As we now know by example , modern economics theory does not work. This piece points out why this is obvious even to the students now in the college economic classes. The profs teaching to classes of 400 will not deviate from the lesson plans to handle the questions and discussions of his students, he has to stick to the schedule. Lots of lessons from that admission. To me it shows the real problems in our schools, if it ain't in the lesson plan we are not going to go there.
Richard Wolff has said in all three colleges he graduated from there were essentially two economic schools, one labeled School of economics the other School of Business. Economics was taught in both schools but were totally different..IN one how the math showed it would work and the other showed it was the bottom line of the balance sheet was what counted.
So in current day economic classes the students get mostly math. Formula that discount any input from the real world. People are placed in the formula as always acting as rational human beings. So far from actual life to be laughable. I personally have made quite a few choices that don't come to be rational and so do many people.
The belief of current day economists that they can formalize life is laughable. A formula is a fixed equation that is viewed as gospel if all fields of study. The problem is life is a variable.. Decisions are seldom cast in concrete , todays students know that better than anybody. They spend 16 to 20 years pursing a career that as they finish the career is gone, outsourced or outdated. Hello dad, can I move back in is a sign of the times.
Let's look at recent big events that the popular economists say the didn't see coming. The Housing Bubble is a prime example. Alan Greenspan the nations Chief economist still says today he didn't see it coming. Being blind must be a requirement for being a top economist. House prices rising at 15 to 20% a year , year after year, should have alerted even the dullest economist that this cannot continue. But yet many of them didn't see it and still don't.
On to a bubble that is about to bust and the results almost have to be worse than the Great Depresion. The table is set for the biggest bust of all time. Daily you see the stock and bond market being at level that are far from justified by real earning. The Fed is printing money as fast as the presses can print it and taking it by the wheelbarrow full to dump in the banks trough almost cost free, and the banks are dumping it into all kinds of market driving prices of everything through the roof. The little guy isn't in this market they are struggling to put food on the table. Countries holing our debt are dumping it as fast as they can and not buying new , the fed has been buying most of the new issues eventually causing the crash of the dollar and it's loss as a reserve currency. Because of this the dollar will depreciate and inflation will run wild.
The formulas show we are in a recovery and here shows why formulas as an economic theory fall flat on it's ass. Their are formulas for everything take for instance the formula for unemployment. It has been changed so many times over time that the difference in rate comparing the original formula to the one used today gives you a 7% rate compared to the old which gives you a 22% rate. The CPI is another great example. Over time this formula has been changed many time to hold SS payments in check because if we had stuck to the original formula SS payments would be twice as much.
The bottom line of using formulas for economic policy , if you don't like the results change the formula. The crash of 2008 was helped along because the derivative formula did not contain a down element. The math geniuses did not see how their could be a down in that market , oops , they were wrong.
So here we sit and you can pick your crash predictor all by yourself , there are many to choose from with time frames running to tomorrow to 2016 and after..It really doesn't matter when (oh it would be nice to know) but ruling anything but blind luck you can't time it. Just know that the stage is being set as you read this for a trigger event to start the avalanche . With the derivative market out there being some where between 600 trillion to a quadrillion bucks heavy ended in interest rate derivatives can do nothing but explode. A slight move in the direction against the major derivative position out there and boom it goes..The banks don't come near to having the money to cover their positions , Boom and they go and the world goes Boom along with them.. All brought to you by stupid math formulas being followed by blind idiots.