Are Central Banks the Enemy?

As with used car salesfolk, plumbers, mechanics, doctors, lawyers, and yes, even economists, one should always pay heed to caveat emptor.

[quote]The Federal Reserve’s seemingly endless program of quantitative easing (QE) begun under Ben Bernanke, and continuing at a slightly slower pace under Janet Yellen, has some of the punditry and much of the electorate up in arms. With good reason.

Implicit in quantitative easing is the horribly obtuse notion that central banks can produce real economic growth through their monetary machinations. If only life were so simple.

Back in the world of the reasonable, the sole purpose of money is as a stable measure of value that facilitates the exchange of goods and investment. Quantitative easing, by its very name, involves the corruption of money’s sole purpose as a stable medium of exchange.

In that case it must be stressed that QE has in no way boosted growth. The latter results from investment in new and existing commercial concepts, and for destabilizing the value of money, QE works against the very investment that would drive economic growth.

Worse, the imposition of QE can only take place when the White House and Treasury support such a move, the latter support speaks to a desire on the part of the White House and Treasury to devalue the unit of account (the dollar), and as investors are buying future dollar income streams when they invest, QE acts as an investment deterrent.

Looked at in terms of financial markets, QE similarly has not been good for stocks. Indeed, stocks have been rallying ever since word emerged from the Fed two years ago about an eventual end to the program, and as markets always price in the future, it’s apparent that investors would logically prefer an end to what which logically does not, and cannot, work.

Taking this further, implicit in the suggestion that QE has been good for stocks is the view that the creation of liquidity in search of yield will force buyers into the stock market. That’s fine, but for an investor to buy, another investor must be willing to sell. The better question to ask vis-à-vis QE is just how much healthier the stock markets would be absent this investment-sapping ball-and-chain conceived by the ever-fraudulent economics profession.

Another persistent view about QE that’s popular even inside the crowd that is properly skeptical of it is the notion that QE amounts to “money printing.” It does not. To be clear, the Federal Reserve has not been printing money. It hasn’t needed to, and that’s where the horrors of the Fed’s machinations become most apparent.
forbes.com/sites/johntamny/2 … uch-worse/
[/quote]

Fair point. Personally I don’t think the federal reserve is a problem in itself. Other countries with stringent monetary policy have an equivalent institution. My take on the matter is that nobody actually knows how “the economy” works. That is, the idea that we can fiddle with this lever or that one and make “corrections” is based on a fundamentally flawed proposition: that humans can predict the future with any accuracy.

I know some people will at this point draw a parallel with climate change. The difference here is that the risk of (say) eliminating reliance on fossil fuels is essentially zero, while the risk of (say) another round of QE is … completely unknown. As someone mentioned back there, the intent behind QE is that banks should use the money to stimulate spending. They didn’t. Or not much. This is fact: there is no debate about it. Several economists have pointed out that it would have been better to just give the money to citizens (which is what some countries actually did). But I don’t think anyone could have predicted a priori the outcome of either action. Physical systems are sort-of predictable, up to a point. Humans, less so.

And there’s a broader question: should we even try to stimulate spending? The Keynesian rationale for it is that economies can get stuck in what a software engineer would call a deadly embrace (I forget the economic term for it). QE in that instance breaks the embrace. But the current recession was surely caused by too much spending. So is QE still appropriate? Would it not be better to get people used to the idea of spending less?

I’m not saying we should go back to a complete laissez-faire system, merely that social regulations have much more potential to do good than purely monetary ones.

And as mentioned, that’s exactly what does happen (to a greater or lesser extent). In other words, the problem (if there is one) is not the central bank, but banks in general: the money multiplier effect is a direct result of fractional reserve banking. Banks of any kind can effectively print money by making loans that do not in any sense represent the current level of economic activity.

Remember also that “money” does not just mean paper currency - it’s any fungible, tradeable instrument that fulfils the same function(s). In a high-trust society, even promises can be a kind of money - that’s the basis of invoice factoring. That suggests there are other, more subtle ways to prod a sluggish economy along.

