Welcome to the Scam

It has taken me a few days to process the op-ed written by Treasury Secretary, Timothy Geithner.  The title of his piece, "Welcome to the Recovery", is so ironic it took me two days to quit laughing.  If you haven't read this epic work of bullshit, you can find it here. 

This is economic recovery?  Surely, you jest. If you aren't disappointed by this "recovery" than you have incredibly low standards and should immediately stop reading this blog.  You would be just as happy reading Brittany Spears blogging about the housing crisis. 

The disappointment that this is what smart people call economic recovery is akin to finding out that heaven is just a really huge Department of Transportation office and that you will spend eternity waiting in line to renew your heaven license, only to find out you didn't fill out the paperwork correctly and must take a new number. When did we decide to accept such low standards for economic recovery?

I no longer want to be an economist because it is mortifying that myriad intelligent economists are spewing the propaganda and bullshit to convince the American public that things are getting better.  The worst part is that these economists know better and if they don't, they should.  Every piece of economic data that is released is discarded if it is negative and explained away.  If there is the slightest bit of implied positiveness in a number, it is heralded as a sure sign of recovery.  The problem with this is that most of the data is suspect, and the analysis of the data is even worse. 

I recommend that you immediately take everything Bernanke and Geithner say and infer the opposite for at least the next 18 months or so.  If they say the auto industry is booming, I want you to hear, "The auto industry isn't declining at the frightening speed it was thanks to the infusion of your future into this dinosaur industry."  If they tell you the private sector is investing, you should hear, "The private sector is investing in things that don't really create jobs and the increase looks great because it is a positive number, but investment plummeted so much that it had nowhere to go but up."  When Geithner says businesses have repaired their balance sheets, you should hear, "Businesses have made use of many loosey goosey accounting standards and in addition, by laying off a huge part of their labor force they can direct the money they were paying in wages to paying off debt that has been called due by struggling banks."  This is just a brief sampling of how to take bullshit and turn it into truth, I am working on a patent for a portable economic bullshit translator that resembles a Kindle.  Stay tuned for that.

The hard core truth is that the financial crisis is both a symptom of a false economy created with government incentives and the cause of our new economy.  Without the government infused housing bubble, perhaps we might have recognized back in 2003 that the strength of our economy was an illusion.  Instead, we rode the false economic growth like a reckless drunk on a mechanical bull. 

A gentleman asked me the other day if the current economy was Keynesian.  I was baffled but wrote his comment off to someone trying to impress me with their vast economic knowledge earned by listening to Rush Limbaugh.  Maybe I wrote him off to soon, perhaps, he was implying that the cause of the crisis was Keynesian economics and that is highly likely.  Regardless, modern economics cannot describe what our economy is and therefore it cannot purport to know how to fix it.  Keynesian policies will only make the economy worse because the underlying assumptions are not valid.  We have undergone structural changes in our economy that have altered the framework of neo-classical economics, so much so that if I were teaching economics right now I would have my students tear up their textbooks.  The government intervention in the economy and the perverse policies of the Federal Reserve have irrevocably altered our economy and now our economy has new DNA.  The basic tenets of economics are the only economic principles that are applicable now and my mantra, "Incentives Matter", is the key to understanding the crisis and eventually recovering.

I have blogged before that I think there are only two possibilities about economics right now:

1. Our models were always wrong and we just got lucky because the spontaneous order of the economy was strong enough to counteract our stupidity.  In this theory, the economy used to have a very strong immunity to the falsehoods of economists.
2. Our models were once applicable, but we have so screwed up the natural economic order that we have to start over or at least go back to Adam Smith. 

Economic recovery is a long way off and we are paying for the false growth that led to the housing and financial crisis, and it is even more painful than if the government had let us recover from the 2001 recession without "pumping up the jam" by propagating and encouraging the American Dream.  While all this has gone on, the "brightest economic minds" of our time are systematically lowering our standards for what economic recovery is and what we should expect economic growth to look like.  Maybe it is necessary but it is depressing all the same. 

I would bet that if Geithner and Bernanke went to happy hour and were drunk enough to be very honest about the economy they would say, "We are royally fucked."