Topic: Economics
World's Economists: Clueless or Lying? Comments emerging from a world forum of top economists and investors in Davos, Switzerland this week raise the question: do economists really not "get it", or are they engaging in more smoke-and-mirrors?by Walt Thiessen
(libertarian)
Wednesday, January 27, 2010
The World Economic Forum met in Davos, Switzerland this week. A Geneva-based non-profit organization, the WEF met this year under the theme, "Improve the State of the World: Rethink, Redesign, Rebuild". It should have been named, "Business as Usual".
Business Week reported from the meeting, "Carlyle Group LP co-founder David Rubenstein said it's a 'pretty attractive' time to invest, telling New York University Professor Nouriel Roubini that his pessimism about the economic outlook is misplaced." Roubini, who predicted the crisis a year before it began in 2007, replied, "There is now a debate about the shape of this recovery. I see a faltering of growth in the U.S., Europe and Japan." A faltering of growth professor? That's a very mild way of putting it. The article goes on to quote Dennis M. Nally, global chairman of New York-based PricewaterhouseCoopers LLP saying, "We're not out of the woods yet. There is a cautionary view." Perhaps that's his way of saying that all hell is going to break loose by the end of the year, but it sounds rather milquetoast to me.
The India Times wrote of the event, "the bears of Davos are brandishing their claws again..." Their article quotes Bob Doll, vice chairman and chief investment officer for global equities at New York-based BlackRock saying, "The bears continue to preach. We lean to the bull case." Bull indeed.
I have two words for all the overpaid financial geniuses spouting their carefully hedged, double-talk nonsense at Davos: mortgage resets. They won't be major news in the first half of the year, but you can bet your unemployment check they'll be big news by the end of the year. And in 2011, it'll be 2008 all over again.
The troubling part of all this is that I'm certain, beyond any doubt, that every attendee at Davos knows this. Why, then, do they persist in peddling their cautionary optimism vs cautionary pessimism babble? Why not tell the world what is obvious to everyone, that the financial crisis not only has no end in sight, but that it will get significantly worse by the end of this year into next year? Cluelessness doesn't explain this, because the people in attendance at this meeting are all very bright. That leaves only one possibility: smoke-and-mirrors.
This is consistent with the history of debt-based monetary policy throughout the world. Debt-based money is "con man" money, so the con men who support it and profit from it routinely rely on building up the public's confidence in debt-based monetary systems in order to perpetuate those systems' existence. It is the essence of smoke-and-mirrors. I guess I shouldn't be surprised. These people have made (or encouraged the making of) fortunes from the debt-based monetary system, fortunes that were in some part funneled out of the pockets of average men and women via a banking system that lends out money that doesn't belong to the banks...or the investors who profit from those loans. Over the decades, the value of the money slowly seeps away under the banner of "low inflation", and it's the little guy who is hurt the worst by it all. He's the one who can't understand why his paycheck just doesn't seem to go as far as it used to.
Thank you, Davos experts, for your assistance in that regard.
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The problem is too many people think of mainstream economics as scientific. Science dictates you look at all the data and reject hypotheses that have counter-indicating data. If economists were scientists, there would be no Keynesians.
Posted By: Jahfre Fire Eater
Date: 2010-01-28 07:34:13
Hi Walt,
I like your observations and the questions they lead to.
While I disagree with analysis and reasoning that yields the bullish forecasts I don't conclude that every individual who promotes a bullish future is part of some pervasive conspiracy to avoid telling the "truth" about THE future your faith tells you is inevitable.
The "only one possibility" conclusion you reach is a stretch though. To reach this conclusion you first establish that there is only one possible future and these people "know" it. Both of these assertions are impossible to substantiate.
I would agree that the Davos attendees all know your scenario is a possibility. Yet, many do not choose to champion that possibility. Since you cannot see other possibilities you wrongly conclude there are none. This is the critical fault of every faith-based rationale.
At least you didn't beg them to "wake up."
I don't know what the future holds but my expectation is that some Human Action will alter the game such that the actual future cannot be known by following the logic of various ideologies from this point forward as if they exist in a vacuum; immune from the events in the real world.
Assuming one's opponents don't believe their own reasoning, and therefore, are lying and conspiring implies that they are immune to incentives and consequences. I see this as a pattern of faith-based self-reinforcing futility; defining the problems such that the outcome is pre-determined, divinely or logically, removes the incentive to choose constructive efforts for surmounting them.
Posted By: Walt Thiessen
Date: 2010-01-28 19:33:37
Perhaps you can enlighten me, then, Jahfre. Given the almost 100% certainty that we will see huge increases in mortgage resets in 2010 peaking in 2011 at roughly the same levels we had in 2007 and 2008, and given the extreme likelihood that they will lead defaults at relatively the same rate (if not more), what other possible prediction can be made except for another major downturn similar to 2008? Perhaps you think we'll just sail through relatively unscathed?
I agree that most of the time the future remains relatively obscured. However, this is one case where the future is very easily predicted with a very high degree of certainty.
Perhaps those at Davos who express optimism are assured to some degree that they have at least won the game. I don't think we should ever neglect to calculate the self interest apparent in their statements. It looks to me as though faith in promises to pay is breaking down worldwide, and as that occurs, there will be a growth in militarism to assert order. These Davos folks won't be winners during that state of affairs.
Posted By: Walt Thiessen
Date: 2010-02-19 06:42:41
Ben, you're probably right, but here's the thing: even if they believe they've "won the game", the questions still remain. How do they see us surviving not only the coming second round of the residential mortgage crisis, but also the now hugely looming commercial real estate crisis? The TARP oversight committee is now claiming that fully one-half of all commercial real estate in the country is "under water", meaning that the amount owed on it is more than the property is worth. Further, and even worse, one-third of all commercial property is likely to be unable to qualify for refinancing once their current contracts come due over the next four years. Put the two together, and another major financial crisis is a mortal lock. Yet, the economists are optimistic that the worst is behind us. Go figure!
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