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The Essence Of Modern Economics: Garbage In, Garbage Out
Submitted by MN Gordon via EconomicPrism.com,
“On two occasions I have been asked, “Pray, Mr. Babbage, if you put into the machine the wrong figures, will the right answers come out? …I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.” – Charles Babbage, Passages from the Life of a Philosopher.
Crunching Data to Fix Prices
The fundamental problem facing today’s economy is the flagrant contempt by governments the world over for the free exchange of goods and services and private stewardship of property. Perhaps it is power and control governments are after. Maybe they believe they are improving the economy and making the world a better place for all.
No one really knows for sure. But what is lucidly clear is the muddled disorder modern day economic policies have wrought upon us. You can hardly enter into a transaction without a cluster of intervention mucking with the price of payment.
Taxes, tariffs, wage laws, and subsidies. These all impact prices. But the main culprit affecting prices and trade are central bank interventions into money and credit markets. Relentless actions to control the economy by manipulating money and credit stand the price of everything else on end.
Certainly, government intervention into the U.S. economy is much looser than a Soviet style command and control system. But it does share a common refrain. Price fixing is central to its operation.
The Soviets, armed with their Five-Year Plans and the Theory of Productive Forces, deliberately directed how much wheat should be planted and how much a potato should cost. Conversely, the U.S. approach is mostly hidden from the short sighted view of the average lay person. The Federal Reserve allows the government to bypass the nuisance of tinkering with individual prices…though they still do it through subsidies and appropriations.
In short, the Federal Reserve, an unelected board of appointments, crunches economic data each month and draws a conclusion as to what price to fix the economy’s most important commodity – its money. By doing so all other prices in the economy must change – and distort – to adjust to the Fed’s market intervention.
Guided By Garbage
The Fed believes that by fixing the price of money artificially low, they’ll increase something they call ‘aggregate demand.’ The thesis is that cheap credit will compel individuals and businesses to borrow more and consume more. Before you know it, the good times will be here again. Profits will increase. Jobs will be created. Wages will rise. A new cycle of expansion will take root. Sounds great, doesn’t it?
In practice, however, the results are destructive. While cheap credit may have a stimulative influence on an economy with moderate debt levels, once an economy has reached total debt saturation, where the economy can no longer support its debt overhang, the cheap credit trick no longer works to stimulate the economy. Like applying additional fertilizer to an already overstimulated crop field, the marginal return of each unit of additional credit in terms of new growth diminishes to nothing. In fact, the additional credit, and its counterpart debt, actually strangles future growth.
The experience following the Great Recession is that the abundance of cheap credit floods not into the economy, but into asset prices…grossly distorting them in the process. The simple fact is solving the problem of too much debt by pushing more debt doesn’t solve the problem at all. It makes it worse.
What’s more, the approach of using data to identify apparent aggregate demand insufficiencies and perceived supply gluts is flawed. Unemployment. Gross domestic product. Price inflation. These data points are all fabricated up and fudged out to the government number crunchers liking.
For each headline number there are a list of footnotes and qualifiers. Hedonic price adjustments. Price deflators. Seasonal adjustments. Discouraged worker disappearances. These subjective adjustments greatly affect the results. So what good are they?
Computer programmers are familiar with the term garbage in garbage out. Meaning, computer outputs are only as good as the data that are input. If garbage data is input the resulting outputs are garbage. The point is the radical monetary policy interventions being employed by the Fed to somehow improve the economy are being guided by garbage.
Garbage In Garbage Out Economics
The classical economists recognized that economics, as a field of study, is not a stationary system to be engineered and improved upon. Rather they understood it is a natural and dynamic system that can flourish when given the proper conditions. Generally, these conditions include private property rights, a stable money supply, and minimal government interference including free trade, low taxes, and balanced budgets.
Thus the goal of economists should not be to influence the economy by policies of market intervention. The goal should be to get out of the way; to minimize market hindrances and promote policies that allow the economy to function most efficiently.
No doubt, the present price fixing system of garbage in garbage out economics has reached a critical mass of absurdity…
“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation,” reads the recent FOMC statement.
“This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”
Pure garbage indeed.
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repeating the same thing over again and expecting a different result is also known as insanity.
Rinse is repeat.
Actually the economics today make perfect sense if you are an occupying group in charge of a colony of slaves and want to maximize exploitation of the slaves without provoking a slave revolt.
What Bernanke did shoveling QE when the labor force was being reduced by the millions was brilliant Freidman, Bernanke himself is an idiot, but Freidman knew how to get the most return on the slaves.
Economics today totally makes sense if you understand the motivation of the writers.
Yes. the "good" news is that I know who all the bilderbergers are and the places they like to frequent an many of my former brothers in arms are already working their "security" details...
People who think they really can isolate themselves from the chaos they create really need to pick up a history book. Yes, sheep will always be sheep, but power does shift from time to time...
interesting times my friends...
Thank you. I get so tired of reading about TPTB here as if they inhabited some untouchable realm of the gods. They don't and they know it. That's why they're trying anything and everything that might keep this thing hanging together so desperately, lest they find themselves hanging separately.
I doubt they could actually kill the host. Its a catch 22. They just dont have the skills to servive on their own.
Economics, the dismal science, exists to make astrology look respectable.
Like most things in life, economics started out with good intentions. Some peeps in the Enlightenment era said, "Look at how people buy, sell, and trade goods and services. That's interesting. Let's study it."
But later, the Fabian social engineers got together and said, "How can we use economics to ensure our perfectly managed, technocratic society?"
From that point forward, economics ceased to be any kind of scientific or inquisitive discipline. It was transformed into intellectual cover, a dog-and-pony show that distracts you from seeing the wizard behind the curtain, pulling on his levers. It is no different from the ancient high priests who claimed to divine the future, by consulting from the sacred texts THAT ONLY THEY WERE ALLOWED TO READ.
I was talking to a few friends recently (we all have degrees in economics from the London school of Economics and other English universiteis) - and we agreed we did not learn anything useful and that it took about 15 years to unlearn the Friendman propaganda shit they brainwashed us with
Imagine paying money and studyig hard to get duped then having to undupe yourself through the real world school of hard knocks.
A big fat YUP to that one.
Human centipede
The incoherent economics of Stephen HarperStop accepting their paper in exchange for your labor!!!
Nothing fucking changes otherwise, period.
LoP Barter dont scare you much does it?
Anyone that has a dependable tribe capable of delivering real things of real value (skilled craftsmen or otherwise) won't. When silver was $40 an ounce I had a new sewer line run for 10 ounces. Would have cost me at least $3000 otherwise.
this is and has always been about power and control, period.
Ivy league eCONomists really hate it when people do not do what their "models" say they will...
Gee, no shit, evolve or die motherfucker!
been this way for billions of years...
Barter will work for those that produce and realy thats all that matters. All the rest is just blather from the free shit army.
I accept their paper cause its what the sheeple accept as money these days but I Gresham out the investable part asap.
Modern eCONomics is a con.
especially in a monetary system where "money" can be conjured out of nothing with no real collateral, but only by a select few....
Whatever, we have seen the outcome of such "let the majority eat cake" monetary experiments. This time of course we are talking about a global experiment...
The "official" CPI is near zero, which means COLA is near zero, yet even the NPR shills today said Obamacare premiums are soaring 33% in some places. The guests tried to claim in most areas the rise was "only 3-7%" yet every caller complained why is theirs then rising 33%-60%!
I am guessing the National Propaganda Radio shill callers were not available today to call in an claim how great their O-care coverage is. My own plan is being discontinued and the similar plan option will cost 33% more as many callers had said.
People think NPR is for libs but actually it stands for Nice Polite Republicans
this happens to any organization that loses government funding and is forced to become profitable....
good for them.
Just call it CONomics for short.
free exchange, what with everything rigged for those at the top. If anyone tries to organize a labor union they're likely to go missing, develop cancer or depending on the jurisdiction be found in a ditch with a bullet hole through their head....neo liberalism and globalism is a cancer on humanity.
so it's like Catholic Inquisition not so long ago?
In summary, you are being lied to on a regular basis.
In summary, you are being lied to all the time, about everything. FIFY :) you're welcome.
"Maybe they believe they are improving the economy and making the world a better place for all."
And maybe Wall Street is really run by the Little Sisters of the Poor.
Duplicate Redacted.
Waste Management Economics.
We had un-regulated, trickledown Capitalism in the UK in the 19th Century.
We know what it looks like.
1) Those at the top were very wealthy
2) Those lower down lived in grinding poverty, paid just enough to keep them alive to work with as little time off as possible.
3) Slavery
4) Child Labour
The beginnings of regulation to deal with the wealthy UK businessman seeking to maximise profit, the abolition of slavery and child labour.
Where regulation is lax today?
Apple factories with suicide nets in China.
A leopard never changes its spots.
Yes, predators will be predators.
Welcome back to the new fuedal age, on a global scale.
Interesting times.
I've seen nets like that around primary schools in San Francisco
The essence of
real economics:
POLITICAL FUNDING
ENFORCING FRAUDS.
There it is in a nutshell.
Yes, tragically NUTS!
A bit o honey and a handfull of pecans heated up in a pan. Thats my kinda nuts.
Economists cannot render accurate forecasts. Fed monetary policy acts only with a long and variable lag. Therefore, the central planners must design a policy for a future that they cannot see. This is a fool's errand but only if you accept the idea that the purpose of the Fed is to manage the economy for the good of the body politic. However, I do not think that is the purpose of the central bank architecture. I think its real purpose is to maintain a system of extraction in order to skim the proceeds of all real human production thereby enriching the few and enslaving the multitudes.
How does the system of extraction manage to persist?
It seems to me that the people are complicit, that they aid and abet their own descent into debt and servitude.
Short term gain, long term pain...
Drink to excess, expect a hangover. Do that habitually, expect to die early.
Buy now, *pay* later...
Think about later before you buy now or, out of the box concept, do not buy.
Truth is, for me, none of this is about the money. I have enough money to live comfortably for the rest of my life even though I retired when I was 41 and receive no returns on my three main assets, i.e., my house, cash and gold, in that order. For me, this is about 1)truth, 2) freedom, and 3)peace.
The people of the USA will never enjoy wholesale prosperity while they're being brainwashed, enslaved by debt and led into perpetual wars. Quite simply, it is just very hard for me to watch the people get raped by a handful of bad actors.
Barter with your stack.
"No, I'm going to barter with your stack.
Sincerely,
Your Friendly Local Neighborhood Warlord."
Na the warlord needs more shit all the time. He will be my bitch.
Zio-con-nomics: pushing the boundary of Keynesian claptrap to the completely absurd, merging it with behind the scenes controlled socialism and teaching it to brilliant dunces in colleges where Ivy grows. Then bringing it all out into the real world to farm goyim sheeple.
The question posed, if we put the wrong numbers into the machine, will the right answer come out, begs the real question, which is, are any of the numbers the right numbers for any possible machine to describe our reality? Realty is not scientific, nor even mathematical. All the evidence it is, is a deceit.
The equation, 1+1=2 is essentially as meaningless as a chess move. Our reality is not mathematical.
Mathematics is itself a false model of reality.
There are no two things anywhere in the Universe, alike enough that if we say of them 1+1=2, we have adequately described our reality or even any small part of our reality.
Reality is infinitely complex, in the smallest of the small, in the largest of the large, and in everything in between these two extremes, as we perceive them.
And there in lies the great problem of economics. Economics ultimately claims to be about reality, not numbers. There always is an adequate excuse for being wrong in the science of economics.
Look. The computer models are used mostly for telling our masters what they want to hear, or for generating output that can be used to tell the proles what our masters want them to hear (viz. prosperity with low inflation is just around the corner). Otherwise, the models are disregarded.
Very occasionally, the models are even junked when even our masters can no longer believe the bullshit the computer is telling them.
Remember the Phillips curve? For a long time economists believed that there was a fixed relationship between the unemployment and inflation rate, and the only thing stopping governments from ending unemployment was being afraid of voters grumbling about X per cent inflation forever and maybe voting against them. (Politicians hadn't yet perfected the art of importing and hiring the diverse to stuff ballot boxes their way.)
They assumed the proles would only grumble. What the proles actually did was demand wage rises of X+Y percent, and got them (much less outsourcing in those days), and in no time inflation was X+Y percent and unemployment was as high as ever. The old Keynesians could only get away with being wrong so many times before even Jimmy Carter stopped paying attention.
THE saddest thing in the world, man.
B*llshit economic data from America - the best country in the world.
I never thought I would see this country sink so low.
There's a LOT of people who have really F*CKED UP America.