Guest Post: Whitewashing The Economic Establishment

Tyler Durden's picture

Submitted by John Aziz of Azizonomics

Whitewashing The Economic Establishment

Brad DeLong makes an odd claim:

So the big lesson is simple: trust those who work in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger. That means trusting economists like Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right.

Larry Summers? If we’re going to base our economic policy on trusting in Larry Summers, should we not reappoint Greenspan as Fed Chairman? Or — better yet — appoint Charles Ponzi as head of the SEC? Or a fox to guard the henhouse? Or a tax cheat as Treasury Secretary? Or a war criminal as a peace ambassador? (Yes — reality is more surreal than anything I could imagine).

The bigger point though, as Steve Keen and Randall Wray have alluded to, is that DeLong’s list is the left-wing of the neoclassical school of economics — all the same people who (to a greater or lesser extent) believed that we were in a Great Moderation, and that thanks to the wonders of modernity we had escaped the old world of depressions and mass unemployment. People to whom this depression — judging by their pre-2008 output — was something of a surprise.

Now the left-wing neoclassicists may have done less badly than the right-wing neoclassicists Fama, Cochrane and Greenspan, but that’s not saying much. Steve Keen pointed out:

People like Wynne Godley, Ann Pettifors, Randall Wray, Nouriel Roubini, Dean Baker, Peter Schiff and I had spent years warning that a huge crisis was coming, and had a variety of debt-based explanations as to why it was inevitable. By then, Godley, Wray and I and many other Post Keynesian economists had spent decades imbibing and developing the work of Hyman Minsky.

To my knowledge, of Delong’s motley crew, only Raghuram Rajan was in print with any warnings of an imminent crisis before it began.

DeLong is, in my view, trying to whitewash his contemporaries who did not see the crisis coming, and inaccurately trying to associate them with Hyman Minsky whose theory of debt deflation anticipated many dimensions of the crisis. Adding insult to injury, DeLong seems unwilling to credit those like Schiff and Keen (not to mention Ron Paul) who saw the housing bubble and the excessive debt mountain for what it was — a disaster waiting to happen.

The most disturbing thing about his thesis is that all of the left-neoclassicists he is trying to whitewash have not really been very right about the last four years at all, as DeLong freely admits:

The third surprise, however, may be the most interesting. Back in March 2009, the Nobel laureate Robert Lucas confidently predicted that the US economy would be back to normal within three years. A normal US economy has a short-term nominal interest rate of 4%. Since the 10-year US Treasury bond rate tends to be one percentage point above the average of expected future short-term interest rates over the next decade, even the expectation of five years of deep depression and near-zero short-term interest rates should not push the 10-year Treasury rate below 3%.

Yet we are supposed to take seriously the widely proposed solution? Throw money at the problem, and assume that just by raising aggregate demand all the other problems will just go away?

As I wrote back in August 2011:

These troubles are non-monetary: military overspending, political and financial corruption, public indebtedness, withering infrastructure, oil dependence, deindustrialisation, the withered remains of multiple bubbles, bailout culture, systemic fragility, and so forth.

These problems won’t just go away — throwing money around may boost figures in the short term, but the underlying problems will remain.

I believe that the only real way out is to unleash the free market and the spirit of entrepreneurialism. And the only way to do that is to end corporate welfare, end the bailouts (let failed institutions fail), end American imperialism, and slash barriers to entry. Certainly, cleaning up the profligate financial sector would help too (perhaps mandatory gladiatorial sentences for financial crimes would help? No more paying £200 million for manipulating a $350 trillion market — fight a lion in the arena instead!), as would incentives to create the infrastructure people need, and move toward energy independence, green energy and reindustrialisation.

Then again, I suppose there is a silver lining to this cloud. The wronger the establishment are in the long run, the more people will look for new economic horizons.

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knukles's picture

LOL

Foolishness.
Pabulum, propaganda, rubbish and tripe.

Minsky's work is diametrically opposed to those he cites.
Garbage galore.

vast-dom's picture

Hey John guess what? Ponzi is the head of the SEC. And The Fed. And JPM. And he also happens to be the Prez. Amazing what alter reality is when you care to look....

