Submitted by Tim Price via Sovereign Man blog,
A few weeks ago, William White (former economist at the Bank of England, the Bank of Canada, and Bank of International Settlements) made a frank admission.
And while we search for assets whose prices are less obviously distorted by malign government intervention, it’s refreshing to hear a mea culpa from a member of the economics “profession”.
“The analytical underpinnings of what we [mainstream economists] do are actually pretty shaky. A reflection of that fact, is that virtually every aspect you can think of with respect to monetary policy, about best practice, has changed and changed repetitively over the course of the last 50 years. So, this stuff ain’t science.
“Think about what’s happened recently. One, its completely unprecedented. People are making it up as they go along. This is hardly science – building on the pillars of the past.
“Secondly, what they’ve been making up as they go along actually differs across central banks [The Bundesbank, for example, is fighting the threat of high inflation, whereas the Fed is more concerned about the prospect of deflation]. They can’t even agree amongst themselves about what’s the best way to do things.
“I’m becoming more and more convinced that all of the models we use are basically useless.
“It’s surprising that we’ve had this huge crisis that the mainstream didn’t predict. It’s gone on for years, which the mainstream absolutely didn’t predict. I would have thought this was a basis for a fundamental rethink about what we used to think we believed. But that hasn’t happened.
“The policies that we’ve followed – on the monetary side at least – since 2007 are just more of the same demand-stimulating policies that we’ve been following, I think, erroneously, for the last 30 years.
“We’ve got the potential to do so much harm by not getting the creation of fiat credit and money right. We’ve got the capacity to do so much harm that we should be focusing much more on making sure that doesn’t happen.”
Doctors at least have the Hippocratic Oath: first, do no harm. If only economists and central bankers had a similar ethic.
But they don’t. So they continue ‘making it up as they go along’, as Mr. White suggests, applying failed ideas with impunity and continued authority to an unquestioning public.
Warren Buffett famously compared financial markets to the card table, observing that if you’ve been playing poker for half an hour and you still don’t know who the patsy is, then you’re the patsy. It seems we are all patsies now.
You can listen to the full interview here: