As noted in an earlier blog post (A Galilean Gesture: Eating with Dr. Steve Keen), one of the attendees at the talk Jim Stanford and the Canadian Centre for Policy Alternatives organized for me in Toronto was the blogger Genevieve Tran, whose cause is improving financial literacy. She persuaded me to take one day off from the Fields Institute while to visit Toronto’s Centre Island–a combined park and nature reserve just a kilometre or so offshore. As we wandered among the ducks and geese (but completely failed to connect with the peacocks), she grilled me about strange species of which I am undeniably one–the Tyranosaurus Economist. Here’s her take on the conversation (you can read more of Genevieve’s take on money, the universe, and everything at her blog Money Big and Small).
In case you haven’t heard, our beloved nerds over in Paleontology have recently discovered that several species of dinosaurs, which up until now had been thought to be separate, were actually baby vs. teen vs. adult versions of just one!
And that the bone structure of a dinosaur was liable to change so much as to confuse non-dinosaurs. Now usually, during the regular day-to-day, these scientists compete the crap out of each other to race to dig sites in case they might be the ones to name a newly discovered species of ol’ lizard bones; hoping to fulfill a childhood pact-to-self, no doubt. Elbows out! Shoes affixed with back-blowing torches! Collegial cooperation be damned. But, I imagine that, just perhaps, such a discovery in the field must have been a rare unifying moment among professionals.
But not so much over here among our beloved nerds in Economics, whose in-fighting rivals the Desperate Housewives of Jurassic Park. (No joke, they insult each other by calling each other “economist!”). With the Global Financial Crisis: fresh insights, books and revised theories are popping up everywhere bringing a renaissance to this previously office-carpeted field. This would seem to be a cause for collective celebration! But not so. And I think it’s because individually, economists have never had it so good. Now more than ever, they are being treated like Rock Stars: they have brand name blogs and book deals; British people invite them overseas for a chat; they have giant website followings without having to strip on camera (?); they are in essence, body-surfing over this growing mosh-pit of fans interested in Economics. These latter-day Rock Stars are taking it all in!
Woe unto he or she who dares steps in the path of their light!
It’s too bad that modern economists’ Day in the Sun happens to correspond with the Global Economics equivalent of an out-of-control genetically engineered T‑Rex running through the streets, foreclosing its jaws on us, because, we kinda need them all to unite, NOW!—to become a Super Collective Brain Fighting Machine!
(However, coming from Tokyo, I can tell you that any concerted response of People Who Should Know How, to effectively battle an industrial-sized Godzilla is just truly fictional indeed.)
This past week, as I have been vortexed into all these interviews, debates and documentaries of talking heads (I <3 youtube!), I realized something: there is some straight-up math that cannot possibly work out in this model of fame: as these economists gain Rock Star status, they can’t possibly have time to write their column, blog, work on their next book, prepare their next radio show or TV appearance, work on their next formulation, do integrated research with others, read each others’ criticisms, respond to them properly, travel, attend conferences, prepare and give speeches, accept awards, run for office, look good, eat well, sleep well, bathe, tend to their families, their plants, their pets etc. and truly be able to think straight. It’s just not humanly possible. It’s the Paradox of the Thoughtful Economist.
But, strangely, in this equilibrium where:
fame= no time, and
no time = no time to think,
but no thinking = no fame,
Dr. Keen, who is Busy-As‑F@#&, managed to spend a whole day out with me on Toronto’s Centre Island! Kinda just hanging out!
Here he is with some Canadian Geese.
Here he is leaning on a wall.
And opening up his sushi bento.
Getting him out of the city, in the middle of Lake Ontario, had him speaking to me in ways I understood! Maybe it was the fresh air! Maybe it’s because we are both parselmouths. (OMG I did it: Chinese Horoscope x Harry Potter x Economics!!) Sorry. Here is an interview I caught of him after he finished eating his sushi, whilst wearing his Alpha Wolfram swag (don’t ask):
So, after my close encounter with this Economics Glitterat…o(?), I wanted to know who else in the field was making sense (or not) regarding their solutions to end the Global Economic Crisis. So, I studied up! Here is my guide to:
The Rock Stars of Economics!
Wildly popular among many of the young, but considered silly among the political and economics establishment. Perennial appearances on TV, despite being dismissed as passé in the 90s. Sincere effort to inspire the young to think what it means to fundamentally be American. But it all might be a zipper suit, just to stay in spotlight.
US Congressman Ron Paul points out egregious contradictions to the US Constitution in prevailing economic policy such as having the Fed monopolize the determination of the amount of money in their economy and the interest rates—which he rightfully says no one (person) is smart enough to do; and that purposeful inflation is stealing from the value of hard-earned money and savings. He thinks a smaller government that doesn’t spend on stupid wars or bailouts or sticks its expensive nose in other world affairs would greatly reduce the debt and promote a better image of the US abroad (tho, can you imagine anyone ever dare touching the Fed, the US war machine or its presence in the Middle East? ‘Xactly). In a debate with Dr. Paul Krugman, he rails against printing more money to solve the Debt Crisis:
“[The US] still [has] a little leeway because the world still trusts our dollar…but that just means it’s a bigger bubble for our bonds and our dollar…we don’t know [how much printed money it would take get out of the crisis]…if you continue to believe that the world will take our dollars no matter what our debt is, then Americans shouldn’t have to work anymore because we can just print all the money!”
Weird thing is, he IS the establishment: a rich congressman. And he still might end up supporting Mitt Romney, whom he contradicted on everything, including economic policy in the Republican primaries, just to stay in the political mainstream. He’s like that.
Anointed by higher powers / IS a higher power (?) Suggests highly populist policy meant to ease the pain of people in the here and now. Great book sales. Accused of being “socialist”. His ideas involve paradoxes and counter-intuitive thinking. Not the best predictor of major moments (in Economics) through the years, but loved nonetheless by Liberals. Jokingly recommends Armageddon to keep life exciting.
Professor Paul Krugman, who won a Nobel Prize by himself, recommends spending to get out of debt, on a government level. Many complain that this is counter-intuitive mostly because it will add to future debt and cause the same problem later. But, Dr. Krugman points out that if we don’t spend the money now somehow to build, roads, schools etc. and get banks to lend to small businesses and get people working for their sanity’s sake and put some disposable income in their pockets, the economy will just remain at a standstill—in which case there will be no future to speak of. Dr. Krugman references the successful big war spending that happened after World War 2 and his nostalgia for that America, and has jokingly(?) suggested that an Alien Invasion / War of the Worlds would get the money circulating just like that, why not! I kind of think that he has a loose respect for the Fed’s handle on the money printing press and figures that if the Fed was able to print out a bunch to bailout banks a few years ago, with the merest tinkle of the butler bell by banking heavies, what’s really stopping it from doing the same to make sure social services are being provided at such a dire time for the people? However, those sick of the culture of profligate spending and the obese American debt are not amused–and refuse to be categorized as heartless because of it. As well, the Fed (and other central banks he has publicly “encouraged”) seem to ignore him, so as to maintain their image of Knowing What They Are Doing! Don’t‑Tell-Us-What-To-Do! Still, he sermonizes every week.
Represents a class we are all inherently afraid of. He proposes natural selection at its best, an economy with prey and predator mixing freely, a la Mesozoic Era, or as nature would have had it. Despite being a successful beast on the whole (=millionaire), he lost a senatorial race in the US and therefore has small political appendages. In a way, he speaks the truth about the real natural order of things. However, complex erring humans have been complicating his plans, however delicious they may be.
Mr. Peter Schiffpredicted back in 2006–7, using his big boss heuristics, that this crazy spending habit of Americans would be catching up to them soon. Like Ron Paul, he doesn’t figure that the American dollar can just ride on its reputation of “What-Exactly?” for much longer. So, the Chinese and Japanese housewives who have been lending Americans their hard-earned savings, via their governments who buy American dollars, will one day be tired of it all and demand it back. No one will want to accept American “paper” in exchange for goods for much longer. More to this, the type of spending that the US has being doing on this borrowed money has been mostly for consumption (i.e. on imported new cars, new clothes) and not on productive investments (i.e. factories, new technologies) which would create jobs, exports to sell and income to pay off debt. This means that America can’t even produce enough goods itself to be self-sufficient (and has to import) nor has the savings to draw from to pay for what it needs. He figures America needs to stop borrowing money, admit that it can’t pay the debt it has now in full (this is the big elephant in the room). Then, in order to redeem itself to the world, it needs to make an honest effort at cutting spending (i.e. social security, education etc) and paying down whatevertrillions it is that it owes. Any prolonging of this will just make it worse. Mr. Schiff would like to see all the regulatory gates and taxes lowered, which currently may discourage companies from doing business in America, which would be a mass incentive for business to boom again. He went down to Occupy Wall St. to say he is with the protesters, though that there should be MORE capitalism, not less, much to everyone’s confusion. He points out that the leaching/leeching comes from a culture of both social and corporate welfare. Oy…Mr. Schiff. Give me a minute, all this is giving me indigestion like a piece of unregulated meat…
Brought 3D to the world of Economics modeling. The Steamboat Willies of yesteryear are resentful of his new-fangled Pixar-esque technology, which reveal never-before seen factors in Economics, wowing the kids. You’ve seen him around a few times now…looks familiar lurking around here, doesn’t he?
Professor Steve Keen, back in 2005 predicted the 2008 crash using historical data and math. The factor of huge private debt (not just government debt), not considered by other economists, appears in Dr. Keen’s calculations. He reveals how this debt bears an uncanny resemblance to the circumstances surrounding the Great Depression, only huge‑r! Private debt (held by households, businesses and the finance sector) is the real, underlying reason behind lack of demand and a slowed economy—so, no matter how much money a central bank prints, the old practice of then handing it to the banks to make loans is futile as a stimulus because people have so much debt already, they aren’t interested in any more. And like other realists, Dr. Keen thinks that “a debt that can’t be paid off, won’t be paid off”, so it’s time to come clean as a society and have a debt jubilee (i.e. using government money to pay down private debt), which would free up people’s money and the psychological constipation of spending among the population. This is highly controversial and confusing because government debt would rise some more! But Dr. Keen insists that private debt is the true “Clear and present danger” (to misappropriate Dr. Krugman’s assessment)—at 300% to GDP, (at least 2x, 3x that of public debt). Plus, Dr. Keen has laid out a plan that doesn’t have anything to do with emptying bagfuls of money out of helicopters, whilst shouting WooHoo! Furthermore, this plan weakens the position of banks, who will suddenly see their loans/assets paid down and therefore have less excuse to be leveraged. The whole problem, as seen through Dr. Keen’s 3D glasses, is that the whole culture of over-leveraged banks (who, for decades now, have pushed people to borrow more and buy bigger assets like houses, in addition to then turning around and speculating wildly on derivative markets using those assets’ mortgages as collateral) is the problem. And that when we allow for infinite debt as accelerated through this machine of over-leveraging (which is the case now) (1D), we mathematically approach a dangerous blackhole of no income (2D) and no employment (3D). If nothing’s done, the market could possibly self-correct through mass bankruptcies. But that would take at least 15–20 years, involve tons of social unrest (and violence?) without the added benefit of being able to correct the over-leveraged banks. [Hmm, come to think of it, could this be the math behind why there’s the Occupy Movement in which a broad sample of people are seeing an end to their income potential and employment prospects because currently ‘nothing’ is being done about this out-of-control debt?].
Capitalists and economists like to ignore lefties like her, but can’t deny that the natural reserves of the planet that she speaks of are awfully useful in their economy. She represents the used and burnt up raw materials, the pressed and oppressed sweat and tears of Mother Earth, who we all forget to call ‘cuz we’re too busy. Her gooey “socialist” appeals for a more qualitative (not just quantitiative) approach to macroeconomics makes a lot of people feel dirty.
Ms. Marilyn Waring was named by Wired Magazinethis year as one of the 50 people who will change our world. Once an MP in New Zealand, she for years now has been seeking to include women (those ‘nother 50-percenters) and the environment in economic measurements and considerations. Problem is, GDP when strictly dealing with *stuff* is easy to count, whereas economists (and we in general) are notoriously bad at being able to quantify the value of non-oily penguin down, still-pristine Philippine jungle, or women who stay at home and raise the future population. So, eggheads stick to their equations that omit such non-essentials. And yet, and yet, it is the lovely coast of northern Scotland that Donald Trump is fighting to keep wild and natural (save for his golf course); it is to the incomparable beaches of Thailand at which one finds an exotic underaged fish or two; and it is to our moms we run crying when our investment banker has put our entire retirement saving up his nose. And don’t forget that War Machine! One nuclear submarine = the annual education budget of 23 deveolping countries combined (=160 million school aged children). War and the threat of war is big business, not only the sale of arms, but all the destruction that will require rich, foreign Benefactors to bid on. In fact, Ms. Waring narrows all this modern day hulabaloo in Economics down to a tiny WW2 pamphlet, entitled “The British National Income and How to Pay for the War”, written by Keynes and Richard Stone. Stone later went on to remix this for the UN in the early 1950s, who used it as the cornerstone for economic standards required of new member countries who wished to be included in the protection and lending pool (World Bank, IMF) of the now 193 member states. Thus, the problem with the world’s macroeconomics formula is that it fails to calculate huge swaths of real things that matter and instead overemphasizes stuff like war spending, anti-depressant sales, nail art and Chinese souvenirs. This is the qualitative inherent problem with our economy that no one seems smart enough to be able to include in Economics. [On the point of war spending: funnily enough, Ms. Waring’s whole point of view is that there are so many @$$holes in the world (=more reason to ramp up the defense?)].
* * *
Maybe it’s a good thing all these Rock Stars have solo careers. The hair pulling could get nasty. Still, if I believed in Humanity, I could imagine that everyone here genuinely wants a brighter future for the world and for each country faced with crippling debt. It’s as if they each represented very different stages in thinking of the same Super Thoughtful Economist. They are Rock Stars because clearly, they have the articulation and arguments to persuade–so, why wouldn’t they think about getting together to form a Super Solution? I need to write a happy ending:
Everyone wants to alleviate the pain from debt. Everyone knows that the central bank as a printing press works somehow, but as a possible mastermind to solve this thing? No. Everyone knows the huge mechanisms of the economy, however imperfect, will move on command. But what are the right commands? Dr. Keen has the clearest math so far. He can convince the others, with his supermodels, that private debt (more than government debt) is to be in the cross-hairs; Dr. Krugman can get his government spending and see it go directly to the benefit of people, with 3D modeling to prove to him that we would be moving away from zero employment and zero income, when it’s done like this. Ron Paul and Peter Schiff will be happy to know that the era of bailing out casino-banks is over and that going forward, financing speculative activities is out; productive investment is in, restoring their country’s reputation in the world. Ms. Waring can add a 4th dimension (or a variable, with a giant coefficient??) to Dr. Keen’s model to show the inverse relationship that stuff-centred economic activity has with social / environmental well-being and can only be reversed by equal and opposite remedial activity to restore civil equality and the environment, which, if innovative enough, gets added back to the GDP and represents sustainable growth, thereby paying down both sovereign and private debt.
Scenario a) “??! ???????! ???????????”
(translation: “Godzilla size and stimulus payload miscalculations. Over.”)
Scenario b) The Taming of the Beast by Super Economist
What will it be? You’re welcome
*UGH!!!!* I just totally remembered now that there is a whole layer of politicians to get through to enact any of these ideas! F$%^ing bureaucracy and politics! 🙁 No wonder the dinosaurs died out.
R.I.P. Rodney King.