The biggest fraud in economics is ... economics?
What鈥檚 the point of having an economy, asks Bill Bonner? It makes no sense to waste trillions of dollars鈥� worth of resources just to 鈥減rotect the economy,鈥� he says. The whole point of an economy is to create more stuff, not to waste it.
What鈥檚 the point of having an economy, asks Bill Bonner? It makes no sense to waste trillions of dollars鈥� worth of resources just to 鈥減rotect the economy,鈥� he says. The whole point of an economy is to create more stuff, not to waste it.
Forget 鈥榩eak oil.鈥� Or so they say. It has fracked its way to energy self-sufficiency.
Porter Stansberry:
The Wall Street Journal tells us that the US will not import a single barrel of oil from the Middle East by 2035.
Hey, wait a minute. Wasn鈥檛 that supposed to be why we鈥檙e spending trillions on wars in Middle East鈥o keep vital supplies of black goo headed our way?
Of course, the numbers never really made any sense. Neither did the logic of it. It would have been a whole lot cheaper just to buy the oil on the open market. Trillions cheaper.
But money isn鈥檛 everything. The US needs to guarantee access to oil鈥r its whole economy might be brought to its knees.
Which is probably a good place to introduce a new idea:
What鈥檚 the point of having an economy? It is so that people will get the stuff they need and want. The more efficient the economy, the more stuff people get with the least effort and expense of resources.
It makes no sense to waste trillions of dollars鈥� worth of resources just to 鈥減rotect the economy.鈥� The whole point of an economy is to create more stuff鈥ot to waste it. You might just as well try to protect your health by committing suicide.
Most economists are fools or knaves. The knaves want to get prestigious jobs and Nobel prizes by offering crackpot advice. The fools think it will work.
A few months ago, they were concerned with peaks. There was a peak in oil production. There was a peak in food production. There was a peak in available water coming. Then, a peak in peaks must have been hit.
Now there is a peak in valleys. All of a sudden, the peaks are far away. Commodity prices are falling, not rising. Deflation is economists鈥� worry, not inflation. Deflation is an impediment to growth; everyone believes it.
The European debate is largely a dispute over which fraudulent solution will cause 鈥榞rowth.鈥� The austerity crowd believes it has to clamp down on government spending. This will give investors confidence in government bonds. The feds will be able to borrow again. The economy will grow. All will be well.
The stimulus crowd targets growth directly. It wants the feds to spend鈥reating jobs, incomes, spending and so forth.
Paul Krugman is in The Financial Times today.
Krugman says the real problem is a lack of demand. People just don鈥檛 want to spend their money. This is something that needs to be fixed!
Why? Why not let people decide for themselves when they want to spend and when they want to save? Why let the government do for them what they do not want done? Krugman doesn鈥檛 bother to think about it.
He is worried only about growth. He is afraid that the economy will collapse completely before austerity measures lead to growth. The austerity group worries that government-led 鈥榞rowth鈥� will blow up the economy before it has a chance to turn into real, private sector growth.
Neither side doubts that growth is the key. Almost everybody agrees: we have to pursue growth. 鈥淭he Hero,鈥� Ben Bernanke, does it by printing money. Congress and the administration do it by running trillion-dollar deficits.
Nobody doubts that 鈥榞rowth鈥� is the key to progress, happiness, and maybe even Heaven. But there鈥檚 the foundation of the great flim-flam right there.
Why do economists think 鈥榞rowth鈥� is such hot stuff? Because they can measure it鈥�
Economists can measure GDP. They can tell when it goes up鈥r when it goes down. Generally, more is better鈥ecause it means the economy is creating more stuff. So, economists tailor their policy recommendations鈥heir theories鈥nd their editorial page blah-blahs to the goal of stimulating growth.
But is growth a good thing? Is it the same as progress and prosperity? Is more stuff what the world really needs?
Just 5 years ago, TIME magazine thought the US needed more stuff鈥n the form of houses. Seventy years ago, the US needed more stuff鈥n the form of tanks and fighter planes.
Forty years ago, US economists 鈥� notably Samuelson 鈥� were convinced that the Soviet economy would soon be larger than the US economy. Why? It could produce more stuff. They had charts to show how stuff production in the Soviet Union was increasing鈥nd how it would surpass the US in just a few years.
And what happened? It didn鈥檛 matter. The stuff was worthless.
More tomorrow.
Regards,
Bill Bonner
听蹿辞谤 The Daily Reckoning