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Guest Post: Bleeding the Patient, Modern Economics and the Symbolic Economy
Submitted by Charles Hugh Smith from Of Two Minds
Bleeding the Patient, Modern Economics and the Symbolic Economy
Modern economics is analogous to the junk-science of 17th century medicine, and it serves a symbolic economy of phantom wealth and freedom.
Back in the bad old days, the premier physicians of the age accepted and practiced the idea that the cure for illness was to bleed very ill patients, effectively weakening them. Countless patients who might have recovered if simply left "untreated" died as a result of the misguided "science of healing" of the era.
Only with the advent of a true understanding of the nature of infection, the immune system and disease did the "folk" pseudo-science of bleeding pass from accepted medical practice.
We are mired in a similar era of pseudo-science being accepted as actual science, i.e. as reflecting the underlying causal mechanisms of life and the universe, and that pseudo-science is called economics.
As I have noted here many times, we are experiencing not just a standard-issue financial crisis but the failure of the entire pseudo-science edifice of modern conventional economics.
The basis of pseudo-science is to mask unfounded, misguided and potentially disastrously dangerous ideas drawn from superstition and folk beliefs with the external trappings of real science. Thus economics presents itself as a "science" by invoking the symbolic magic of equations and quantification of data gathered from the real world.
In esence, the "understanding" of junk-science is symbolic: the body is plagued with "humors" which can be drawn out via bleeding the patient, etc. The actual workings of the body, far beyond the conceptual reach of the folk/junk symbolic "science," are conceptualized symbolically via analogies: disease is "hot" or "cold," the body functions like a clock, etc.
In the exact same fashion, conventional economics "understands" the workings of the economy symbolically, and its "cures" play out in its artificial construct, the symbolic economy.
The symbolic economy is based on the cargo cult of "animal spirits", the magical "humors" which ignite the economic activity quantified by the pseudo-science. The witch-doctors at the Federal Reserve (the eminent, highly educated "expert" bleeders) have been busy painting radio dials on rocks for the past four years, hoping that their increasingly desperate pleas will magically reach the gods of "animal spirits."
The true nature of conventional economic's symbolic economy is best illuminated by the cargo cult's increasing dependence on managing perceptions as the "tool" to influence financial behavior. In other words, the "physicians" rely on fundamentally symbolic actions to influence the symbolic economy.
One of the folk beliefs of the cargo cult priesthood is that ruthless pursuit of self-interest to the point of worshipping self-serving pathology is the foundation of a "healthy economy." The end-state of such a quasi-religious faith is of course the purchase of the machinery of governance to the point that government at all levels is reduced to a battle between self-serving concentrations of wealth.
The cargo cult priesthood's primary goal is to preserve the symbolic wealth created by the symbolic economy. One way to understand symbolic wealth is that it is phantom wealth created in symbolic form.
Simply put, no economy can consume more than it generates in real surplus. Rather than face up to this constraint, the Fed creates phantom financial wealth which ends up in the hands of politically influential concentrations of wealth--in essence, a self-referential cycle of creating phantom wealth to serve the interests of current holders of phantom wealth.
Everyone with phantom wealth is of course committed to maintaining the fiction that the symbolic wealth they "own" holds sway over real wealth, i.e. minerals, water, skilled labor, productive land, etc.
There is another layer to the symbolic economy: carefully manicured totems of a vanished free market and independent government are maintained by the Status Quo that benefits from the artifice. The useful fiction that the economy is still a "free market" is heavily promoted by the Status Quo Media, and rags-to-riches stories are trumpeted ceaselessly as "proof" of the free market.
All this marketing gins up symbolisms that mask the actual mechanisms of the economy. This systemic official lip-service is also paid in China, where various useful fictions are fashioned into a symbolic economy: that the one-party rule of a command economy nurtures a true but limited form of free-market capitalism in which it is glorious to get rich.
This masks the reality of a systemic crony-capitalism married to a sclerotic command economy.
In other words, like the U.S.
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Yes indeed, just like the US Federal system.