Yes, some economists have made the exact same point. But doesn’t that suggest - as I said above - that any given monetary change can have entirely unpredictable consequences? Why is it that some people are saying QE “should” have this effect, others are saying it should have the exact opposite effect, and empirical reality appears to match neither opinion?

Anyway, all I’m saying here is that financial experts don’t seem to be the precision engineers they think they are. Rowland’s quotes from Bernanke (several of which I’ve read elsewhere) make that abundantly clear.

I wrote about that exact thing five years ago. I also think that giving money to ordinary citizens would have been just as, if not more effective in the long run. There’s several ways to stimulate spending. Both of those options would have worked, both have their advantages and disadvantages, and it’s the job of the central bank to weigh everything and try to make the best choice they can. This recession is different than others though. The fed felt, and in hindsight were probably right that in a balance sheet recession as this one is, the personal consumption route may not have taken hold either. They made a choice and it was a pretty good one. Was it perfect? Of course not, but it certainly got the job done. Or haven’t people noticed how strong the US is right now compared to their competitors? Sometimes I think some people just prefer to stay uninformed. It must make their pre-determined world make more sense. This mornings job report marks the 50th straight month the US had positive payroll growth, the longest streak ever.

And as I said, people conveniently forget that if lending picks up, that has several positive effects on the economy which would have to be weighed against the negatives you seem to be 100% focused on. For people to ignore the positives and just focus on the negatives is just disingenuous. Are we trying to have a real discussion based on facts and reality or not? If we are, then let’s try to look at the whole picture, not just half of it…

Economics is not an exact science in the sense that you can know everything empirically. You are committing a common fallacy in your assessment there. You seem to be making the assumption that since Economics can’t know everything, it therefore can’t know anything. We can’t control everything, so we shouldn’t try to control anything. This is very far from the truth. There is a whole lot that we do know, and a whole lot of cause and effects that we can accurately predict. You don’t throw the whole thing out just because there are some unknowables in the equation.

Let’s not forget how many things Isaac Newton got wrong, sometimes ass backwards wrong. That doesn’t change the fact that he’s still arguably the smartest person to have ever lived. Bernanke got some things ass backwards too and people can quote mine and prove that all day long if they want. This is true of everyone in the world. Again though, that doesn’t mean he isn’t still one of the smartest most informed Economists in the world, and the most suitable person to be at the helm.

We live in a system comprised of many different moving parts. Most people are lazy and find it easier to just blame results on one thing. They don’t want to apply some higher thought and understand the correlations of it all. Most people live in their FOX news 3 word catch phrase, social media 6 second information world where nuance is all but lost. Unemployment is too high, it’s Obama’s fault, end of story. Inflation is running hot, it’s the fed’s fault, QE fucked the world. This is far too simplistic to be helpful. The central bank just plays one role in the broader system. If the other aspects of the system did their part, we wouldn’t even be talking about QE right now. We would just be praising it’s success (as we should be anyway)

Personally I believe that if the Federal government got their act together, nobody would have even noticed what the fed was doing. The government also had an opportunity to do their part. If they simply took advantage of low interest loans and spent that money on infrastructure, manufacturing, technology, innovation, what the fed did with QE would have been a perfect fit. But that didn’t happen. Bernanke can’t control the tea party. Bernanke can only do what he can do with his role in the system. The government, corporations, individuals, they have to play their part too if the system as a whole is going to work.

It’s foolish to be so enamored of central bankers and quantitative easing that one concludes that the root causes of the near economic collapse in 2008 have been fixed. They haven’t been. QE was just a bandage over them and they didn’t somehow magically heal themselves. At some point, just as in Japan, some relatively minor economic dislocation will trigger them again and it’s more BenDollars – or in this case, JanetDollars – to the rescue. So long as bond vigilantes go along with this merry scenario by stepping back in to the bond market to buy the huge quantity of government bonds the Fed will no longer be ‘easing’ then this could go on forever – or not. Either way the all important effect on U.S. government borrowing costs won’t be immediate because the Fed’s huge bond portfolio has so cornered the market an artificial shortage of government bonds will persist for some time and the full effect of ending QE will be delayed.

