Why Listening To Economists Is Dangerous For Your Health

Tyler Durden's picture

Submitted by Bill Bonner via Acting-Man blog,

Why Listening to Economists Is Dangerous for Your Health



Source: Data and graph from Bureau of Labor Statistics, May 2014. Image treatment by Bonner & Partners – click to enlarge.


Mainstream Economists and their Forecasts: Worse Than a Coin Flip

According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper. The Dow rose 98 points yesterday in anticipation.

Fed economists say they don’t think inflation rates are rising. (See more below from Chris.) They think the most recent reading is a fluke. But why does anyone take them seriously?

Prakash Loungani, an economist working for the IMF, undertook a study, not so much to find out as to gawk and laugh. It was published in 2001 in the International Journal of Forecasting.

For those of us who have been following the story, there were no surprises in it. “The record of failure to predict recessions is virtually unblemished,” he reported.

That was in 2001. Surely, by 2014, the experts had managed to stain their pathetic record with some success?

Nope. Loungani and a colleague, Hites Ahir, took another look. They examined 77 different national economies, of which 49 were in recession in 2009. In 2008, how many economic forecasters saw the recessions coming a year later?

Go ahead, dear reader, take a guess.

The answer is zero. Recession or no recession? It’s a binary question. You’d think a few would have gotten the right answer by chance. Instead, none did.


coin flip

The special coin used by mainstream economists for the really important predictions: the “heads I'm wrong, tails I'm still wrong” coin.


When Predictions Fail

Queen Elizabeth II of Britain was baffled. She wanted to know how come, with so many economists on Her Majesty’s payroll, none had warned her of the worst recession to hit the developed world since her grandfather, George V, was on the throne.

She needn’t have bothered asking. It didn’t matter whether the economists were working for private companies or for the government. The predictions they made were terrible.

Economists didn’t see the recession of 2009 until it had crashed onto their heads – after the markets had been cut in half and Wall Street had come within a hair of going broke.

Then their eyes were shocked open. Everywhere they looked they saw recessions – even where there were none. They predicted recessions in 54 of the 77 economies studied by Loungani – six more than actually had them.

Which brings us back to the Fed. Its Dynamic Stochastic General Equilibrium model makes forecasts; they are always wrong. For example, back in 2011, the Fed’s model predicted economic growth in the US of about 3.5% for 2014. Each quarter the Fed adjusted the reading downward, as the future approached the present. Now, it is projecting growth for this year of barely 2%.

Quack, quack, quack … Why do people pay them any attention?

But not only do they listen, they salute… and implement trillions of dollars in fixes and fiddles, many of which result in disaster. It is as though George Armstrong Custer rode to the Little Bighorn on the advice of a palm reader.



Say wot?


Gagging Prices

You might say we are not giving the devil his due. Economists have “avoided another depression,” you might say. And they’ve even managed to bring volatility down to levels that haven’t been seen in 10 years.

This despite adding $10 trillion to central bank balance sheets… goosing up the stock market 150% since 2009… and swamping the planet with corporate, student and sovereign debt.

“Volatility extinguished by moves from central banks,” was a recent headline in the Financial Times. The VIX – Wall Street’s “fear gauge” – is at only about 14. At the height of the crisis, in 2008, when Ben Bernanke warned Congress that if it failed to act by Friday “we may not even have an economy on Monday,” it was at about 80.

Now investors scarcely bother to read the headlines… and prices barely budge. Surely, preventing prices from going up and down – that’s an achievement, right?

Well, you can say we’re “old school” on this one. We believe prices should be allowed to do anything they damn well please. After all, they’re trying to tell us something.

Prices, according to the classical economists, were not to be set. They were to be discovered. And where they are found tells you something. High prices bespeak scarcity, and the need for more investment. Low prices shout abundance… or even surfeit… warning you to stay away. Gagging prices serves no purpose at all.

Besides, do you remember the Great Moderation?

In the mid-2000s neither the whine of recession nor the growl bear of markets could be heard. House prices rose. Stocks went up. The economy appeared to be in a sustained expansion, caused largely by the Fed’s manipulation of mortgage credit.

Even as late as 2007 no respectable economist gave out a peep of warning. And that sound you don’t hear now? That eerie calm in the markets? That is the sound of prices that are not allowed to speak their mind…

But oh … Prices that do not speak whisper softly to an o’er-stressed economy… and bid it to break down or blow up.

Despite all the manipulation, the price of hourly labor is back to where it was in 1968.


What does that tell us? Stay tuned to find out…


Steve Bell's If ? 13/12/12

The above article is from Diary of a Rogue Economist originally written for Bonner & Partners.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TeamDepends's picture

Look at that lizard bitch!!!   Jig's up, Queenie!

TeamDepends's picture

Oh shoot, that was terribly called for.

