Over the years I’ve now become resolute in holding the conclusion: the so-called “smartest people in the room” when it comes to economics, monetary policy and more – are those that staunchly oppose venturing into said “room,” for fear the permeating idiocy wafting unimpeded would be more dangerous to their mental faculties than deliberately walking in front of a moving semi.
It is absolutely dreadful what is touted as “insightful.” The evermore frightening aspect to the above is much of this monetary, economic policy dogma is then inflicted on a populace with disastrous results, while they are unaffected. i.e., Their salaries, pensions and more remain intact, regardless.
What adds further insult to injury is their speaking fees and venues to blather more of this idiocy to a group of political sycophants with the power to enact also grows. Halloween may come once a year, but the horrors this group can inflict on a global scale makes thermonuclear war appear like child’s play.
Today, we are, once again, being bombarded with the idea that not only is MMT (modern monetary theory) the way to go, but also the perfect vessel to bring it to us. e.g., Stephanie Kelton.
Ms. Kelton in now considered among the intelligentsia set as a “rock star” when it comes to economics out of her frequent cable news appearances as one of Bernie Sanders top economic advisers. The issue is not with her affiliations or “rock star” status, my issue is with her theory, MMT – for it is nothing more than gobbledygook for enhanced mental masturbation to the intelligentsia class.
Let me make this one point, which is the most relevant to any and all economic theory, that lays waste to any and all comers like the Sword of Damocles: Once this theory meets the cold reality that a people, country, __________ (fill in the blank) deem it as a con and want some other form of payment than what this theory bases itself on – it falls apart in toto, rendering all it’s so called “hypothesis and theories” to the trash bin of history with immediacy. Period.
What everyone (especially this so-called “smart crowd”) seems to forget is the very simple fact that where we are currently in regards to currency, reserve status and more is based entirely on confidence. That’s it.
In this world currently known as “fiat dominance” all it takes in just one, repeat, one debt holder to no longer hold your form of payment as “acceptable” and the entire charade collapses in a manner that would make Charles Ponzi wince.
Think that’s hyperbole? Fair point, so lets use just one small example and see how it may work out in a real-world environment, shall we?
China demands all future trade to be settled in, oh, let’s use Euro’s, because the Renminbi (i.e.Yuan) is just too easy. Let’s also say to back up this “idea” that China begins selling U.S. Treasuries en masse and converting them into, oh I don’t know, let’s use some other new and improved version of lunacy say, 100 year Euro bonds, tit for tat. What does one contemplate will happen next?
Now I can hear some of you right through my screens yelling “They would never do it, besides, there aren’t enough to replace that magnitude so quickly!” Fair point, here’s the problem – all one has to do is openly get the ball rolling in earnest. i.e., just actually start. And – it’s all over.
The Federal Reserve could turn around and buy all the Treasuries, stocks, bonds, ________(fill in the blank) it wants. But it wouldn’t matter, because outside of the U.S. – they wouldn’t be worth dog crap. And the more they bought, the faster the progression from dog sh#t, to cat, to mice, to amoeba. Remember: If printing your currency to prosperity truly worked – Venezuelans would be eating caviar daily, rather than searching for their pets or escaped zoo animals for sustenance.
Oh yeah, lest we forget, it’s this same crowd that held up the policies of Venezuela as “proof” that their theories worked – until they morphed into what we see today. Now you’re more likely to find these clarion callers on the back of a milk carton rather than in public touting their prior slobber. Paging Mr. Stiglitz. Mr Stiglitz? Bueller?
Again, if you think any of the above is either harsh, or not criticism worthy? Let me expose to you what happened with another Nobel Laureate for economics, Paul Krugman.
In an interview at a NYT™ conference he made the following statements. Below are a few pull quotes from an article by Michael Hirsh at Foreign Policy™. To wit:
Paul Krugman has never suffered fools gladly. The Nobel Prize-winning economist rose to international fame—and a coveted space on the New York Times op-ed page—by lacerating his intellectual opponents in the most withering way. In a series of books and articles beginning in the 1990s, Krugman branded just about everybody who questioned the rapid pace of globalization a fool who didn’t understand economics very well. “Silly” was a word Krugman used a lot to describe pundits who raised fears of economic competition from other nations, especially China. Don’t worry about it, he said: Free trade will have only minor impact on your prosperity.
Now Krugman has come out and admitted, offhandedly, that his own understanding of economics has been seriously deficient as well. In a recent essay titled “What Economists (Including Me) Got Wrong About Globalization,” adapted from a forthcoming book on inequality, Krugman writes that he and other mainstream economists “missed a crucial part of the story” in failing to realize that globalization would lead to “hyperglobalization” and huge economic and social upheaval, particularly of the industrial middle class in America. And many of these working-class communities have been hit hard by Chinese competition, which economists made a “major mistake” in underestimating, Krugman says.
It was quite a “whoops” moment, considering all the ruined American communities and displaced millions of workers we’ve seen in the interim. And a newly humbled Krugman must consider an even more disturbing idea: Did he and other mainstream economists help put a protectionist populist, Donald Trump, in the White House with a lot of bad advice about free markets?
To be fair, Krugman has been forthright in recent years in second-guessing his earlier assertions about the effects of open trade. He has also become a leading and sometimes harsh critic of his own profession, especially in the aftermath of the financial crisis and Great Recession, when he declared that much of the past 30 years of macroeconomics was “spectacularly useless at best, and positively harmful at worst.”(Source)
I encourage you to read the entire article for yourself, while I also believe the above pretty much tells one all they need to know. i.e, Speculate just how wrong he is that he has had to come out and say it, rather than partaking to the requisite “milk carton” scenario.
This is not the first time I’ve made the above arguments. Back in April, 2016 I stated in the end the Federal Reserve would fall victim to its own perceived success when I wrote the article “Absurdity: When The Con Believes The Con” in regards to then former Chair of the Federal Reserve, Ben Bernanke, to the screams and howls of this same intelligentsia crowd.
And what has happened since? Let me ask it this way…
How is that decreasing of the balance sheet and interest rate normalization going along?
In a day and age where 2+2=4 math is being taught as racist. The only math that still holds up is when 1+1+1= idiocy cubed. Or said differently: when past, present and future economic, monetary theory meets the reality of the day, it is sheer lunacy – that it is this ilk – that still has standing to express it.
Someone, anyone: please take away their chalk or markers before more wealth and prosperity is laid to waste via their black and white boards.
© 2020 Mark St.Cyr