[quote]Imagine that the Federal Reserve wants to increase the price of suntan lotion. There are 10 bottles of Hawaiian Tropic for sale at the cabana. The Fed buys one per hour until it owns nine. Each time it acquires one, the price for the remaining bottles rises because people who don’t want to get sunburned are competing for the dwindling supply. Now that just one bottle is left, the Fed stops buying. Would you expect the price of the last bottle to fall suddenly? No—there’s still lots of demand and constricted supply. Same with bonds. The price of bonds should stay high—and yields stay low—as long as the Fed hangs onto its huge inventory.

To mix metaphors, ending QE isn’t putting on the brakes. It’s just easing off the accelerator. The Fed’s bond holdings will naturally shrink as bonds come due; as new debt comes onto the market, the Fed’s portfolio will have less impact. For now, the Fed will continue to reinvest the proceeds back into other bonds. It says it won’t allow the portfolio to start shrinking until after it starts raising the short-term interest rate it controls, the federal funds rate. That’s likely to happen sometime in 2015, most economists expect.[/quote]
One immediate effect of the end of Quantitative Easing to be on the lookout for though is a decline in the carry trade – the “liquidity tsunami” the president of Brazil complained of – which has boosted asset prices in places like Hong Kong, Taiwan and Australia. That could be good for home buyers.

It’s much too early to make any judgement on that. It’s only been a couple of years. 20 years from now we’ll know whether it worked or not, and there’s another problem with economics: it’s really, really hard to observe the outcomes and gather empirical evidence for your actions. QE may have achieved some result, but how can we know? How can we point to QE as the source of that payroll growth you just mentioned? It isn’t at all obvious.

But lending didn’t pick up. Nobody disputes that.

I quite agree, and the big picture is awfully complex. The bottom line, I suppose, is that the $1trillion of monetary “stimulus” ultimately represents an equivalent amount of materials and manpower over the next … well, a long time to come. Will that activity have some useful purpose, or is “stimulating the economy” an end in itself? In other words, have the government just paid for an awful lot of make-work and stimulated more behind-the-scenes financial magic? Remember, there has been no meaningful reform of the banking regulations that allowed the whole thing to unravel in the first place.

Not at all. The study of economics has thrown up some very interesting results. However, a lot of it is pure hogwash. To take a very simple example, the idea of linear supply and demand curves is so foolish a smart 10-year-old could pick holes in it, yet a whole lot of macroeconomics is built on the assumption that such things are real and meaningful.

People respected Newton not because he was clever, but because he was right. Newtonian mechanics was 100% correct within a certain domain. Bernanke, on the other hand, clearly didn’t know his anal sphincter from a terrestrial excavation. Whether he was smart or not is completely irrelevant. It’s results that matter.

Spot on - which is why I brought up regulation.

And thankfully nobody here thinks it is fixed, so your straw man statement is quite vacuous in this discussion. Obviously our problems are far from over. The truth is we won’t ever get over the crisis we experienced. The great depression did permanent damage to the economy, as did this latest one in 2008. The best we can hope for is that we make some positive moves to reduce the lasting effects and we return to a “new normal,” but the scars will always remain. QE was necessary to stop the bleeding. It was in no way shape or form meant to be the ultimate solution. That is yet to come. That will require central banks, government, corporations and individuals, both domestically and around the world to start working together and make some changes. The bandaid QE program just gave us a chance. The hard work is still ahead. Sadly, people are still focused on the past, questioning the very bandaid that allows us to still be here to be having this conversation. Personally, I’d rather actually be constructive and talk about what’s next…

But nobody wants to do that. When asked the simple question: Ok, if we do what you want and abolish the fed, WHAT THEN ? Err… um… well… fuck QE ! Very profound :unamused:

As a scientist you should know the answer. We take our results and compare them to other groups, eliminating variables. What happened to other economies when they didn’t act as fast and as swiftly as the fed? The answer is right there in the data. QE served it’s purpose, but it’s not a scalpel, it’s a machete.

