Monday, September 28, 2009

Casting Runes on the floor of the NYSE

Economic is not a science; it is augury; it is the casting of runes in a vain attempt to bring predictability to the nonlinear chaos that is our human lot. And, as John Michael Greer points out, economists have an abysmal track record.

One of the problems is that economists believe that the past never happened. The past is a dream lost in the mists of time and has no relevance to the present. Their vision is a pinprick of light that sees only the fleeting present they mistakenly believe can be captured and held in place by complex mathematical models.

Greer quotes John Kenneth Galbraith who said that, “[I]n the financial world, the term ‘innovation’ usually refers to the rediscovery of the same limited set of bad ideas that always, without exception, lead to economic disaster.”

This is especially true of bubbles, be they housing bubbles, dot.com bubbles, South Seas bubbles or tulip bubbles. Every time a new bubble surfaces, economists put on their priestly robes and mumble that four-word incantation that is the precursor to disaster, “It’s different this time,”

It never is.

However, as Greer points out, bubbles are golden eggs for economists. As asset prices soar towards the galaxy, economists are the seers assuring us that the current bubble is constructed of high-carbon steel and will never, ever burst. And the first thing a people with no sense of history do after the bubble has popped is to forget that it popped so they are primed and ready for the next one.

Economics is a branch of the social sciences, surely history’s greatest oxymoron. They filled the vacuum left by the collapse of religion and are just as invalid.

Heisenberg’s Principle of Indeterminacy is a product of quantum physics, but it certainly describes the fatal flaw in the social sciences. The principle states, “Absolutely precise measurements are impossible, due to interference to the measured quantity which is inevitably introduced by the measuring instrument.”

In other words, as soon as an economist opens his mouth, the phenomenon being described is changed by his statement. But that doesn’t stop economists from constructing their mathematical models and hawking them as valid predictors of future activity. As Greer points out:

Economics is particularly vulnerable to this sort of malign feedback because its raw material—human beings making economic decisions—is so complex that the only way to control all the variables is to impose conditions so arbitrary and rigid that the results have only the most distant relation to the real world.

He cites the example Long Term Capital Management (LTCM). Two noble laureate economists constructed mathematic models one claimed “were so good that they could not lose money in the lifetime of the universe.” Unfortunately, the model failed to factor in history, i.e. countries sometimes default on their debts. Russia did, and LTCM tanked.

The reason we need high priests is that we simply don’t know what the fuck is happening. It’s all so confusing. The truth is we don’t know if we’ll survive to see tomorrow morning. This is especially true of our financial retards who are like little boys who love building intricate structure out of blocks just so they can send them crashing to the ground.

The high priest of economics is a godsend to them. The economists unroll their complex formulae and our fund managers, whose concept of history is Sunday’s Giants game, are reassured that the current bubble is forever.

The story is told of the man who, when he walked into work every morning would be hit alongside the head with a two-by-four wielde by his boss. It was the same thing every morning, Monday through Friday. Then, one day, the boss wasn’t there, so the man waited for him to appear.

The employee must have been an investment banker.

7 comments:

Suzan said...

It also helps the game along that these guys get their take off the top.

Thanks for the analysis of what we've been afflicted with since the appearance of Alan Greenspan on the scene.

Ayn Rand lives!

S

(snarky S, of course)

Case Wagenvoord said...

Suzan,

It's more than Greenspan. It's the wholesale acceptance of the value-free thinking advocated by all the social sciences. Why qualify when you can quantify? If the policy tells us to kill, we kill; if it tells us to exploit, we exploit. Moral judgements are just too messy.

TAO Walker said...

....and here we have homo domesticus lining-up en masse for another run from the feed-lot, through the chutes, and onto the killing floors.

Any guesses about their reaction if the guy with the hammer isn't there this time? Of course, many are already just waiting for 'someone' to appear.

HokaHey!

Case Wagenvoord said...

"Civilization" has become an exercise in passive obedience.

TAO Walker said...

Like it's domestication counterpart for the "lower" animals, "civilization" has never been about anything but maintaining a captive population of "manageable" two-leggeds to exploit in one way or another. The problem for those billions presently captive to it, is their CONtrived and institutionalized ignorance of any viable alter-Native.

Ironically, their privateering gangster overlords are all too aware of how actually tenuous is their grip on homo domesticus....thus the lengths they go to to create and maintain the illusion of invincible inevitability. Yet here in these latter days even they see THE END of their ten-thousand-plus year run here, as the "reality" they've defined for their human livestock is falling-apart in ways become too obvious to cover-up any longer.

The Hopi say this immanent collapse of the CONfinment regime will be too much of a shock for most of its inmates to survive....even without any actual physical catastrophe. We'll soon see.

HokaHey!

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