I don't know what everyone is complaining about - this is a fantastic oportunity. Retail and consumer stocks are on sale and I'm looking to add to my positions. Financials are SCREAMING BUY right now.
Before that thought there is Greece... Ugh. Heck the PIIGS are the ones that are getting bled to death at the moment. Wonder what changed doctors minds back then that bleeding was not the way to go. We need that specific moment in time now.
Apparently, they figured it out through trial and error:
"In 1885 bloodletting in London had fallen into disfavor.3 At this time it was thought that disease represented a depressant effect to be overcome. Since bloodletting aggravated depression, its usefulness was limited to the treatment of local inflammations. "The year 1830 and subsequent years were marked by the epidemic visitations of cholera and of influenza. These diseases were characterized by extreme depression. If antiphlogistic measures were adopted, they proved failures, and taught the physician that bloodletting was not the universal panacea it was supposed to be." http://www.pbs.org/wnet/redgold/basics/bloodlettinghistory2.html
I think that would be similar to modern economists realizing that adding more debt is not going to solve a problem created by excessive debt. Interestingly, bloodletting still happened for another seventy years or so after it was discovered to be ineffective. Doesn't exactly bode well for a quick-fix.
Welcome to ZH, Cramer!
No shit!
The schtick is stale as last week's donuts, MDB; we already have mainstream media so you've been obviated.
Wow. You guys work on Sundays? Respect!
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Sorry, man. Look at some of RoboTroll's work from a few months ago, or Harry Wanger from like a year ago.
... "This masks the reality of a systemic crony-capitalism married to a sclerotic command economy."
+1
Nothing new here. Scientism has always had an influence on humanity, fluctuating in periods of mass hysteria throughout centuries. We happen to be in a such a period that's all.
Probably when they realised more people were dying than staying alive.
Oops, are we at that point economically?
good article...investors who would laugh at alchemists all somehow thing politicians and central banks can turn lead into gold...all they can do is make gold worth more
"One of the folk beliefs of the cargo cult priesthood is that ruthless pursuit of self-interest to the point of worshipping self-serving pathology is the foundation of a "healthy economy.""
Hmm this is true, when it does not include force, like the current system does.
It's not true because no one can ever pursue self interest to the same level as another, and pathological self interest results in pathological ruthlessness results in pathological disregard for rule of law. There is no way a free market system can ever work. It will always lead to disparity and inequality to an extent where the market itself cannot function, even if that was the only aim. In the end, you would end with exactly what you see today, oligarchy. It's inevitable in capitalism, it's accelerated in free market self interest driven systems. Self interest actually results in deficiency. The only hope for humanity as a civilized society is working to the benefit of others, the compassion will result in surplus, instead of deficiency.
Think about it before you disagree. What happens if everyone produces to satisfy the needs of their neighbors, instead of trying to keep the neighbors from having what you have?
They tried that, it's called communism. "From everyone according to their labor to everyone according to their need". It fails because of free riders. It is made worse by not having a pricing mechanism to order production. Thus the need to study ECONOMICS.
Your understanding of free markets and capitalism are incredibly ignorant. You should study about it before you disagree.
I completely disagree, what we have today is the direct result of socialism. To blame today's problems on capitalism which ended 100 years ago is wrong. Oh I get it the SEC has not done it's job so we need to double there regulatory power. Yes Yes I must sacrafice myself for you but of course then I get swrewed because you talk a good game. Fuck marxism and all the destruction it has wrought.
"I am sure that, on the one hand, the Rothschilds appreciate the merits of Marx, and that on the other hand, Marx feels an instinctive inclination and a great respect for the Rothschilds. "
Mikhail Bakunin
To blame today's problems on capitalism which ended 100 years ago is wrong.
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Does it mean that from 1776 to 1910, the US system was capitalist? Yes or no?
Just wondering because capitalist/socialist/communists (even though the latter are a dead species) are master of elusiveness. It is also something else that failed, not their previous system.
Free market capitalism has never existed. But yes that is the period in the usa that has come closest.