Which is why I keep harping on the same thing over and over. It’s silly for people to be wasting time and energy arguing about QE which has already taken place. The hard work is still ahead. Financial regulation, meaningful government programs, individual responsibility, and time. If we drop the ball now, QE will have been for nothing. Continuing to beat the dead horse, QE was not meant to save us. It was meant to buy some time and give us a chance to save ourselves going forward.

As much as I understand why you and many others feel that way, I can assure you that is not the case if you continue with your studies beyond the entry level courses that many people have taken. Yes some Economics is built on false assumptions, especially early on. Perfect competition, perfect information, linear curves as you mentioned, it’s all bullshit of course when talking about the real world. But that is only taught in order to give people a base on which to expand. Entry level courses aren’t meant to be taken seriously and they certainly don’t give people any practical ability to analyze the real world. It’s just text book crap to pass the course and move on to the good stuff.

The real fun begins when you combine math and economics. Econometrics is real world applicable, but it isn’t something that is easy for the average joe who passed a few econ courses to follow. I would imagine much like any profession. Just because I passed some physics courses in university doesn’t mean i’m ready to debate Neil Degrasse Tyson.

Just because someone passed a few econ courses in university doesn’t mean they are ready to question Bernanke’s decisions. There’s a lot of very smart Economists who do question him, and they have every right to because they are doing it based on a good understanding of the problem. They put the work in and deserve to be in the room, to be in the conversation. If people question Bernanke and the fed based on actual fundamentals and a real understanding of the problem, we take those criticisms seriously. But why should we lend any credence to the opinions of people who haven’t even an introductory level understanding of the problem?

He was right on many things, but wrong on others. So was Einstein, as was every expert on all subjects throughout history. Even the most brilliant people make mistakes. Bernanke is an expert who got a lot right, and a few things wrong. Is there a point to any of this? Finley says he doesn’t know shit, so that means something? That’s rather arrogant don’t you think? Do you honestly not know why he held the position he did?

Do you respect it when unscientific people with no facts, evidence, or understanding say the IPCC is bullshit, their findings meaningless, and the people involved are idiots? No, probably not.

Try as i might, i can’t see what Newton and Einstein have to do with economics.
I also haven’t seen evidence that economics has anything to do with science.

What i can see is that whatever clever schemes some politicians and economists come up with, there are some people who take advantage of these schemes - and most of those are people in what you might call “privileged positions”, that is they already have the money, legal structures, and international connections at their disposal that allows them to profit, whether it is by investing in a wide variety of markets (including markets in other countries), whether it is taking advantage of currency exchange rate fluctuations, or whether it is by influencing law makers and regulators to get laws and regulations that are favourable. With any thing, device, or system, creative people will always find ways that designers did not foresee.

Economics does not seem any closer now to becoming the tool to meet the needs of any society than it was 60 years ago - the only tool that has so far proven to work (to the extent possible) is a set of enforceable and enforced rules based on on ethics and values. And since capitalism has proven to be as healthy as cancer (it has pretty well destroyed democracy already in most parts of the world and has long become uncontainable by national boundaries), religion is making a comeback, because religion can offer something that capitalism cannot: if not a reasonable level of fairness and justice (as in the case of some ethically inspired religions) then at least a level of certainty (as in the case of religions that could be described as personality cults). Sad to see that these two thought systems are the only real contenders in most of the world right now (i prefer non-religious humanism, federalism, and democracy, but reality is not doing me that favour: apparently most people like something that is more black and white).

Quite.

Economics actually purports to be two things: a science and a technology. The idea that any science can be based on this:

is frankly appalling. My degree subjects were electronic engineering and psychology, and in both cases we were required to study additional mathematics (advanced calculus and statistics, respectively) right off the bat. That was considered a basic prerequisite. I would expect an economist to study, in his first year, the mathematics of dynamic systems (eg., differential equations, laplace transforms, and linear feedback systems), complexity theory, and cognitive psychology. A science degree should not involve any “text book crap” which “isn’t meant to be taken seriously”. It’s supposed to give you a solid foundation for further study. It certainly shouldn’t be using 8th-grade math on the basis that candidates might not understand anything else, nor should it be teaching anything that doesn’t represent - however imperfectly - the real world.