TeamDepends's picture

She needs a "man" like McCain who could look both ways....  Somebody stop us.  Wait, there's a knock no more like a smash at the door....

knukles's picture

With that picture, I've decided to stop any further reading of ZH, trolling about the net, eating a nice big dinner of sausage and eggs and watching something civil, something kinder and gentler, something saner  ....  like tonight's boxing.


deflator's picture

it is an honest face.

lizard face

knukles's picture

Ya'know, at some point ya' just say fuck it and assume that everything that can go wrong, really fucking is in process, there are no more conspiracy theories, they're all gonna come true, including your bad dreams, there is no hell, we're already on the remedial planet, and we're already fucked over about as much as can be, so I'm not gonna listen anymore, because every time I do its like bad acid flashbacks when you come to in Barstow, the love capital of planet Earth, for fucks sake.

COSMOS's picture

That old hag will do anything, even bayonet little kids to get her anti hemorrhoidal cream for free.  Imagine what she does for free maintenance of her castles and castle grounds.

deflator's picture

A really good guitar player should come up with a riff for that...

36 years ago I was in a bar that had a guy slithering around in his underwear on his back with a guitar... I actually stepped over him a couple times on my way to take a piss. https://www.youtube.com/watch?v=_bP6aVG6L1w

f16hoser's picture

I hear the Queen of England is one Psycho Bitch from Hell!

deflator's picture

Bill Bonner dear readers... has to be broke by now with his insistence of projecting sound money ideology onto this fiat currency clusterfuck.

max2205's picture

Queens are stupid too

knukles's picture

Does that include Freddie Mercury?
Hah ha ha ha ha ha ha ha ha ah hah

DaveyJones's picture

Q: how many economists does it take to screw a lightbulb?

COSMOS's picture

All of them currently in existence, one to screw it in as slowly as possible and all the others to calculate how much money you are saving the economy (that is the macroeconomic model and then how much 'economy' you are doing for your household that is the microeconomics side) by not using the electricity to power the lightbulb

deflator's picture

 Mish Shedlock is a paid .gov troll bitchez. For that matter, so is anyone else who promulgates the notion of deflation from a sound money perspective in a fiat world.

moneybots's picture

"Mish Shedlock is a paid .gov troll bitchez. For that matter, so is anyone else who promulgates the notion of deflation from a sound money perspective in a fiat world."



It is simple math.  In a fiat world, deflation happens.  The FED is printing, but global debt has INCREASED  by 30 trillion dollars since 2009.  Just how is printing eliminating a debt bubble?  It isn't.  As 100% of bubbles burst and deflate, what is coming, due to a 100 trillion dollar global debt bubble?  Deflation.




eclectic syncretist's picture

It's dangerous to listen to economists because their training is based on a falsehood, namely that one can counterfeit mutual prosperity.  When "money" or FRNs are printed into existence they could just be equally distributed to all individuals, but clearly no one would be enriched by this because one is only rich RELATIVE to his fellow human beings.  In 1913 the banksters got the Federal Reserve Act passed over the Christmas holiday, allowing them to counterfeit money at the Federal Reserve, who is strictly limited in being able to distribute the counterfeit only to the same big banks that own the Fed.  The banksters can then loan the counterfeit at interest to anyone they feel might be worthy of being lent to at interest.  Obviously, this also cannot lead to anything like a mutual prosperity, or even stimulate the economy in any meaningful and lasting way, but it will certainly enrich the banksters, which is all the Fed is designed to do.  The economists are taught that the Fed can control the economy, which is not true, and is certainly not what the Fed was truly designed to do.

Downtoolong's picture

The difference between the We's and They's is that They's always gets a do-over until they guess it right and profit. We's don't. 

Not Too Important's picture

Didn't Stiglitz call it? He's an economist.

That's 1. Out of ???

UselessEater's picture

"From whence does the House of Windsor, (as it is called,) derive its immense power? Basically, it comes from German Mariolatry, from Freemasonry, from Illuminism and its members who run the Guilds of the City of London and the Church in Westminster Abbey.

The House of Windsor (an assumed title invented by King George V in 1917) does not operate in a vacuum; it operates from behind a dizzying array of secret societies, mostly interfaced and interlocked with each other. This is the “power behind the throne” as it is publicly expressed.

….. The Rosicrucians were closely allied to the British Royal Family, and while there is a great deal of dispute as to whether the Rosicrucians developed the Illuminati, or whether it was the other way around, the fact remains that both secret societies have intimate connections to the oligarchical elite in England, and that have both exercised a profound effect on the history of the United States of America. The top Illuminati families of America, many with strong links to the oligarchial structure surrounding the House of Windsor include such names as DuPont, Freeman, Kennedy, Collins, Astor, Rockefeller (co-funder with Her Majesty Queen Elizabeth II of the Satanic Tavistock Institute of Human Relations), Rothschild, Russell, Lee, and van Dyne, to name but a few of these….

