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"Understanding the Great
Explaining the Great Depression, its Trade War, and failures of "New" Keynesian interest rate suppression policy without ideological clap trap, theory confirmation bias or political spin.
"Understanding the Economic Basics &
Modern Capitalism: Market Mechanisms and Administered
Wealth of Nations. Ricardo: Principles.
Debunking Authoritative Myths
FUTURECASTS online magazine
Vol. 12, No. 12, 12/1/10
Reality perversely refuses to conform to ideological
Mere “possible outcomes” are, of course, limitless, and “desirable outcomes” are highly subjective, so these are left to others.
It is the basic premise of FUTURECASTS online magazine that enough can be foreseen - as substantially probable outcomes - to materially assist in the understanding of and planning for the world of today and tomorrow.
The magazine basically publishes three types of
articles. There are forecast articles, book reviews, and articles
debunking authoritative myths.
The use of paints and brushes made scientifically by Dupont, doesn’t reduce the artist to a mere scientist or technician.
Authoritative myths are defined fairly narrowly.
To be “authoritative,” they must be seriously propounded by
respected individuals who have recognized expertise in the subject
matter of the myth, and they must at some time enjoy a considerable
public following. This has generally restricted them to the four
“Ps:” Professors, pundits, professionals, and Presidents.
Obviously, this excludes all campaigning politicians and all
politicians other than the President of the United States when
speaking with the authority and presumed expertise of his office.
Professionalism implies “practice” and “opinion,” not “scientific certitude.”
The misapplication of mathematical reasoning or other inappropriate scientific approaches does nothing but confuse issues and block the sort of professional inquiry that might lead to levels of understanding useful for practical application.
These fields are “professional” fields -
like law and accounting and the delivery of medical care - requiring
professional modes of thought and inquiry. Professionalism implies
“practice” and “opinion,” not “scientific certitude.”
(Yes, I know, not even “a scientific certainty” is an absolute
certainty, and "scientific certainties" fill a wide
reliability spectrum.) The misapplication of mathematical reasoning or
other inappropriate scientific approaches does nothing but confuse
issues and block the sort of professional inquiry that might lead to
levels of understanding useful for practical application.
Acceleration of technological development has
accelerated the rate of change generally. Ideological rationalizations
are being undermined by real world developments at an ever faster
Keynesian theory should never have taken so long - it should never have been permitted to cause the widespread financial and economic disasters of the 1970s - before being broadly rejected.
The weaknesses of Keynesian theory are almost as obvious
and multiple as those of Marxist theory - from which it admittedly
took much of its conceptual dogma. It, too, should never have taken so
long - it should never have been permitted to cause the widespread
financial and economic disasters of the 1970s - before being broadly
rejected. See, Keynes, The General Theory
Part I. "Elements of the General Theory." and Keynes, The General Theory
Part II, "Interest Rates, Aggregate Demand, and the Business
The pace of change is now so rapid, that advocacy scholars and other weak scholars now sometimes have the stupidity of their work demonstrated while their books are still in page proof.
FUTURECASTS refers to such propagandists as
“advocacy scholars.” See, Modern Advocacy Scholars. Others have referred to them as “policy
entrepreneurs” - willingly twisting their scholarship for
ideological purposes. In the Introduction to his 1994 book, “A
Journey Through Economic Time,” Galbraith admitted - without apology
- that his intellectual life had been dedicated to the lies required
to support his socialist cause.
Events will continue to be unkind to those who sell their intellectual souls for a mess of ideological pottage.
During the 21st century, the pace of change will
continue to accelerate. Events will deal with advocacy scholarship
and other weak scholarship efforts with increasing brutality. Events
will continue to be unkind to those who sell their intellectual souls
for a mess of ideological pottage.
A half century of accurate economic forecasts:
The first published economic forecasting
effort of the publisher of FUTURECASTS online magazine was a 1967
book presciently entitled “Dollar Devaluation.” It accurately set
forth the tumultuous economic events that occurred in the next 15
years - a period of almost complete frustration for professional
economists. From 1972 until 1984, his financial columns appeared in a
string of business newspapers predicting with almost complete accuracy
the economic twists and turns of that turbulent time.
Time has never undermined the published
work of the publisher of FUTURECASTS online magazine, unlike the
routine experience of so many establishment economists and all
Keynesians. With only a few minor exceptions, time has always
confirmed it. See, Futurecasting
Record 1, "A Dozen Years of Perfect Economic Forecasts
Record 2, "Continued But Not Perfect Excellence
Record 3, "Predictions of Soviet and Oil Cartel Weakness,"
4, "FUTURECASTS - The First Five Volumes," and "Eleventh
Annual Review of FUTURECASTS Issues" covering Credit Crunch
forecasts since October, 2002.
A few examples from that financial column:
Not surprisingly, there were a few
mistakes during those fifteen years. There were three economic
miscalls - one of which was serious - and one serious political
miscall. They were all quite instructive. Failures are always more
instructive than successes.
The political mistake came in March, 1976, when the bleak political and inflationary economic landscape of the day led to the following conclusion:
National decline is an inevitable feature of entitlement welfare and Keynesian economic policy and will be reversed when entitlement costs are effectively constrained and the Keynesians are again kicked out of Washington.