If such faulty ideas remain lodged in an economist’s head - even if eventually “superceded” by whatever he learns during his PhD - it should be obvious that any technology based upon them will be faulty too.

You’re quite correct that I’m in no position to assess whether QE was “successful” or not. However, I can observe results, and I can apply some general principles. For example, this:

has its limits, partly because you can never be sure what all the variables are, and partly because large economic experiments are unrepeatable (a fundamental requirement for a Science). No recession of this type has ever occurred in human history. No two countries had the same experience of it. It’s a one-off. The technocrats may have had some better gut feeling than the rest of us, but basically they were flying blind. They also would have had a very limited definition of “success”: the aim was simply to get all the dials in the green zone, on the axiomatic assumption that this will make everything all right again. The possibility of making some political or human progress out of this crisis wasn’t even mooted.

And my original question still stands: should we try to “correct” recessions? Are there other things that can be done? I suggest the failure to reform banking systems was the most egregious problem with QE: it wasn’t a stopgap, it was deliberate evasion of the underlying problem. The doctors treated the symptoms instead of the illness, and I can see no evidence that structural changes are even being talked about, nevermind implemented. The question here is not “did QE work?”, but “could we have done something much better?”. I suggest the answer is yes. If you want alternative examples:

  1. The government could have performed a New Deal style intervention, spending $1T on a complete new transport infrastructure for the US. America, almost uniquely, has all the pieces of the puzzle but refuses to assemble them. There would have been nothing like it on the planet. They could have recaptured a sense of national pride that they’ve had no cause for since 1969. Failure could have been turned into a showcase victory. Instead, they rewarded the failure, and told those who had caused the failure that they were free to line up the dominoes for the next one.

  2. The government could have set up a massive unemployment fund - not to provide handouts, but to make use of cyclical unemployment, which is inevitable and not inherently harmful. “Unemployment” could be re-framed as a period in one’s life when one has an opportunity to take training or education in some new subject, travel, meet new people, volunteer, and so on. One’s basic living expenses would be (temporarily) covered by the government, and in exchange one would give back to society. The idea that 9-to-5 employment is the only valid use for one’s life, and that one is less than human if one is a ronin detached from a feudal lord, has been the cause of much misery and social dysfunction.

It seems to me that anything would have been better than relying on banks as part of the solution, when they quite obviously caused the problem in the first place, either through ignorance or deliberate intent. It’s like giving money to the burglar who just stole your TV and asking him to go buy a new one for you.

It’s a valid comparison. In fact a very apt one: bear in mind that people object to the IPCC’s findings not because they disagree with (or even understand) their results, but because they disagree with a worldview in which humans can make bad things happen. At the root of it all, they have an unshakeable faith in human technology and “progress”. It is inconceivable, to them, that all that can be “bad”. Therefore, the IPCC must be wrong.

I am, in fact, objecting to economic jiggery-pokery on the same basis as climate-change deniers. I realise this.

I know enough about economics to understand that it has useful insights to offer. Most of those are comprehensible to the layman: for example, it can be easily demonstrated (both empirically and theoretically) that free trade is a Good Thing (with a few minor caveats), and that mercantilism is a Bad Thing. However, not everything can be reduced to an economic formulation. Economists, because they do not study (for example) ecology or psychology, cannot tell us anything useful about environmental management, human happiness, or even unemployment. There are human factors to consider that are more important than purely financial ones.

As yuli implied, a question like “of what use is the fed?” is as much about values and philosophy as it is about economics.

If you weren’t aware, the business cycles in the past were actually pretty extreme. There is in fact a reason why the fed exists. I know people don’t like the concept of what they do and fight it every step of the way, but what they don’t like even more than that is what happens when you don’t have a central bank. That’s REALLY ugly. So if the question needs answering then yes, we should. Not “correct” them, but definitely try to smooth them out. The irony in all of this is that people actually think the fed is just there to serve the rich. The truth is rich people are going to be fine regardless. They’ve always found ways to take without giving back. But without the fed trying to smooth out recessions, poor people would be royally fucked. It’s crazy that people today are complaining about unemployment. You want to know what unemployment is? Abolish the fed and wait a few years. But remember, be careful what you wish for. :astonished:

Come on, who are you kidding? :laughing: There is no psychology 101 course on the planet that requires advanced calculus and statistics. That only becomes a requirement for people who are moving beyond all the bullshit entry level courses that we all took in University. No different than micro and macro economics. Those are just bullshit filler courses for rando university degrees. The hilarious thing is that people who took micro and macro economics in University actually think they know something about economics. Please… I took psychology and engineering courses in University. So what? Now I’m supposed to pretend I understand it, is that how it works? I passed psyc 101 and 201 and now I’m an expert on the human mind? I’ve got a few engineering courses under my belt and now I can tell industry experts how to build better bridges? Somebody passes econ 101 and 201 and now they’re an expert on fed policy? Interesting…

Nothing, nobody is comparing them. They were just brought up as an example that ALL men are fallible and make mistakes. Both Newton and Einstein got things wrong, sometimes way wrong. And yes, Bernanke and a bunch of very brilliant economists did in fact miss the housing bubble, among some other mistakes. All we can say about that is, we all make mistakes. Fortunately the preponderance of their other work more than makes up for the few blunders they did make. Now don’t get me wrong, Bernanke is no Newton that’s for sure. I personally think Newton was the most brilliant man who ever lived, in any time period. Bernanke is just one of the worlds most renown and respected experts on balance sheet recessions. He’s no Einstein, but certainly worthy of a tremendous amount of respect, and his position at the helm.

:popcorn:

[quote]And yes, Bernanke and a bunch of very brilliant economists did in fact miss the housing bubble, among some other mistakes. All we can say about that is, we all make mistakes.
[/quote]

Newton and Einstein never did that kind of damage by getting the physics wrong.

[quote]
Fortunately the preponderance of their other work more than makes up for the few blunders they did make.[/quote]

No, it doesn’t.

Some were, some weren’t. The point is, as (I think) yuli said earlier, sophisticated economic “management” seems to have made no difference either way. If you’re alluding to the “great moderation”, there are all sorts of plausible explanations for this, and the fact remains that a lot of economists didn’t see anything wrong with what a layman would recognise as feckless behaviour.

Its true that the immediate effects of the recession were less severe. People were not queuing at soup kitchens this time around because, I suggest, we had improved social services and more accessible food supplies (even though it’s awful food, but of course that’s a different story). Not because the banks were recapitalized.

And again: why does it matter if we have deep business cycles? Are there not ways to anticipate them and ride them out? We don’t attempt to “fix” earthquakes or typhoons, but (if we’ve got any sense) we do a bit of urban planning to minimise their impact. I keep banging on about this because some systems are fundamentally unfixable: that is, the system transfer function is such that your measurement and feedback arrangement cannot make corrections (or will make things worse). I suspect, but cannot prove, that this may be the case with human economic systems. Since most economists don’t bother to study the mathematics of dynamic systems, they haven’t even considered that possibility.

Sure. But there are many different ways to run a central bank. And during the 2008 crisis, the fed did rather overstep its mandate.

Why? What long-term advantage is gained? I suggest recessions act as a kind of natural selection for businesses. The American car industry should have gone to the wall - as the (mostly useless) British one did, decades ago. It would have made America a better place - especially, as I said, if the government had taken it as an opportunity to spend a lot of cash on a modern transport infrastructure, or perhaps had supported the car industry on the condition that they make a more useful product.

I disagree. My experience is that a lot of poor people are poor because they’re shit at handling money, and are unemployed because they’re unemployable. There is no financial fix for this complex reality, although there are undoubtedly social and/or regulatory ones. And a state apparatus which acts like a poor person with a brand-new credit card doesn’t inspire confidence.

Are you calling me a liar? :eh: I said “respectively”: statistics for psychology, and advanced calculus for electronics. You could not continue without a passing grade. It was hard, it was detailed, and it was practical. In the third year we spent several weeks applying what we’d learned to spot statistical bullshit in published papers.

