Posts Tagged ‘Economics’
Financial Cycles

Do you applaud the BIS for acknowledging financial cycles or to shake your head that such an article should be thought necessary?

Understanding in economics does not proceed cumulatively. We do not necessarily know more today than we did yesterday, tempting as it may be to believe otherwise. So-called

“lessons” are learnt, forgotten, re-learnt and forgotten again. Concepts rise to prominence and fall into oblivion before possibly resurrecting. They do so because the economic

environment changes, sometimes slowly but profoundly, at other times suddenly and violently. But they do so also because the discipline is not immune to fashions and fads. After

all, no walk of life is. The notion of the financial cycle, and its role in macroeconomics, is no exception.

No s**t Shirlock

This in all probability means moving away from equilibrium settings and tackling disequilibrium explicitly. In many respects, all this takes us back to previous economic intellectual traditions that have been progressively abandoned in recent decades.

You mean those classical economists had something sensible to say after all. Well I never.

If policy is unable to constrain the boom sufficiently and the financial bust generates a serious balance sheet recession, policies need to address balance sheet repair head-on. The overarching priority is to structure them

so as to encourage and support the underlying balance sheet adjustment, rather than unwittingly delaying it.

Take that Krugman, Bernanke et al. Your policy prescriptions have not and can not work. Reality always wins and your policies fly in the face of reality.


Ghosts of econs past, present and future

Ghosts of economists past, present and yet to come (again) sing along in the spirit of Christmas on this video:

It’s a great video that gets the big question right – is more consumption or production the path to prosperity? I know that sounds stupid, but economists tends to obsess over the former and pay lip service to the latter.This distorted thinking flows through to government policy, resulting in the current debt induced macro mess.

While it’s a shame much of the profession did not watch such a witty clip in first year, it would profit from an even greater emphasis on production. Having your savings squandered by someone else on more “toys” is not a path to prosperity. It matters little if our bankers bonuses go on ferraris,  yachts or more homes. They will not generate a sufficient future income stream to reward the saver.

It’s productive investment which is the key. Or more precisely, attempted active productive investment. Look around, are your savings being invested in income producing assets which will fund your future comfort? Or are they being squandered on government white elephants and crony capitalist excesses?

But this is all too long and serious for an excellent video clip. Watch it, have a laugh and possibly even learn something

Hat tip Steve Kates


Economic roller coaster to hell

Dongguan in Guangdong is on the brink of bankruptcy. Up to 60 per cent of its villages are running up deficits and will soon need a bailout from the township.

It’s a race to the bottom between the US, EU, Japan and China to name but the four largest global economies. It’s perfect timing for an alternative currency to come into being.

It’s not so much a case of being on a road to hell, but a roller coaster.