You think that free people try to starve their neighbors? What the hell is wrong with you? Which circle of hell do you live in?
Earth I believe it's called. The people here believe in self-interest at the expense of generosity, charity, compassion.
I live here.
http://edition.cnn.com/2011/09/26/world/meast/syria-mutilated-body/index...
http://edition.cnn.com/2011/09/25/world/americas/mexico-editor-decapitat...
http://edition.cnn.com/video/?hpt=wo_mid#/video/world/2011/09/20/roberts...
Where do you live? Never mind. I see where you live. I wouldn't like living there.
Plato's cave metaphor regurgitated once again. Yawn.
Good analogy. So when does the Middle Class finally keel over and Die from Blood Loss?
Within 2 years, most likely within 6 months to 1 year.
November.
This motherfucker hasn't been a free economy ever. It's just getting worse by the minute. And now what was unsustainable is essentially collapsing before our eyes. All one has to do is take a sober look at who's calling the shots and there would be revolt everywhere. When funds for junk food and coke run out the zombies will stir, but they won't groan out laissez faire.....it'll be a hell of a lot worse.........
Simply put, no economy can consume more than it generates in real surplus. Rather than face up to this constraint, the Fed creates phantom financial wealth which ends up in the hands of politically influential concentrations of wealth--in essence, a self-referential cycle of creating phantom wealth to serve the interests of current holders of phantom wealth.
This is the problem with with ignorance- it knows no limits. Smith is not an economist, otherwise he would know better. Economies often consume more than they generate, PROVIDING THEY HAVE WEALTH TO PAY THE DIFFERENCE.
Classical economics and the Austrian school that evolved from it are very specific about how an economy functions. Economics, when studied as a science, has all the hallmarks of rigourous proofs. Results from hypothesis can be measured and conclusions drawn.
Smith has a complaint with Keynsian economics. If he were to make this distinction, I could agree in an instant. However, to slight the entire school, built on centuries of discovery and practice, is just another attempt to destroy the meaning of words for his own purpose.
There is nothing coherent about Keynsian economics. It was developed for the revolution of Statism that has conquered the world (in all its' forms). Whether soviet communism, chinese centrally planned markets, european socialism or our own totalitarian socialism; Keysian economics has been used to drain the wealth of the free man, transfer that wealth to a priviledged class and put us all in chains.
If people had understood economics, they would have seen the wolves at the door, led by FDR and the New Deal that has destroyed any semblance of a free market and capitalism in the US.
Smith may think he is doing a service, but it is the same service done by propagandists since the 1930's.
I'm not sure what you're saying here. You are lamenting the destruction of civilization by statists, I suppose, but you call the author of the article a propagandist? Why? Can you clarify?
By attempting to destroy economics through association with Keynsianism. Economics has evolved over the centuries, since the Greeks. Modern development began in the 1600's.
It was the propaganda of the thirties, enforced with Keynsian nonsense, that was used to lead people astray through confusion and doubt. This is the purpose of propaganda- to change definitions and co-opt words for their own purpose.
Economics is a science and a well developed field that starts with Contillion through Smith, Ricardo, Mill, Mengar, Mises and Rothbard. Marx and Keynes were merely attempts to confuse the people so that neo-feudalism could be instituted through centrally planned Statism.
Whether Mr. Smith was cognizant of his actions is not known, but the result is the same.
I see. Thanks for the clarification. I think I agree with you.
Economics is a science and a well developed field that starts with Contillion through Smith, Ricardo, Mill, Mengar, Mises and Rothbard. Marx and Keynes were merely attempts to confuse the people so that neo-feudalism could be instituted through centrally planned Statism.
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Made me laugh.
Made me think of that Hayek's book "the road to serfdom" so cheap...
Do you have any evidences that the path taken by the US is not to lead to feudalism,no matter what.
Because feudal lords had their ways to promotion: invading of others and distribution of the land to their chosen ones.
This is exactly the same path taken by the US from the start: robbing land from the Indians and distributing the land to US citizens. The main difference is that no feudal lords had the chance of finding so much land open for robbery.