:doh: People with economics degrees go off to work in jobs where they are responsible for other people’s money. Lots of money. OK, fine, they might need a few years of experience and/or an MSc before they’re allowed to do any serious damage, but teaching them “bullshit filler” for three years is unconscionable. For one thing, it suggests that there isn’t anything better to offer.

An economist should study those parts that are relevant to his subject. For example, he should know about crowd behaviour, conditioning, and perhaps a little bit of social psychology. Not because he needs to be an expert, because it will inform his thoughts on economic behaviour - which is, after all, the behaviour of human beings.

You should be able to tell if one is about to fall down or not, or has an obvious design flaw. If you’re advising a bridge-building businessman about financing, or if he’s coming to you asking for a loan, you’ll be able to discuss the subject on something like his level. If he’s asking for money, you’ll have a gut feeling for whether he’s spinning you a line.

I’ve read a few books written by economists about “fixing” poverty, and their lack of knowledge of physical reality - such as farming, thermodynamics, or basic engineering - would be funny if people didn’t take their pronouncements so seriously.

The big difference here is that neither was in the driving seat when a national-scale project went horribly wrong. When Einstein refused to accept the emerging evidence for quantum theory, nobody suffered. Other men picked up the ball and ran with it.

Yes he is. And yet, he didn’t recognise one when he saw it. :roflmao: Can you imagine a volcano expert turning up in an emergency situation and asking, so, where’s the volcano?

Bottom line is, if economists can’t get their act together, people are going to stop believing in their religion, and more unsavory ones WILL become ascendant.

The QE program was secondary to the general health of the American economy, it’s tech and academic might, established institutions and its bountiful natural resources and very large size. These are the real bedrock of the economy , not monkeying around with money at the edges.
Mostly what the money manipulation did was allow some of the would be losers to stay winners, an economy being something generated by trade where individuals and corporation benefit on both sides of a trade to different degrees ie if the banks had shut down new banks would have taken their place. Although I can also see the sense in helping stopping the break up of a given company IF it it was a very temporary credit crunch, rather than a failed enterprise with little core value to add.

That’s an incredible skill you possess there. To be able to see both what did happen, and what would have happened, and then be able to compare the two.

Which is why I popped in to this thread, hoping to have a real discussion on where we go from here. Personally I’m operating on the assumption that we need monetary policy and a central bank. From that starting point, it’s all about what we do going forward.

Although as always in these types of threads, people only want to use broad generalizations and un-factual claims to throw shit on what we did and the people that did it, claiming to have some specific knowledge on how much better off we would have been had we not done it.

We were talking about entry level courses, which I specifically named 101. You said right off the bat you were required to take statistics and advanced calculus. So no, I’m not calling you a liar per se, but that is clearly not true at all. I would imagine most people who went to University took the courses we are talking about. Psyc 101, Engineering 101, etc… I don’t think you’ll find many people who agree with you that statistics and advanced calculus were required for 101 courses. And I did say 101, entry level, bullshit filler courses, rando introductory, all over the place. You could not have misunderstood me.

Yes that would be, but again you seem to not be reading anything that’s being said. At no time did I ever imply in the slightest that for 3 years they teach that. I SPECIFICALLY said micro and macro 101 and 201. It’s hardly an important point in our discussion, but it is in fact very hard to make if you aren’t going to read anything.

For 1/4th of 1 semester, they teach economics from a perspective of assumptions that very quickly are abandoned. They are only taught in entry courses, so that concepts of marginal curves etc make sense for people who don’t possess the math and statistics to understand Econometrics. Theres an army of arm chair economists out there who at the end of the day, never made it past micro and macro. That is the equivalent of psyc experts that never made it past the intro psyc courses we all took in first year university. Kind of sad really…

Hmm, are you blaming Bernanke for the financial crisis of 2008? This is about to get interesting :popcorn:

So again, are you implying that Bernanke didn’t recognize this as a balance sheet recession, and act accordingly? Pause, remove foot from mouth, and then please continue … :popcorn:

That’s an incredible skill you possess there. To be able to see both what did happen, and what would have happened, and then be able to compare the two.
[/quote]

It had better not be too incredible a skill, if you argue that there are people competent to manage the economy from the District of Calumny.

