Class Warfare Blog

May 15, 2017

Economists Fail and Fail and Fail …

I could envision a role for economists in modern society except they continue to be willfully blind. They are blind because they have their heads so far up their asses.

Follow me now. Before the Great Depression, economists were only interested in small economic exchanges. But the misery of the Great Depression created the impetus to look at the economies of entire countries, even regions. Macroeconomics was born. (The goal was to prevent depressions, even recessions from ever occurring again.)

Like the “old” economics, microeconomics, certain simplifying assumptions had to be made and like the old economics, the simplifying assumptions lead to completely false conclusions. In microeconomics we ended up with the philosophy that markets were self-correcting and created an optimal economic situation. This dogma is, in truth, a piece of wishful thinking on the part of these academics. They wanted something that seemed directed at keeping the fairy systems they created balanced and whole. This belief that markets are benign and create a natural equilibrium inside of a larger economy still exists today as a political goal of those profiting from that mistaken assumption.

Macroeconomics, not to be out done, also had to make some “simplifying assumptions,” in its quest to understand how to prevent events like large recessions and depressions. In order to make things “doable” they decided to include the role banks play in our national economy but leave out finance. For reasons strange to a casual observer to understand, they also decided to leave out private debt. So, what has been the role of finance in the last 40-50 years in the U.S.? It has been to “financialize” the economy to the point that Wall Street doesn’t serve businesses in the manner you learned in school (by providing capital for businesses to modernize, expand, etc.) but now businesses exist to serve Wall Street. The money generated through finance has created a class of oligarchs who have captured the mechanisms of government and are now running it for their own benefit. They went on to shift governmental burdens off of businesses and onto private citizens, so that private debt has ballooned mightily, leaving citizens with little to buy anything with after ordinary expenses and debt service.

And what do economists have to say? “Move along, nothing to see here,” like all good Stormtroopers. One has to wonder whether the rich of a hundred years ago, having taken such a financial beating in the Great Depression, didn’t guide the creation of modern economic theory as a way for them to get back to the top and stay there. And this time, they are serious about hanging on, no matter what it does to you, me, or the country as a whole.

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5 Comments »

  1. “One has to wonder whether the rich of a hundred years ago, having taken such a financial beating in the Great Depression, didn’t guide the creation of modern economic theory as a way for them to get back to the top and stay there.”
    Yes, but not with malice aforethought 🙂
    The cycle of “optimisation” ends up having the effects you mention. I’ve seen it happen in the auction houses in the past 20 years in an extraordinary way. Not only do they make money on every aspect of the business now (from transport, to insurance, to photography of items), but they also make it so they have no responsibility for anything. That means a client might walk in wanting to sell a vase, it can go into an auction, not sell, and the client can be stuck with substantial fees.

    Comment by The Pink Agendist, née Mr. Merveilleux — May 15, 2017 @ 4:20 pm | Reply

    • Re “Yes, but not with malice aforethought :)”

      LOL! Greed aforethought, just greed. The appalling thing is that these plutocratic actors are already so rich, they couldn’t possibly spend the money they already have, e.g. to spend a billion dollars in a calendar year, you have to spend over $500,000 per hour every hour of every day of the work year (business hours, buying in your sleep not allowed). Many of these assholes have made more in one afternoon than I have made in my entire career.

      On Mon, May 15, 2017 at 4:20 PM, Class Warfare Blog wrote:

      >

      Comment by Steve Ruis — May 15, 2017 @ 9:10 pm | Reply

  2. They are blind because they have their heads so far up their asses.

    Remember the Irish economics student we used to follow? He nailed it when he said to get ahead in economics you need to publish a formula. Doesn’t matter if that formula is total and complete shit, just having it, pretty as they are, is enough.

    Comment by john zande — May 15, 2017 @ 6:56 pm | Reply

    • He’s (Robert Nielson?) still blogging, mostly about Irish politics and Esperanto now.

      Can you imagine leaving finance out of macroeconomics. In their defense, finance was not as big as banking in those early days, but now, it is not even close? And private debt?

      On Mon, May 15, 2017 at 6:56 PM, Class Warfare Blog wrote:

      >

      Comment by Steve Ruis — May 15, 2017 @ 9:13 pm | Reply


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