Aziz's picture

Yeah all four examples I used are from reality, not my imagination.

vast-dom's picture

great posts Aziz! thx man. 

 

edit: wanna talk about whitewashing? un-fucking-believable and yet somehow expected:

 


ECB, Bank of England seen easing next week European Central Bank is expected to cut interest rates

http://www.marketwatch.com/story/ecb-bank-of-england-seen-easing-next-we...

 

strannick's picture

Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right.

Orwell would be proud of the sentance above, and Goebells would give him a sticker on the top of his page.

AldousHuxley's picture

academia is a mouthpiece for the power elite. theories elties support will be taught.

 

look at rubinites. Hillary lost, but her banksters are running the scene behind Obama.

Richard Chesler's picture

Delong time sucking bankster cock.

Do fart on the general direction of fake intellectuals.

FutureShock's picture

This just baically say lets get this over with and those in power were idiots .....  just getting it over with is not practical. We have problems with underlying problems and the key is to get rid of the problems as they come up and as they can be best predicted one at a time while trying for recovery and time. All at once would mean a long long time for recovery, lots of pain which is easy to say but real pain...there are kids and families without a clue.....no milk in the store to quote Paulson in the to big to fail movie. It is easy just to say more debt to pay more debt is crazy but it is too simplified. Very smart guys got it wrong which is easy to see now but perhaps not so much then.  Kind of like Greenspans recent comments, we are doing well bailing out the boat wthout fixing the holes, keeping inflation in control, I add maybe we can make it shore one day meaning the right adminstration and political will with even a slight cut in the corruption.

El Oregonian's picture

I don't think you put enough emphasis on that hack Paul Krudman.

sgt_doom's picture

Knowing their program beforehand simply means insider info, dood.

Check those names against  the membership lists for:  Group of Thirty (group30.org), Bretton Woods Committee (brettonwoods.org) -- (lobbyist group for the international super-rich, Peterson Institute, etc.

Was Krugman correct when he stated that all climbing oil prices in 2008 (paper market price 13.8 times above physical market price) was "simply supply and demand" ???

Was Krugman correct when he stated that QE I and II wasn't for the banksters -- that they didn't want it nor like it????

Was Krugman correct, in a recent talk before the EPI, when he claimed the banks were quite healthy (anyone note that recent Moody's downgrade), and that the cause for the economic meltdown was too much household debt?????

The ONLY thing Larry Summers has ever been right about was his remark that women can't do science . . . .after all, Marie Curie only was only awarded two Nobel prizes in science!

Winston Churchill's picture

Are you sure ?

I thought Corzine was elected head last October.

Newsboy's picture

SOMEBODY might be able to "trust" Larry Summers, but it isn't anybody I know, and they would be trusting what comes out of the OTHER side of his mouth.

jez's picture

Haah-vud trusted him enough to make him president. That ended up costing them a billion or two. Plus his salary.

RockyRacoon's picture

...end corporate welfare, end the bailouts (let failed institutions fail), end American imperialism, and slash barriers to entry. Certainly, cleaning up the profligate financial sector would help too (perhaps mandatory gladiatorial sentences for financial crimes would help? No more paying £200 million for manipulating a $350 trillion market — fight a lion in the arena instead!), as would incentives to create the infrastructure people need, and move toward energy independence, green energy and reindustrialisation.

Add world peace, kindness to animals, and the Garden of Eden to the list of your things that ain't gonna happen.

Vic Vinegar's picture

The Garden of Eden is here and now.  It's just that man taking a bite of the apple, wanting to know things he cannot that makes it seem otherwise.

But I agree with your post.  Look at the dude who started lazycash9.com for example - he doesn't give a fuk about how the world "should be".  He's dealing with how it is.  Articles like this are simply mental masturbation.

RockyRacoon's picture

Most folks know how to fix the problems.  Mr. Aziz sniping at Mr. DeLong ain't on the list of solutions.

I'll know we are well on the road to a fix when some sonsabitches go to jail, and I don't need to name them here, but THAT ain't gonna happen either.   It's a complete reset -- or nothing.

I'm crouched and ready, waiting for the starting pistol.   And it ain't shooting blanks.

Aziz's picture

Yeah, my wish list will not happen any time soon. You have to deal with reality. 