Linked to Queen Elizabeth Guelph’s Venerable Order of St. John of Jerusalem and the Knight of Malta are the following: British Intelligence MI6 and MI5, London Center for Policy Studies, Order of Johannes, The Mont Pelerin Society, The Heritage Foundation, Rockford College Institute, The Eli-Lily Foundation, Sir Siegmund Warburg, Lord Montifiore, N.M. Rothschild Company, Banque Lambert, Barclays Bank....

The US branch of Queen Elizabeth’s power structure is the Council on Foreign Relations, the “open secret” CFR."

Coleman, Secret Societies Influence on the US History


deflator's picture

 The best deal I ever got buying a new vehicle was when I took a laborer with me who was a high level free mason. He said let me do the talkin' for ya lol.

UselessEater's picture

"If any of you listeners belong to the Freemason secret society, let me say that my remarks always apply to the higher, inner circle, not to those who are no higher than 4th degree and who have no idea of what goes on at the highest levels."

Coleman, An Update on Secret Societies

deflator's picture

My laborer said lets eat at Outback, the manager is a lower mason than me. sure enough he said that we could have all the stock wine we wanted and if we ordered the prime rib he could cut it as thick as we wanted.

UselessEater's picture

I guess you were supposed to be impressed enough to join a club that yields such power to a little guy!!


A ;), nod and a creepy hand shake to ya!!

Colonel Klink's picture

If you're wrong 100% of the time, it's not accidental.  It's LYING!  Make no mistake and don't be fooled by the feral Fed.

Reaper's picture

Economists are the modern,less messy,replacement for soothsayers for Queens and governments. Without bloody entrails to examine, the results are worse.

UselessEater's picture

Heathen. Off with your head.


Queen of Hearts.

Wild Theories's picture

I've always preferred consulting astrologist to consulting economists.

At least astrologists are honest enough to admit everything is open to interpretation and it depends on the comprehension of the one doing the interpreting.

Dubaibanker's picture

It is unfair to say that not one economist predicted the economic crisis. At least two of them are very famous. Dr. Rajan was Chief Economist at the IMF at that ime wo predicted the US crisis.


Another one was Dr Doom - Nouriel Roubini, Prof at NYU.


Last of the Middle Class's picture

You'd have better luck predicting economic outcomes using chicken bones. And a lot more honesty to boot.

q99x2's picture

Show us her feet. 


Raghuram Rajan warned _all_ the central bankers in 2007
and Larry Summers accused him of being a Luddite after
he argued that leverage was too high and 'risk' had not been properly accounted for. Larry Summers is the lead problem with central banking in a global world and Larry Summers lacked the necessary 'creativity' that Queen Elizabeth was looking for in terms of her own so-called
'Economists'. UK Economists were the most leveraged of all in the world and that is why they could not see in what hour
death and destruction was going to pay a visit to Buckingham Palace and the greedy motherfuckers like Queen Elizabeth and Prince Chuckles. Clearly, the Whore of Babylon
was not supposed to have any indication of her hour of doom
or when it would occur. Queen Elizabeth's 'mafia' whores have a date with destiny that has become evident to all in this world except the whores themselves. Not only does Queen Elizabeth lack creativity but her whole fucking family
lacks it and so does her whore cronies. Frankly, I was fully aware of her fate and that of the USA when Raghuram Rajan delivered his speech in 2007. Furthermore, status quo 'Economists' refused to grasp the fact that housing prices don't go up forever. Everyone in 'central banking' was too stupid to figure out that housing prices cannot go up forever. If they are actually this dumb why would anyone ever think that they would ever develop a sense of awareness? Capitalism/Corporatism was destroyed on March 10th 2008 at 11:00am Bear Stearns time. Lehman Bros. bankruptcy was a predictable outcome of the overleveraged
balance sheets that brough us here to begin with. Queen 'Whore of Babylon' and her merry band of corporatists
were just too drunk on the souls of the poor to notice their world was about to blow up in their faces and they were hoisted on their petards and hubris so they could justify their theft of money from the disenfranchised they
love to victimize and abuse. Queen Elisabeth is just a skank
Ho like Larry Summers, Tim Geithner, Hank Paulson, Ben Bernanke, Janet Yellen, et cetera. Frankly, the skank Hos are always the last to admit they are diseased and dying.

orangegeek's picture


moneybots's picture

"Fed economists say they don’t think inflation rates are rising."


Just because they say it, does not mean they are telling the truth.  Bernanke testified under oath that he would not monetize the debt.  However, Bernanke proceded to monetize the debt.

Yellen said the current inflation is noise.  Greenspan said the housing market was frothy. Greenspan knew it was in fact a bubble. So who is Yellen fooling?