Dear Reader,
Here at The Evening Vanguard, we look askance at economists of mainstream orientation.
Here is the central sin of economists:
They are not women and men of science.
They believe they are. Yet they are not.
“Science” binds back to the Latin scientia — knowledge — “to know.”
The practitioner of the astronomical sciences, for example, is merely out to comprehend the universe he infests.
He is not out to change or influence it. He is not out to engineer it. He is merely out to study it.
Now consider practitioners of the economic “sciences.”
Engineers, Not Scientists
The heaping majority of economists are not after knowledge for its own sake — unlike the astronomer.
They are instead out to tinker… to meddle… to engineer… in pursuit of a cherished result.
What is that cherished result? The answer is an expansion of the gross domestic product.
“Growth, growth, growth — and growth some more!” is their eternal mandate.
They believe the economic apparatus must hum perpetually at a very high pitch.
If it slackens, if it sheds steam, if it wobbles, the economic engineers believe they must leap to frantic and immediate action… else the machinery seize.
Financial Engineering
Thus they suppress interest rates. They fabricate oceans of credit — debt, that is — from the bottomless abysm of nothingness.
They seek to bend economic law to their defiant and hubristic will.
That is, they do not simply observe economic law. They attempt to fashion economic law.
Thus they are not scientists. They are engineers.
Alas, their engineering is nearly always botchwork.
Imagine converting a heavenly observer — an astronomer — to a heavenly engineer.
That is, load his head full of the economist’s aspirations. Here is what he would tell you:
- We have established that the gravitational constant is inadequate to our planetary needs. If we can simply alter this so-called constant through wise, applied intervention, we could create a more efficient orbital path. It will give farmers a longer growing season, increasing agricultural yield. We must therefore apply the tools at our disposal to produce the desired result.
They’d Wreck the Cosmos
Now imagine that the astronomer acquires the tools of manipulation in his sphere… that the economist has acquired in his.
He believes he can distort gravity, alter the planetary orbit and expand agricultural production.
Within no time Earth would be careening off course. It would be bound for the grim interstellar wastes.
And its inhabitants would be ice blocks.
After all: Look what the economist engineer has inflicted upon this world.
Because of his counsel Earth is deluged by unsustainable debt, financial fragility and vicious boom/bust cycles.
And so we are infinitely fortunate that the means of astronomical manipulation remain beyond human reach.
An Instrument of Politics
The engineered economy is an instrument of politics — and its perpetual demand for growth.
Yet must an economy be slave to growth?
Nature runs to cycles. The tides wax and wane, the seasons shift, the animals hibernate.
Left undisturbed, an economy likewise runs to cyclical settings.
Why not let it?
Here is the answer of the economic engineer: The unmanipulated economy will not meet his mandate.
That mandate, in reminder, is:
“Growth, growth, growth — and growth some more!”
Economies Need Rest
If an economy wishes to rest, I say permit it to rest. Growth may recede, it is true. An economy may even lapse into recession.
Yet as the human anatomy heals and recuperates in sleep… so the economic anatomy heals and recuperates in sleep.
It will awaken, refreshed, when the rooster crows. It will be keen to stretch its legs and get going.
Yet the economy under habitual intervention is forever denied the rest and recuperation it requires.
Thus it can merely gutter along under chronic fatigue.
Let us revisit — briefly — the Great Financial Crisis…
From Boom to Bust to Boom
The Federal Reserve intervened massively to engineer a recovery.
Quantitative easing, zero interest rates and the rest of the central banker’s emergency kit came to bear.
The engineering “worked.”
Yet it denied the economy its necessary rest and recuperation.
It denied the economy its natural yearning for sleep… to clear away the vast imbalances and excesses of the boom years.
Instead the Federal Reserve engineered another boom — a stock market boom.
What if the Fed Didn’t Intervene?
Absent the Federal Reserve’s gargantuan intervention, interest rates would have soared in the bust’s wake.
Capitalism’s gales of creative destruction would have borne away the wasteful and inefficient.
Many businesses reliant upon cheap debt and low interest rates would have died the death.
Yet the distress — though acute — would have likely been brief.
Sound business erected upon sound foundations would have endured.
Higher interest rates would have encouraged savings… and gradually rebuilt the capital stock.
The United States economy would have reawoken eventually — with fresh, rested legs and a vast energy reserve.
Yet the Federal Reserve denied it its rest. Instead it pumped it full of caffeine.
A Debt-Based Economy Can’t Rest
Alas, the debt-based economic order cannot permit rest.
It requires perpetual expansion to service the debt it perpetually spawns.
That is precisely why this preposterous system requires growth, growth, growth — and growth some more.
Yet the economic engineering designed to give us growth gives us crumbs.
Economic commentator Charles Hugh Smith:
- Borrowing money to consume something in the present brings forward consumption and income…
- If we choose to consume now, we have less income to save for future consumption or investments…
- Those who brought their consumption forward can no longer add to present consumption, as their future income is already spoken for…
- A“recovery” based… on cheap credit and an artificially stimulated “wealth effect” was inherently weak, for the stimulus effectively hollowed out the productive economy in favor of the financialized, speculative economy… stripping future demand to create the illusion of growth in a stagnating economy…
Retire the Economic Engineers
I propose that economists return immediately to their observational role.
They must abandon their engineering at once.
That is because an unengineered economy is a largely self-regulating economy. It is not given to the fantastic imbalances and distortions of the engineered economy.
The unengineered economy may not boom as explosively as the engineered economy.
Yet nor does it bust as destructively as the engineered economy.
I believe this economy would run to far stabler settings.
Thus it is time to hand the economic engineer his pink-hued slip.
His services are not needed. They never were.
Regards,
Brian Maher
for Freedom Financial News