warren Buffett & Marc Faber & Egon von Greyerz: Another 'Market Meltdown', 'Huge Recession' Is Guaranteed. Storm Clouds Gathering Everywhere.  We Have Currency Storms, Economic, Political, And Geopolitical Storms, Which Will Create An Enormous Hurricane In 2013

DeadFred's picture

Bernanke on the other hand painted a rather rosy picture last week for the economy except for his answer to the question " what surprised you most about the crisis?" Answer was "the crisis". He is admitting that despite the numerous people saying a crisis was coming he was so stuck in his fantasy world he couldn't see reality coming. Now with many people saying a crisis is coming he is again sure he is right and they are wrong. Why is it that people accept his version of the future? Whether he is clueless or lying his words lack credibility.

VATICANT's picture

I don't know why everyone doesn't just listen to Emperor Obama; he's clearly the most moral and intellectual mind on the planet. Him and Bernanke are like Ace & Gary coming to save the day in their giant penis mobile 

Bad Attitude's picture

I think of Dear Leader as a more lethal version of Jim Jones.

My wife studies cults for entertainment. In this study, she has listened to hundreds of hours of Jim Jones talks/lectures to his followers. She finds it disturbing how much Dear Leader's speeches, and the zombie-like response of the crowds, are like those of Jim Jones.

slackrabbit's picture

I just hope they drink his cool-aid and do Mother Nature a favour...

VATICANT's picture

Where did you find this amazing woman? I will need to find myself one of these. Most women I know think our Dear Leader is quite the charismatic gentleman. I'm tired of pretending like everything's fine and dandy just to be regularly laid! 

Seer's picture

Same as it ever was, same as it ever was...

IridiumRebel's picture

I have negligible money in this paradigm. I'm no institution. I'm just one of the new fleet of retail who trusts this market as far as I can bowl it. I don't know If "collapse" will happen whether allowed, manipulated or random, but I am going for tangible assets.

ramacers's picture

greed never quite makes it to the finish line.... before it flips to despair. always.

eddiebe's picture

Nice idealism, but on this 3rd rock from the sun, the 1% have been large and in charge for a long time, and I'll be bold enough to make a prediction here: If the shit ever does come down hard, these same greedy fucks will be the ones that survive to enjoy whatever spoils that are left.

DeadFred's picture

For a few years or a few decades. Even George Soros, much as he looks like an immortal vampire, will sleep beneath the grass and find out how much his control on this planet really means.

WTFx10's picture

Agreed, because they always point to some other enemy and they continue the CON by CRYING that if they don't save it ALL will be lost. But the only ALL that will be lost is what they have stolen and their POWER. So in a sense they are right THEY will LOSE it ALL.

 Thomas Jefferson:

“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”

 Startling isn’t it? Look around you; his worst nightmare is becoming our reality – on a global scale.

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." John Dalberg Lord Acton

Son of Loki's picture

zero returns on savings and CDs is killing investors. Distortions and malinvestment.


'nuff said.

earleflorida's picture

1) collar debt [limit-on] ceiling 'NOW'!

2) raise rates immediately by 25-50bps every quarter for next two years

* wait out a decade?, with the advent of a new growth cycle  being the cleanest, 'white shirt' in the world's 'wash-rince-recycle', global agitator!

Jack Sheet's picture

Sounds like typical academic intellectual auto-eroticism. The only thing I remember about Shagglitz is his getting slaughtered by Hugh Hendry in a panel discussion  a couple of years ago.

falak pema's picture

Lost in paradigm translation. 

disabledvet's picture

first off "Phuck you Ben Bernanke." can fault the Chairman for many is NOT being a good student of history. "What we do when the chips are down defines who we are" not when we're "kicking ass and taking names." (though the latter does give us a certain...reputation ;~).)The bottom line is when the shit hit the fan Chairman Bernanke...more than likely unknown to even himself...was the right guy at the right time with the right answers. Go figure, right? As a consequence "if that guy can take the thinking out of being in the market" then indeed...without spending a dime he's worth a thousand Dow points. In short while Alan Greenspan had your back (by putting a knife in it) this guy despite his PUBLIC flaws vis a vis truth telling....well, let's just say "he can simply run that bank by going out and tending to his garden" at this point. Did the economic's profession blow this one? SINCE IT WAS A CRISIS THEY CREATED IN THE FIRST PLACE THE ANSWER IS PHUCKIN' A YEAH. In other words...Professor Professor O..."if i invert the yield curve for three phucking years what else should i have expected?" Sound about right? So needless to say "no apologies for all the State and Local budgets that have been obliterated as a consequence." And "no apologies for the ten million jobs obliterated." And "no apologies for the total annihilation of the war effort" etc, etc, etc, etc. "Methinks your profession is filled with nothing but raging psycho's" one it would seem. And the Academy is better off with the current death too good? From where i'm sittin' it would appear that way. Those Greek Philosphers had beards for a REASON Joe. They were WARRIORS. If you called them a traitor...IT MEANT SOMETHING. Not to you though...your one...has been an active participant in this "demolition derby"...and boy do you all love to watch. Perhaps if your profession had the ability to...turn ask the tough questions...ABOUT CHARACTER and PERSONAL SACRIFICE. Nay, the answer is the same isn't it? "I didn't do it. It's not my fault. I was just following"....following what again? It's not like you were ordered to do this...

in4mayshun's picture

In a way, I kinda disagree Vet, I believe the Bernank is a brilliant student of history. In fact, I believe these guys are so smart that they have identified what caused all the previous dictators in history to fail and have taken steps to modify their strategy so as not to make the same mistakes. Bernanke knows exactly what's going on, he just has to play stupid long enough for the hidden players to set the chess board. The scheme that TPTB have unleashed on humanity in the last 100 years is brilliant. They have created a psychological dictatorship to keep people occupied while they are putting the finishing touches on their physical dictatorship, which appears to be almost finished. We always assume these traitors are so stupid, maybe the problem is that these power crazed demons are much more intelligent than the average person.