SUBHEAD: The dissenting economic 'illuminati' world view is based on a fallacy.
By George Mobus on 25 May 2009 in Question Everything -
(http://questioneverything.typepad.com)
Image above: The Great Seal of the United States (on the dollar bill) is a symbol used by the secret society The Illuminati.
There is a fascinating article in the New York Review of Books, The Crisis and How to Deal with It. It is a panel interview with Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells conducted by Jeff Madrick. In essence these are the economic luminaries who have been critical of the administration's policies (both fiscal stimulus and monetary) in one way or another. They can't really agree among themselves either!
They each give their take on the 'causes' of the current economic meltdown and the financial crisis attending it. Each has a slightly different perspective, but what is absolutely clear is that they all look for 'internal' causes. Several point our over leveraging and a few mention various forms of confidence (a psychological factor).
They all agree on various 'trigger' events as setting off the collapse. Many of them agree that there might be some slow recovery in the economy but differ in amount and timing. But not one of these bright lights considers that the root cause might be something entirely different from all the usual neoclassical suspects.
Not one considers that the actual cause of this debacle is the fact that less real physical (economical) work is being done because there is less net energy available with which to do it. The debt was definitely a factor in the rate and severity of the collapse since debt since at least the 1970s has been built up against a presumed future of production sufficient to pay back both principal and interest.
But also since at least the 1970s the net energy available for non-energy extractive economic work (meaning other resource extraction and refining, manufacturing, and all of the service work) has been in steady decline (see: What counts as real wealth). In other words, the world has been decreasingly able to do the work necessary to service and retire that debt.
Yet debt financing became the only way anyone could see to keep the engine running. News flash for economists: It isn't dollar bills that power your car, it is gasoline. When the latter is starting to diminish in availability it takes more of the former to buy the same amount of power. You guys should know that! The one thing they all seem to agree on, even if implicitly, is that a recovered economy means that the GDP is once again growing and that jobs are being created. That, to them, is a healthy thing.
Never mind that the GDP grows because people are buying useless (or wasteful) stuff and consuming it so as to buy more. Never mind that the majority of jobs being created are to make and sell useless stuff. Or to flip hamburgers and deep fry french fries to make more Americans obese. Never mind that a significant fraction of the GDP is based on money spent for repairing damage (like rebuilding after Katrina), or replacing Hummers and helicopters lost in Iraq (or more macabre - paying for funerals of fallen soldiers). If it is growing it is good. What an incredible grave we have dug for ourselves. And here is the kicker, like AIG or BofA or GM, the world economy based on borrow-spend-consume is too big to fail!
We have to keep going or else. We have to keep borrowing or else. We have to keep creating meaningless jobs or else. No one is capable of seeing any alternative even when they all realize that in the long run it will fail catastrophically! It will fail sooner than later because we are running out of net energy. Left to the private sector (with a few scraps of incentives here and there) the build-out of alternative, renewable energy infrastructure is simply not going to happen fast enough to cover even a small fraction of what we are losing to post-peak oil decline and diminishing energy return on energy invested (EROEI).
Right now the governments of the world should be alerting their publics to what the truth is regarding our economic options (there really aren't any but one at this point) and directing every financial resource into constructing alternative energy infrastructure while restructuring society to live in a far lower energy economy (see: Our energy cocoon). Of course this will be politically difficult. In democratic nations no politician dares tell the truth (even if they knew it) realizing they would be booted out of office for telling people what they don't want to hear. It's a tough problem and may end up being democracy's greatest failure.
Especially since our education systems have done such an incredibly bad job of truly educating people [we want students to learn more math but we don't need them to understand how to use the math to grasp this kind of problem!] (see: Is it time for Education 2.0). Poorly educated citizens can't truly understand the problem let alone the solution. And this is one problem/solution that cannot be captured in a catchy sound bite.
Image above: Painting of a meeting of the Bavarian Illuminati, a secret society founded in 1776.
Well the economic 'illuminati' will continue to debate about causes and effects in their closed-world model. They will not consider that their entire world view is based on a fallacy — that the human economy is a closed system and that all that counts is money (fiat or otherwise). Ah, the failings of human wisdom. More proof that you can be a genius, even a Nobel prize winner, and still not understand the big picture. Good luck Homo sapiens.
.
