Warning

Everything on this blog is the truth, which is pretty fucking scary. Well, some of it is wild conjecture, but that is pretty scary too.

Showing posts with label Bernanke. Show all posts
Showing posts with label Bernanke. Show all posts

Tuesday, August 10, 2010

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."

Tuesday, May 11, 2010

Ben Bernanke Can Suck It

I think this blog has an identity crisis.  Some days there are humorous and silly stories, other days we give inside descriptions of the lending industry, and then there is today.  Today's post is triggered by my absolute abhorrence of the Federal Reserve, Alan Greenspan, and Alan Greenspan's mini-me:  Ben Bernanke. 

Now that you know I am completely biased about the Fed you might wonder what egregious event triggered a rant that includes telling Bernanke to suck it.  Was it proof that the Fed was a fundamental partner in the destruction of our economy?  Nope.  Was it the reviving of swap lines with foreign banks to deal with the crisis in Greece?  Not that either.  The truth is, I am incited by a seemingly innocuous commencement speech delivered by Bernanke at the University of South Carolina and its coverage here. 

Bernanke delivered the message to young college graduates that money can detract from happiness and that they should not take high paying jobs just for the money.  Instead, they should seek the path of happiness because pursuing money may result in a decline in the thrill over time.  WHAT A BASTARD. 

Here is my translation of Bernanke's speech after being run through my bullshit detector and my disingenuousness spotter thingy. 


Congratulations to you young and important minds on your graduation.  I bet you would like to go out and get a high paying job in order to rationalize all the money you and your family spent on higher education.  Yeah, well me and my friends sort of helped to make sure there are none of those jobs available.  We really weren't trying to screw you exactly, we were just trying to help our friends in the banking industry.  

Really I am not solely responsible for your lack of opportunity.  You can also thank my predecessor, Federal Reserve Idol, Alan Greenspan.  You can also thank the entire federal government, some friends of mine on Wall Street, and some really distorted application of economic logic by a bunch of people who should have known better.  

I sense that you might be feeling sad about your futures so let me talk to you about something we all agree on:  happiness.  Happiness is good and really, it is more important than a job or whether you can afford to pay your student loans.  So instead of being sad that you can't get a job what I really want you to do is think about what makes you happy.  If its smoking a bong in your parent's basement for hours on end while drinking out of their liquor cabinet and playing your X-Box, then do it.  Tell your parents that Ben Bernanke said you have permission to maximize your utility, happiness is important.
(Cut to Bernanke singing "If your happy and you know it...clap your hands)

The ass kissing coverage in The Atlantic about this speech made me angry and ill at all the same time; an impact that was reminiscent of doing shots of whiskey in college, not pretty. 

As economists, we do talk about utility maximization and yes we accept that this isn't solely tied to money.  But, we also recognize the one clever thing Bernanke didn't discuss and the Atlantic writer failed to mention that is sort of important; we maximize our utility subject to CONSTRAINTS!!!  Holy crap, that is Econ 101.  We maximize our utility relative to constraints, kind of important ones, like budgets.

It is not that I think money buys happiness nor do I discount the importance of happiness; that isn't what makes me angry about the speech.  For me, hearing an economist talk about happiness in this manner would be like going to a Grateful Dead concert and getting a lecture on responsible drug usage from Jerry Garcia.  I'm just not buying it.  Also Ben, you are the Chairman of the Federal Reserve, a tiny little organization that earned record profits in 2009 by dealing in money, as jobs for those happiness seeking graduates were vanishing.

I don't want economists preaching to me about how to be happy, particularly not the one that sucks a little joy from my life every day because of his job and policies.  I want psychologists, Oprah Winfrey, and chripy little self-help gurus teaching people about happiness.

I want economists, and particularly Ben Bernanke, to solve problems and raise people's standard of living.  I want to figure out how to help developing nations, create wealth, and promote economic security.  I don't want one of the unhappiest looking middle aged white men I have ever seen teaching me that the secret of life is happiness.  Myself, my friends, and the students at South Carolina already understand that.  Even my dog gets it.

Why don't you tell us something we don't know.  Here's a suggestion:  Tell us if we should be scared that you claimed there was no crisis coming but now you are claiming you know what to do to get us out of it.  Then tell us when we are going to recover, I promise that would go along way in maximizing utility.

***********If you are interested, I have opined in print about my fears concerning the Fed, if you care for some snark with your knowledge you can find a reprint of one here.