It is an unforgivable error to lose faith in
democratic electorates. Even during those times of troubles,
neither the idiot left nor the idiot right were able to make any real
headway. My prediction was true - but only for about four years.
The first economic forecasting error came after
a dozen years of economic forecasting perfection. It was a minor error
of timing. It was the result of an unexpected - indeed an irrational -
Carter Administration decision on economic policy. The 1979 recession
didn't come until 1980. It was unbelievable that the Carter
Administration would be so inept that they would put off the
inevitable economic downturn until 1980 - a presidential election
The deplorable forecasting record of many economists - especially Keynesian economists - speaks volumes about the invalidity of their economic concepts. Keynesians admit that they lack the competence to provide reliable forecasts. Keynesians refuse to provide testable hypotheses for their theories.
The second economic forecasting error was much more
serious. Defects in economic theory lead to forecasting error.
Accurate forecasting is proof of theoretical understanding, and
inaccurate forecasting is proof of theoretical error.
A third economic mistake was, like the first,
again due to an unexpected decision on economic policy. For 1984, it
was confidently predicted that interest rates would rise, with an
interruption in the middle of the year before the presidential
Policy makers can always do the unexpected - whether stupid or brilliant - to delay or alter for short periods existing economic trends.
The lesson of these first and third
economic forecasting errors is that the cognizant policy making
authorities almost always retain some ability to affect immediate
events. Policy makers can always do the unexpected - whether stupid or
brilliant - to delay or alter for short periods existing economic
trends. The lesson of the second mistake is, obviously, that any
weakness of theoretical understanding will eventually lead to faulty
conclusions. Forecasting accuracy is always the ultimate test of the
validity of theory, Keynesian economists to the contrary
The Keynesian economists who dominated economic policy during those years determinedly ignored economic history in the vain hope that their theories would somehow change the real economic forces that were responsible for the events of economic history.
Monetary inflation - after initial pleasant results - doesn’t prevent unemployment - it causes unemployment - and stagnant capitalization - or even decapitalization - and a host of other evils.
The publisher of FUTURECASTS takes little pride in
the achievement of those two decades of forecasting excellence.
The truth is that it was absurdly easy.
The modern business cycle:
Administration and Congressional spending
proclivities and policies that disable market disciplinary
mechanisms have been particularly pernicious and are currently worse
Moral hazard guarantees that now extend broadly across the major entities in the financial system remove the fear of default as a disciplinary factor in creditor decisions. Artificially low interest rates for several years at a time allow the economy to adapt to a financial environment devoid of a realistic time cost of money. Resource allocations by the government undermine the basic supply and demand discipline of the pertinent markets.
Tariffs and the allocation of resources in favor of
politically favored sectors like agriculture and housing have played
major roles in serious economic contractions like the Great Depression
and the Credit Crunch. Federal Reserve missteps and its monetization
of government debt have repeatedly increased the volatility and
viciousness of the business cycle. Its efforts to mitigate the
business cycle have largely been counterproductive.
Indeed, capitalist market systems cannot exist without appropriate institutional and regulatory frameworks.
The markets cannot be expected to discipline their
participants if such vital disciplinary mechanisms are disabled by
government policy. These mechanisms are far from perfect, but they are
far superior to any administered alternatives devised to take their
place. Regulation that facilitates market mechanisms is essential and
something the U.S. does very well. Indeed, capitalist market systems
cannot exist without appropriate institutional and regulatory
frameworks. See, Scott,
"The Concept of Capitalism," Broad scale laissez
faire policy has never been a part of capitalist systems and is
actually impossible for capitalism.
The Keynesians didn't quite succeed in destroying the nation's economy during the the 1960s and 1970s, so they returned with Obama to give it another try
When the Keynesians again fail, they will leave behind vast increases in the nation's debt burdens and a debouched currency.
The “golden straitjacket” of monetary stability
and reasonably balanced budgets dominated economic policy during the
prosperous years of the Bush (I) and Clinton administrations. But the
Bush (II) administration and three Republican congresses heedlessly
abandoned these policies in favor of narrow political expediency and a
rush to loot the public treasury. These Republican politicians
revealed themselves to be nothing but unprincipled political hacks.
Government, Government by Crisis
and Congress: The Engine of Inflation,
Their policies resulted in bubble mania and drove the nation into the
Credit Crunch recession - just like the Republican administrations and
congresses of the 1920s that drove the nation into the Great
Depression. See, Blatt, "Understanding the Great Depression and the Modern Business Cycle."
See, also, Summaries
of Great Depression Controversies and Facts and seven Great
Depression Chronology articles beginning with The
Crash of '29,
If you do not understand the absurdity
of Keynesian concepts and its derivative concepts, then you can
not understand recent economic history or have an accurate
understanding of current and future economic possibilities. Since
economics is fundamental to prospects in sociology and politics, a
lack of understanding of economics inevitably undermines a broad swath
of your world view. It is impossible for futurists and forecasters in
these fields to function successfully without coming to grips with
Keynesian and other authoritative economic myths.
And there are a host of other authoritative myths
and misconceptions of all kinds affecting all the nonscientific
practical arts. They have afflicted policy making and intellectual
understanding in the 20th century and similarly threaten policy making
and intellectual understanding in the 21st century.
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Copyright © 2010 Dan Blatt