I have a feeling it’s too incredible a skill for Bernanke or Yellen to master.

I don’t suppose you have an idea for who should manage the economy? Or how? I’ve noticed that about you Rowland. You find it a whole lot easier to criticize rather than to ever offer any meaningful solutions.

Anyway, I’m sure we could argue back and forth for eternity on something that’s already happened, but the only thing that really matters is where we go from here. Here’s what should have happened 10+ years ago to avoid the problems we are in now. And I’m hopeful that at some point in the near future, maybe we start to make the changes.

  1. Slash the bloated defence budget, and stop spending insane amounts of money on wars. Instead, use that money for massive infrastructure programs around the US. Spend more to bolster manufacturing and stimulate innovative technology. Save money, create jobs, invest in the future. Seems pretty obvious right? Nah fuck it, let’s bomb Iraq and fight the facade that is the “war on terror” :loco:

  2. Bring back the Glass Steagall Act. It doesn’t take a genius to see that bad things happen when you allow banks to speculate in the same markets they are supposed to be the facilitators of money in.

  3. Crack down on out of control lobbying and power that special interest groups wield in Washington.

If we did that, nobody would even be talking about the fed. The US would be firing on all cylinders and QE would have either been completely unnecessary in the first place, or if it was needed to smooth things out a bit, it would have been far more manageable and effective.

And notice something? None of those solutions have anything to do with the fed. But you know what criticizing the fed really does? It draws attention away from the true problems the US is facing. Trust me, Senators and Congressmen LOVE when you guys blame everything on the fed, instead of where the blame really belongs. The more you criticize the fed and big bad Bernanke, the less they even have to show up for work. Those guys have the greatest jobs in the world. Through inaction and incompetence they have tried their best to ruin the country, and yet they don’t even get blamed for it because they have the perfect scapegoat.

[quote=“BrentGolf”]I don’t suppose you have an idea for who should manage the economy? Or how? I’ve noticed that about you Rowland. You find it a whole lot easier to criticize rather than to ever offer any meaningful solutions.
[/quote]

Here’s one:

Hang on a sec BG … didn’t you just say there what I just said? :astonished:

And did you also basically agree that the fed are (at least in the current historical context) incompetent and irrelevant?

Cos I basically agree with every word you wrote.

Now I’m confused.

[quote]Hang on a sec BG … didn’t you just say there what I just said? :astonished:

And did you also basically agree that the fed are (at least in the current historical context) incompetent and irrelevant?

Cos I basically agree with every word you wrote.

Now I’m confused.[/quote]

No, not even close. What thread are you reading anyway? :ponder:

(I argued in various places for better join-the-dots regulation, although not specifically Glass-Steagall)

The word ‘inaction’ implies that you think the fed have been doing nothing useful. ‘incompetence’ suggests they don’t know how the economy works.

Maybe not word-for-word, but similar sentiments. So what were we arguing about again?

[quote]The word ‘inaction’ implies that you think the fed have been doing nothing useful. ‘incompetence’ suggests they don’t know how the economy works.

Maybe not word-for-word, but similar sentiments. So what were we arguing about again?[/quote]

The difference being, I was saying that CONGRESS and the SENATE are the ones that through inaction and incompetence have tried their best to ruin the country. That they, the congressmen and senators have the perfect scapegoat, which is the fed. I thought I made that pretty clear, but I guess if it wasn’t I’ll state it again. The three things I mentioned that could be done to make the US better, all three of them have nothing to do with the fed. The problems we are facing today are mostly due to government. Of course the fed isn’t perfect and I’ve never claimed I agree with 100% that’s been done. But for the most part, a pretty solid effort. B+ maybe :sunglasses:

The fed reacts to the economy, which usually reacts to poor government and policy decisions of the past. The fed isn’t the cause, it just tries it’s best to keep the train on the tracks to give the real perpetrators of the damage (Government, Congress, Senators etc) a little bit more time to hopefully get their act together. It’s not too late. The US could still come out of this smelling, maybe not like roses but possibly a dandelion or something. :laughing: But that would of course require some responsibility out of Washington. :roflmao: