Economic theory and bunkum

It could have come from anywhere, this quote. As it is, it comes from the bearish Zero Hedge:

Boston Consulting Group confirms, the “muddle through” is dead. And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the sustainable threshold by the definition of “stable” debt to GDP of 180%.

The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed’s relentless pursuit of inflating our way out this insurmountable debt load have been for nothing.

The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world’s financial asset holders: the middle- and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path.

That statement would be read by two types – those who have but a rudimentary understanding of money, read financial headlines and know something is wrong [this includes me] … and those in the financial services industry. The BCG is one of those.

Whom to believe? Bernanke or BCG? I know where my money would be.

As a layman, I’m not as bound by economic theory as, say, a Chris Dillow or the estimable King World News, interesting though they both are. I’ve a different perspective altogether as to what makes the world tick. I certainly don’t look at the trillions being bandied about with much seriousness because what is life or death to an economist are artificial numbers to someone in the real world.

And that’s an emotive term in this context – real world. This is not a world where fiat money, created out of small deposits is seen as real, it’s not a world where the most esteemed and revered publications gravely pronounce on the basis that government “debt” is actually debt where the survival of the nation is concerned. A real world is not one at the beck and call of Christine Lagarde who uses fixed bookkeeping figures to crack the whip.

The real world is not one where traders imagine they are on an even playing field – JPM and GS have put paid to that theory, regulating the regulators along the way. It’s not about longing and shorting, when the whole currency hyperinflates and becomes essentially worthless – I lived through this in Russia in 1998. It’s not a world where everyone trusts “the government” not to get it wrong, that their word is gospel and that government backed bonds are like money – they’re not. Even money is not like money, if money means units of value with which you can purchase goods and services. If money was real, there’d be no need for SDRs.

Rather, a real world is one where men and women are without jobs, where people are falling out of the middle-class, where a benefit culture has replaced a working culture, along with the accompanying social ills of prostituted children, drugs, violence, courts lenient on crims but down on the innocent – a topsy turvy world.A real world is one where regulations and fines accompany me trying to go out on the street and sell my wares and no, I don’t mean that. How did Marks and Sparks supposedly start up?

Try telling a starving man about OCDs, SDRs and Baumol’s cost disease.

Baumol’s cost disease is oh so real to a particular type in the game, a game which rules us, this world being predicated on money instead of other paradigms. As a matter of fact, it makes sense – read about it at the end of the link – but the first thing which struck me was:

This goes against the theory in classical economics that wages are always closely tied to labor productivity changes.

“Theory” in “classical economics”. And like “natural selection”, pushed by humanists as “Science” instead of what it is – theory, that’s all economics is. When I was still doing my economics degree, the very first thing, in the first breath, which we were told is that economics is the science of scarcity. In the second breath, we were indoctrinated in Keynes.

A real world does not think there is a natural cycle of boom and bust, of bear and bull because in a real world, there is no need for either of those. People simply produce and sell either products or their labour and it has unit value – work for a certain number of hours and you get to have a home and food. A real world does not think the boom/bust cycle is real because it’s not – it’s induced, as it always has been, by the major players. It was not for nothing that Andy Jackson took on the banks.

History is not on the side of the reformers, the whistleblowers. Louis McFadden died from it, Lindbergh Snr lost a son and a grandson from it, the economies of the western world are rigged and anyone but a few pretend they’re players in that world and can understand its ups and downs through economic theory.

What they don’t see is people like Harold Drummon, former President of the Association for Supervision and Curriculum Development, who wrote in December 1964, in the magazine “Educational Leadership”: “The basic goal of education is change – human change.”

No it’s not. There’s no need for most changes, for the sake of change – this is a lie trotted out by a particular political mindset which has gripped education – quietly – by the throat and is feeding this guff to succeeding generations as the accepted wisdom. The victors write the books.

If you want to know who rules the world, look to financial services people only after you look at this sort of person:

Nelson Rockefeller, in “The Future of Federalism”, 1962, claimed that “current events compellingly demand a “new world order.” He said there was: “A fever of nationalism…but the nation-state is becoming less and less competent to perform its international political tasks.”

There you have the global economy, the World Bank, the IMF, the Twin Towers, the EBRD, the BIS and so on. There’s your economic theory and the only reason I’m still alive, having said that, is that hardly anyone will take this seriously.

Have you skimmed through the U.N. General Assembly 1974 report entitled: “New International Economic Order,” with plans to redistribute the wealth from the rich to the poor nations? Observe our presence in Africa just now and lo and behold, in Libya, what was one of the first acts? A central bank and an oil company – well, fancy that.

There’s your economic theory. Until these people, whom I’ve termed Them are stopped, the human misery and the skewed goals of our societies will continue along exactly the same lines. Until they’re stopped, there ain’t gonna be no economic well-being, except an indebted one and we’ll all remain in thrall to the PTB, as we’ve ever been because of our lack of vision, lack of resolve, propensity to mock those out on the edges and the lack of ability to take this on board and work together to overcome it.

10 comments for “Economic theory and bunkum

  1. john in cheshire
    September 30, 2011 at 12:11 pm

    You’ve convinced me, James. I’ve read similar from several websites and it makes complete sense. Unfortunately, I haven’t a clue how to emerge from this web of lies and deceit, theft and destruction. I can only hope that as long as people like you continue to write about it, then one day enough ordinary people will be persuaded to do something about it.

    • james Higham
      September 30, 2011 at 2:54 pm


  2. September 30, 2011 at 2:19 pm

    Agreed, fair summary, I won’t quibble with the details.

    • james Higham
      September 30, 2011 at 2:54 pm

      Wish you would.

  3. Voice of Reason
    September 30, 2011 at 2:55 pm

    ‘“Theory” in “classical economics”. And like “natural selection”, pushed by humanists as “Science” instead of what it is – theory, that’s all economics is.’

    Bull. Scientific theories are based on the available data (unlike perhaps economics, which seems to be based on ideology). They have to withstand assaults on methods, data and analysis.

    • September 30, 2011 at 4:48 pm

      Scientific theories are based on the available data

      Precisely – exactly what I wrote – theory, hypothesis, based on what is available and giving a most likely scenario. That sort of “bull”. Building a skeleton from a fossil, based on what is known from the parts, quite a valid method but still theory for a’ that. 😉

      Explaining the origin of species on what appears to be. Quite valid too and a commendable theory but still a theory and as it’s shown to be erroneous here and there, it’s tweaked. Science is never static, never dogmatic.

      • Voice of Reason
        September 30, 2011 at 6:26 pm

        ‘quite a valid method’ is an understatement. There are quite literally billions of bits of evidence for the current state of the model. That’s more by a factor of at least a billion than the evidence for some things that people believe.

  4. October 23, 2011 at 6:44 pm

    Well said – my own view is based on the simple belief that (for example) it must have been quite handy for Jesus Christ to have been borne and brought and preached the wonderful message that those (slaves) who do the work demanded of them by the ‘Bankers’ of the period (pre-Rothchild?) would find eternal ‘life’ leaving the Slave-drivers to burn in hell!
    Must have calmed many slaves who may have been questioning why they worked all their (short) lives and the ‘few’ lived as Kings?
    WW1 brought Pathe News and similar and heralded in the ‘information era’ (and the slaughter of soldiers on all sides of the conflict)-why?
    Who still control the Slaves and who still are the Slaves?
    We have a ‘Democracy’?-what does that mean? It matters little who we vote into parliament to represent us-it is the Establishment (Civil Service, etc) who run the Country and it is Public School ‘educated’ puppets who ‘run the show’ doing the long-term bidding of their masters!
    It is clearly apparent that the financial reward of citizens is inversely proportional to their ability and usefulness
    The use of Economics, which as practised is clearly Bunkum and has taken over the role of Religion as the main control of the Slaves

  5. david schiller
    December 15, 2011 at 11:36 am

    Having posted a message last October, without response, I assume you do not place any relevance on the suggestion that the ‘Christian Religion’ was a handy concept for facilitating the Slave Society? (basically work hard and you’ll enjoy ‘Eternal Life’ whereas the Slave owners/drivers will ‘burn in hell’)
    Richard Dawkins has made an impression for de-bunking the Christian Religion but as far as I am aware doesn’t suggest why it was introduced?
    The demise of religion has clearly come about with the coming of the ‘information age’, (basically coming into prominance with Pathe News during WW1?)

    Are you aware of any books/blogs etc that suggests Economics is simply the ‘new religion’ which is used to maintain the Slave Trade? That is clearly what it does! DAS

    • December 15, 2011 at 12:20 pm

      David, you can’t be seriously putting Dawkins forward – he’s been exploded so many times and avoids debate like the plague. There are far better advocates than him for that side.

      Far more serious is that you asked a question and it wasn’t answered – that’s an oversight, sorry and I’ll come back in, look at your question again and prepare an answer but it will be in some days.

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