And to be honest, the status quo is collapsing. Eventually we will get a chance to replace the status quo. That's a good time to have a wishlist.

Plausible Deniability's picture

Solid analysis none the less. We may be closer to realizing many aspects of your wishlist than at anytime in the past 50 years. Total capitulation and devastation is often followed by Renaissance, even if it takes quite some time. The Keynesian left wing economists are no more than Phd'd Marxist central planners, whose models are born in the vacuum of academia. The irony that I have always found so perplexing and amusing is that their theories are carried on the back of the same capitalist structure the seek to usurp. Simply put, they monetize the credibility of a government/central bank to better control and normalize the inequitable capitalist economy that funded and enabled said government/central bank in the first place.

Anyway, completely agree with your call for the renewing/unleashing of the entrepeneurial spirits that built this country.

Atomizer's picture

 

 

EXCLUSIVE: Report from Inside a Major Insider Rothschild Conference

EPJ had a mole inside a recent insider Rothschild Conference. The conference was held on June 21-22, 2012 in Bratislava, Slovakia

spekulatn's picture

Nicely done, Mr. Aziz.

 

"Remember your mortality"

 

http://www.thedailybell.com/4043/Anthony-Wile-Memento-Mori-

Duke of Con Dao's picture

here's a vid of Something about Larry Summers in his full glory from The Social Network

tightly edited to remove the dull bits (less Winklevoss's)

https://www.youtube.com/watch?v=haD1xUPHF7o

(this piece was highlighted in a New York Observer article) ENJOY

falak pema's picture

who would want to whitewash "absolute black"???

john39's picture

Henry Kissinger, also a war criminal, responsible literally for millions of deaths in Asia, is considered a statesman.   what else do you need to know about the forces that run the world?

falak pema's picture

that they are human...in all their variety and complexity. Some are worse than others.

jeff montanye's picture

and those at the top seem all too often to be the worst of the worst.

mendolover's picture

Well all I know is that there is a VERY special place in Hell for Larry Summers and his ilk.  This guy Brad DeLong should be lumped in with the rest of the globalist elites, of which there are around 10K from I've read.  We can take 'em!!

Ron Paul 2012

catch edge ghost's picture

just a slight correction...

"The wronger the establishment are in the long run, the more people will [suffer and die]."

And generally the dead only vote in really tight elections where the incumbent is in jeopardy.

Fred Hayek's picture

DeLong is INSANE.

He thinks Paul freaking Krugman, Paul "Createsomedebt!Createsomedebt!" Krugman is in the tradition of Minsky?! Minsky pointed out how conventional economics ignored debt and how wrong that was. Krugman literally advocated creating a housing bubble in 2002 to avoid a recession. He's literally preaching to his drone followers at the ny times that there are NO significant consequences to the U.S. taking on debt almost an order of magnitude greater than that in which we're already drowning.

DeLong is insane.

lynnybee's picture

plz, do not mention that man's name ever to me.    Larry Summer & Robert Rubin, i will not rest easy until these people are in jail.    those two should be in cuffs & suffering badly.     i could say more, but, will keep my typing shut for fear of junking.  

RockyRacoon's picture

Not likely you'll get junked here at ZH for that sentiment, Lynny.  Maybe elsewhere.

nmewn's picture

Never fear the cowardly anonymous junker LB.

Embrace him...hold him close, so you can get the angle just right ;-)

geekgrrl's picture

Thanks for that Lynnybee! But I'd add Hank Paulson, who threatened the Congress with martial law; this, in and of itself, clearly signals who is running things and that it's a criminal racket.

I also agree with Rocky and nmewn that you're unlikely to get junked for that sentiment here, and even if you were, it would probably be from a Fed lackey or a useful idiot, so I wouldn't worry too much.

Illegitimi non carborundum. (Don't let the bastards grind you down) And, don't fear the junk. You're one of my favorite commenters :-)

rambo1028's picture

Out of curiosity ...do you guys think barney frank is evil or just a stooge?