By George Mobus on 25 May 2009 in Question Everything -
(http://questioneverything.typepad.com)
Image above: The Great Seal of the United States (on the dollar bill) is a symbol used by the secret society The Illuminati.
There is a fascinating article in the New York Review of Books, The Crisis and How to Deal with It. It is a panel interview with Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells conducted by Jeff Madrick. In essence these are the economic luminaries who have been critical of the administration's policies (both fiscal stimulus and monetary) in one way or another. They can't really agree among themselves either!
They each give their take on the 'causes' of the current economic meltdown and the financial crisis attending it. Each has a slightly different perspective, but what is absolutely clear is that they all look for 'internal' causes. Several point our over leveraging and a few mention various forms of confidence (a psychological factor).
They all agree on various 'trigger' events as setting off the collapse. Many of them agree that there might be some slow recovery in the economy but differ in amount and timing. But not one of these bright lights considers that the root cause might be something entirely different from all the usual neoclassical suspects.
Not one considers that the actual cause of this debacle is the fact that less real physical (economical) work is being done because there is less net energy available with which to do it. The debt was definitely a factor in the rate and severity of the collapse since debt since at least the 1970s has been built up against a presumed future of production sufficient to pay back both principal and interest.
But also since at least the 1970s the net energy available for non-energy extractive economic work (meaning other resource extraction and refining, manufacturing, and all of the service work) has been in steady decline (see: What counts as real wealth). In other words, the world has been decreasingly able to do the work necessary to service and retire that debt.
Yet debt financing became the only way anyone could see to keep the engine running. News flash for economists: It isn't dollar bills that power your car, it is gasoline. When the latter is starting to diminish in availability it takes more of the former to buy the same amount of power. You guys should know that! The one thing they all seem to agree on, even if implicitly, is that a recovered economy means that the GDP is once again growing and that jobs are being created. That, to them, is a healthy thing.
Never mind that the GDP grows because people are buying useless (or wasteful) stuff and consuming it so as to buy more. Never mind that the majority of jobs being created are to make and sell useless stuff. Or to flip hamburgers and deep fry french fries to make more Americans obese. Never mind that a significant fraction of the GDP is based on money spent for repairing damage (like rebuilding after Katrina), or replacing Hummers and helicopters lost in Iraq (or more macabre - paying for funerals of fallen soldiers). If it is growing it is good. What an incredible grave we have dug for ourselves. And here is the kicker, like AIG or BofA or GM, the world economy based on borrow-spend-consume is too big to fail!
We have to keep going or else. We have to keep borrowing or else. We have to keep creating meaningless jobs or else. No one is capable of seeing any alternative even when they all realize that in the long run it will fail catastrophically! It will fail sooner than later because we are running out of net energy. Left to the private sector (with a few scraps of incentives here and there) the build-out of alternative, renewable energy infrastructure is simply not going to happen fast enough to cover even a small fraction of what we are losing to post-peak oil decline and diminishing energy return on energy invested (EROEI).
Right now the governments of the world should be alerting their publics to what the truth is regarding our economic options (there really aren't any but one at this point) and directing every financial resource into constructing alternative energy infrastructure while restructuring society to live in a far lower energy economy (see: Our energy cocoon). Of course this will be politically difficult. In democratic nations no politician dares tell the truth (even if they knew it) realizing they would be booted out of office for telling people what they don't want to hear. It's a tough problem and may end up being democracy's greatest failure.
Especially since our education systems have done such an incredibly bad job of truly educating people [we want students to learn more math but we don't need them to understand how to use the math to grasp this kind of problem!] (see: Is it time for Education 2.0). Poorly educated citizens can't truly understand the problem let alone the solution. And this is one problem/solution that cannot be captured in a catchy sound bite.
Image above: Painting of a meeting of the Bavarian Illuminati, a secret society founded in 1776.
Well the economic 'illuminati' will continue to debate about causes and effects in their closed-world model. They will not consider that their entire world view is based on a fallacy — that the human economy is a closed system and that all that counts is money (fiat or otherwise). Ah, the failings of human wisdom. More proof that you can be a genius, even a Nobel prize winner, and still not understand the big picture. Good luck Homo sapiens.
.
1 comment :
that painting cant be of the illminauti because their are women in that painting and no women are let into the illminuati..
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