The US has used the same recipe as feudalism, so why not the same end game?
Economics are such a joke: can not even explain boom and burst, can not even account for wars. There is no place for wars in their thesis, while it had so much an impact. These guys deny wars because it is their engine, the ropes behind the curtain they would not like people to see.
Made me laugh.
Made me think of the book, "General Theory of Employment, Interest and Money" by Keynes, so wrong...
Austrian economics explains boom and bust, the business cycle, accounts for wars and many more things- like capital, interest and employment. However, it requires study and the discipline necessary to understand and assimilate the material. As free markets have never been attained and capitalism (as imperfect as it is) merely provides a superior economic order- not a perfect one, to assume they have existed alongside the feudal/mechantilism of the last 250 years shows an incredible degree of ignorance.
Keynes is an economist, so why quote one of his works?
Nothing to answer my question.
Where are the evidences that a system that used the same rope as another will not merge with the former in the end?
But here, it looks like the christian promise, heavens for tomorrow, capitalism never achieved but we know it is so better...
Hayek is an economist, why quote one of his works?
Nothing to answer my response.
Except for the nonsense that makes up the rest of your response. If you fail to understand the ramifications of Austrian economics, you evidently aren't capable. Tough to have to settle with that.
Capitalism has accomplished all that it is supposed to when allowed to. Especially in the period 1870-1890, our best period of growth and stability besides the period after WWII. "History of Money and Banking in The United States", Rothbard.
Austrian crap is not economics but a wish list of a gift from the gods of "animal spirits". The gifrt eats them up. An excuse for greed is not the same as the actual results of concentration. "It was the worse of times, and it was the best of times".
The idea is to do away with social programs to protect the concentration of wealth. Who own the press and the gov't.
Why would the Elites get rid of social programs? That is what they used to enslave us with in the first place- something for nothing. They may reduce their costs by cutting them back, but that is how you protect your profit.
In the mean time, you have given up your individual liberty, you have allowed the government to take over and thus determine all policy- both political and economic. Further, this power has coalesced in the executive branch, in direct opposition to the founders of this country and writers of the Constitution.
Laws are written by the exective through administrative fiat and bypass the protection granted by a popularly elected house and state elected senate. This is a dictatorship.
Why do you think wealth has become so concentrated over the last one hundred years? If Wall Street is the enemy, why do we continue to bail them out? You have allowed the propagandists to identify "an enemy" in the general, but they continue to be favored by the staus quo?
Austrian crap? Read a book.
I posted this in another article, but I see it more approriately belongs here.
You could also look at it another way. America was an experiment. The Oligarchs established the policies, culture, infrastructure, institutions, indirect representation, pretense of democracy / liberties , pretense of prosperity / welfare. The experiment started to get out of hand as people really started to believe they were entitled to a decent life, so it was halted.
The experiment is being disassembled slowly so as not to create an even bigger nightmare, civil unrest. The ideologies were close, the privileges were too great. They will revise their experiment and establish the correct mix in the next location, wherever it is, if not China. The new experiment will include enough progress to facilitate increased profit, but it will include reduced expectations of wealth / prosperity and liberty / democracy, so you don't start acting like you're a small time oligarch.
If Ferrari could instruct Senna to crash the second car into a wall if it looked like someone was going to overtake Alonso, to bring out the safety car, and at the same fucking track a few years later, Red Bull could instruct the second team to crash a car into a wall, if it looked like someone was going to overtake Vettel, to bring out the safety car, well, you can rest assured the entire system is fucking corrupt and a joke.
Anyway, consider the possibility that people like Edward Bernays are all around, manipulating the story. You are a victim of conspiracies, even if you don't believe it possible. You are welcome however, to believe there is a genuine system worth preserving. i.e. double dip is not the real problem, the entire system is.
I recommend "The People's Potage" by Garet Garrett for an excellent essay by someone who was there, reported on economic events and even knew Bernard Baruch.
Why do you think wealth has become so concentrated over the last one hundred years?
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Not over the last one hundred years. Over the last four hundred years.
And it is the result of Smithian economics that aims at transfering from an exterior to an interior wealth.
The concentration movement has started much earlier but as US citizens do not account certain categories of people, only them so what?
What has happened over the last four hundred years? The rise of Statism. Smithian economics has little to do with the transfer of wealth from exterior to interior (whatever that means?). Though it would be helpful to include an example? Do you even have a copy of "the Wealth of Nations"? I doubt it.
Whereas, the transfer of wealth exhibited in Statism is rather easy to see: State sponsored monopolies, cartels, debt accumulation, control of currency, police power to generate taxation, growth of State welfare systems, etc.
The abuse of Native American treaty obligations was a result of Executive abuse of power- something Justice Marshall ruled three times against and was ignored- as the Court has no enforcement mechanism. This has nothing to do with Smithian economics as it is market intervention by government.
Perhaps if you read up on the topic?
Smithian economics has little to do with the transfer of wealth from an exterior to an interior? Really? US citizens are never short of denial.
If so, why Smith advocated for colonization?
And your responses have little to do with the coherent use of the english language.
"Simply put, no economy can consume more than it generates in real surplus."
Unless you steal it.
Unless you steal it.
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Stealing does not exist in economics. Stealing is not factored in. Quite a blind spot but hey, this is a US world order.
Sure it does. You obviously have never read up on private property protections. Again, please read a book on the topic.
No. Some economics (but not all) rely on the existence of private property.
It considers private property like gravity, an inherent, non suspending property of the system.
Economics does not factor in stealing or war.
Yes, the economic principles regarding private property are freely available. While some would attempt to eliminate it or transfer it to the State (marxism, Keynes), private property law deals with theft in very clear terms. War, as an attempt to confiscate private property as well as the expression of the police power of the state on an internetional scale is treated equally as well.
See "Man, Economy and the State with Power and Markets" Rothbard.
Your ignorance of this material withstanding.
Rothbard discusses a lot of things that are not discussed in the mainstream. The typical college text does not put war in the mix. Does Keynes discuss it at all? Without considering war you cannot possibly understand the 20th century, or the current situation.
Drive through any major US city and you will see the real economy at work.
If "major" .eq. "Blue" then we could take your point.
Yep. Fix the basis of the problems, not the sympthoms.
"Simply put, no economy can consume more than it generates in real surplus."
This is so obviously true it cannot possibly be the present problem. I would suggest the problem is the opposite: a society cannot consume less than it produces without consequences.
Then let's spend ourself into prosperity!
Wait! Isn't that what we are doing?
The US was consuming more than it produced and borrowed the difference offshore. The Federal government and households ran deficits. The current difficulties are a result of the transition to a lower overall standard of living and the attempts by everyone to pass the problem to someone else.
How amusing that CHS calls out one group's delusions in support of his own delusions.
Modern economics is analogous to the junk-science of 17th century medicine, and it serves a symbolic economy of phantom wealth and freedom.
Back in the bad old days, the premier physicians of the age accepted and practiced the idea that the cure for illness was to bleed very ill patients, effectively weakening them. Countless patients who might have recovered if simply left "untreated" died as a result of the misguided "science of healing" of the era.
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Hey, that was my comparison.
today, its mostly just magnesium deficiency (we dont measure intracellular mg ions - where 95+% of total body magnesium is stored), vitamin d deficiency, n-3 fatty acid deficiency, and more generally food nutrient deprivation.
not to mention we put mental retardants in the drinking water so the aluminum/phosphate/pesticide industries dont have to pay to dispose of a toxic chemical.
and then there are antineoplastons, which have been suppressed.
at least modern science has brought us (and our president apparently) modafinil.
Is that the necessity of the "Kobe Beef" treatment regemin currently popular within a short radius of 1600 Penna. Ave.?
- Ned
TPTB are happily flogging flu vaccines that benefit 1% of recepients.
Still primative, but 100% better than bleeding the sick.