I vote stooge....

lynnybee's picture

p.s.   on the bright side, tho, i would like to profusely thank Robert Rubin for those cheap gold prices back in the early to mid 1990's !    thank you for the cheap gold bracelet that has quadrupled in price, i'll end up selling it for food, i'm sure.      Robert Rubin, Larry Summers, god damn criminals, thieves & looters ! 

slewie the pi-rat's picture

throw money @ slewie and accept austerity for yourselves or the system will collapse, BiCheZ!

OMG!  there it goes!  call now!

sangell's picture

Laying all the economists end to end across the Sahara desert might be the proper solution to our economic problems. The expense of maintaining these 'useless eaters' is a significant burden to any society. Heeding their advice ruinous in most cases.

A Lunatic's picture

Laying all the economists end to end across the Sahara desert..............

With strings tied to their balls on one end and a moon rocket at the other.

geoffb's picture

I was thinking more along the lines of the human centipede. Garbage in garbage out.

http://m.imdb.com/title/tt1467304/

Plausible Deniability's picture

Moon rocket! HAHAHAHA! I'm LMAO!! I needed that

GlomarHabu's picture

If all economists were layed end to end across the Sahara or for that matter arced all the way to the moon they could not reach a conclusion.  The cardinal rule in all of the "anointed" world of influential people is to give the people a date, or give them a number, but NEVER provide both simultaneously.

Amish Hacker's picture

"If all the girls who attended the Yale prom were laid end to end, I wouldn't be a bit surprised."

Dorothy Parker

Cthonic's picture

Economists mostly are shills for the establishment, whatever that establishment might be.  If you want to partake in good theoretical economics, you'll need to read the works of a lot of dead authors, and not all of it is even translated.  People like Irving Fisher, Joseph Schumpeter, von Mises, Jean-Baptist Say, and the anomalous Friedrich von Wieser.

 

"There is no security of property, where a despotic authority can possess itself of the property of the subject against his consent. Neither is there such security, where the consent is merely nominal and delusive." -- Jean-Baptist Say

Some truths are immutable, and most modern economists stand in the shadows of tall giants while proclaiming it is night.

blindman's picture

On the Edge with Catherine Austin Fitts

Posted on June 30, 2012 by stacyherbert|
http://maxkeiser.com/2012/06/30/on-edge-catherine-austin-fitts/

CloseToTheEdge's picture

"Long ago, I made a promise that I would never act against the best interests or the excellence of my own people — that I would do my best to ensure that we were worthy of the stewardship of our world and that we did our best to leave a better world for generations yet to come. To make and keep such a promise is to understand that money and position are tools, not goals, and that death is not the worst thing that can happen."

C.A.Fitts

kevinearick's picture

"Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door”

Liberty

The foundation of govt is tax, and the only tax that matters is the one on economic profit, which is invisible to all but few, because it rests on the shore on the other side of the Valley, which the income robots fear only more than their own collective, woven into the emperor’s clothing.

Monetary policy can only leverage the outcome, the leader of the “free” world is taxing economic inactivity, and the entire system is “e”mploding. Why?

Where do you suppose the kids, targeted by ACA, are?

For all the Internet chat, what are you doing?

Justice Roberts simply reminded the majority that it is its own fall guy, and that govt is a delay of delays, a black hole to be ignited.

Remember how this round began at Delong's place?

Peter Pan's picture

The world is not suffering just from bad eonomics. It is suffering as a result of bad men who are bent on perpetuating evil that spawns more evil, bad men who have inverted the list of priorities so that the least worthy cause gets the most funding. Bad men who fail to punish bad men and shield them as well. Bad men who are willing to strip whole communities of their livelihood by closing factories in pursuit of one more dollar in profit.

Rest assured that over the top military expenditure, men like Corzine being free, interference in the affairs of other nations and refusal to audit Fort Knox and to produce a report on silver manipulation, are all the evil results of evil men who may or may not understand economics.

TrulyBelieving's picture

Peter Pan, thanks for your comment, well said.  And in addition, 'For the sociopaths, to understand or not understand economics is not a priority. This is because their goal isn't to promote a fair and just sociaty where the 'pursuit of happiness' is unencumbered. But rather their goal is to empower and enrich themselves. A law is not for their purpose entended to maintain a free and purposeful sociaty, but rather a method used to control and steal from the deserving, in order to maintain their power. And nothing is too great to be sacrificed in order to increase their power.'