The analogy goes further. The bleeding was called purging, and there is a direct association with morality. If you have sinned, you can redeem yourself by atoning for it. Similarly economics easily leads to calls for prudence and sacrifice to atone for spend-thrift and lazy ways. Debtors must be punished and forced. Economic talk easily gives way to organic terms like healthy, robust, strong, flexible, and resilient. These are the surest signs of getting away from the spirit of inquiry. In the end all the passion and vitriol makes clear that it's mostly about one group of moralists fighting with competing moralists in a bid to subject others to the whip of their particular discipline.
"Economic talk easily gives way to organic terms like healthy, robust, strong, flexible, and resilient. These are the surest signs of getting away from the spirit of inquiry." Fabulous point!
You can add sustainable to that list, as it is equally undefinable and ultimately a moral judgment. All these terms rely on value judgments about what defines a "good" system. Some see stability as good, others see volatility or growth in a certain direction as good. CHS is right in pointing out that by introducing mathematics and quantification, economists have mystified the field in an effort to disguise the value-laden nature of economic decisions.
Was slightly optimistic when I started reading this article, but then it didn't say anything... just a rant, no details explaining the analogy, no science. Whats the point?
Also, why not quote where you stole this from? http://www.nytimes.com/2011/09/19/opinion/economic-bleeding-cure.html
Have you noticed they pratice modern day bloodletting?
Every Dr. now takes five vials or more of you blood and yet they all never seem to figure out what ails you?
Has anything changed?
Many Heart Patients Anemic After Too Many Blood Tests in Hospitalhttp://health.usnews.com/health-news/family-health/heart/articles/2011/0...
What's next? Trepanation to improve cerebral blood circulation?
Trepanation is the practice of making a hole in the skull in order to improve the brain pulsations and hence the overall well being.
A trepan is the instrument used for making a hole in the skull bone. It is sometimes spelled trephine. The idea is to pump up the brainbloodvolume. It's known that one's level of consciousness is directly related to the volume of blood in one's brain. As a result, trepanners say, one feels happier and more energetic. The practice of trepanation has been around since the Stone Age. Trepanation is the oldest surgical procedure practiced by mankind.
Nothing else has worked.
http://www.trepanationguide.com/
picture a field of meerkats....the land around is full of meerkat goodies (leeches and worms and grubs). It has a self-policing tribal structure and alert system for predators that exist in sufficient numbers to prevent a meerkat population explosion as they swoop down out of the sun. Now picture the meerkat population dotted with "special" meerkats acting as economists and elected officals explaining the behaviour of the meerkats in terms of the free or managed markets (meerkats). What happens when the meerkats run out of leeches or a new predator emerges? Do the economist meerkats and government meerkats find new leeches or adapt to the new predator before or after all the other meerkats move on or are wiped out? My guess is the main body of meerkats moves somewhere safer and with more food and the economists and government meerkats tag along, because without the rest of the meerkats, economists and governments have no purpose!
Only with the advent of a true understanding of the nature of infection, the immune system and disease did the "folk" pseudo-science of bleeding pass from accepted medical practice.
Medicine has always operated on ridiculous theories that are never proven, which is why they're theories not facts. These ridiculous theories are disproven by simple observation every single day, but it doesn't seem to matter. These ridiculous theories are so widely believed and promoted by the medical / government establishment, no opposition has any chance of being heard.
The basis of these ridiculous theories today has nothing to do with science nor health. The basis is money, plain and simple. Like any other area, follow the money and you find the truth.
We see the same thing in economics. Ridiculous theories that are never proven, but in fact dis-proven every single day by simple observation. Like medicine, it doesn't seem to matter, because these ridiculous theories are so widely believed and promoted by the economic / government establishment, no opposition has any chance of being heard.
These are two examples of the state of affairs in all academia. Severe resistance to any idea challenging their widely believed pet theories.
MIT Professor Don Sadoway said "Science is very hostile to innovation."
Actually it's not science that's hostile. It's academia. In every discipline, except engineering perhaps.