By Hal Snarr
Mainstream economists are at a loss to explain why the current regime of inflation and central bank interventions have been so economically devastating. Understanding Cantillon effects is vital to making sense of the current madness.
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Most economists don't have to make real world decisions about spending, budgeting or solving financial problems in real time. So to them it's all theoretical formulas and econo rules.
Eh, maybe. But I don't know if this is one of their bigger issues. Related to this I'd say a bigger problem is simply not interacting with enough people outside their bubble and therefore not understanding how regular people think about and process the economy around them
Are they really at a loss to explain it, or are they just afraid to speak out against orthodoxy?
I don't talk to enough mainstream economists anymore to have a good feel
"At a loss" sort of implies that they're trying to understand it and failing, which I don't think is accurate.
I also don't think it's a fear to speak out. You've probably talked about money with more economists than I have, but my impression is that most just haven't given this stuff much thought at all.
I think there could be genuine fear of speaking in a way which sounds critical of the Fed, or sounds "coded right". Especially given the prevalence of fed economists in academia, as well as the fed being the largest employer of economists
But isn't criticizing the Fed barking up the wrong tree?
It's fiat that's broken, not the institutions that run it. They're just doing their job of fulfilling contradictory mandates.
I'm sure that's real, but also most economists hold orthodox work in pretty high regard.
I was kind of wondering how claims like "Economists fail to understand..." should be evaluated. We have lots of specialties, after all. Should we all be up to speed on everything or is it a win for the profession if the specialists get their stuff right while the rest of us are clueless?
What is the typical view of Mises, Hyaek, and Rothbard. I believe other than Rothbard they are respected in the profession right. Are most economists not familiar with their writings or do they just consider them qwacks?
I don't talk to economists except here but in my work Slack channels that talk about the financial markets I usually get one of two responses when I mention monetary inflation / fed policy. The people say they disagree but aren't equipped to explain why or these are qwacks out of date ideas long discredited. Then they cite the so called wildcat pre-FED years.
There are some gold standard Ron Paul folks but they are usually bitcoiners too and they are in the bitcoin channel I created.
The lack of curiosity about it blows my mind. It's especially crazy to me that people that complain the loudest about the problems created by money printing seem the least interested.
I have a theory that it's because it is faceless and bi-partisan. Much easier to sell it as a Trump or Biden problem instead of institutional.
Also the case in the state of California. Easier to sell Newsom as a root problem than decades of left wing and right wing interventions.
Most economists haven't read much of anything that would be considered economic philosophy or that's older than about ten years prior to their PhD.
Yes, they view the Austrians as right-wing quacks. No, Hayek and Mises are not widely respected in the field. They are, however, well respected amongst economists who actually study the history and philosophy of economics. Those economists aren't held in high esteem either, though.
Can confirm. My econ phd program had basically zero history. It was entirely technical. I became a better engineer than an economist, to be honest. I got better at being an economist after my phd program.
There aren't many programs that have any economic history, as far as I know. There's George Mason, Chicago, and some of the Ivies.
When they cite the "wildcat pre-fed years", do they have in mind the bank runs in It's a Wonderful Life? Because I have a feeling that that's what they have in mind, haha.
It may also be the messenger or medium or context of work. I don't start these things
We need to understand it's a debts trap for common people. Economy, Inflation and finance are mostly operation of just 1 percent rich elite's making most of the decision based on their own interest. It's a shell game!
No estudie economía pero díganme si concuerdan en esto. Hoy fue a comprar los alimentos de la quincena y una tienda estaba cerrada, supuestamente la respuesta que dio una de las dependientas era que estaban almorzando ( eran las 3:15 pm), todas estaban sentadas afuera, ahora ¿como mantener una economía comercial si no se trabaja?, yo misma estoy trabajando en estás plataformas como sustento y ahorro. Por causa del fluido eléctrico que nos quitan y que suspenden la conexión a internet por temor a manifestaciones trato de mantenerme para seguir ganando y que pierdo el sombrero cada vez. Si no lo hago ¿ Cómo puedo tener una economía? . El comunismo es un atraso y pagarles a las personas sólo por hacer actos de presencia en su trabajo también lo es. Como comercial que soy,mi lema es sin clientes no ganamos
Also, it would be worth understanding the Rate cuts as mentioned below ..
Dow Jones vs Federal Reserve Rate Cuts Before the 2008 Crisis
Many market participants assume that interest rate cuts act as a safety net for equities. The events leading up to the 2008 financial crisis tell a far more sobering story.
September 18, 2007 – First Cut Brings a Short-Lived Rally The Federal Reserve reduced the federal funds rate by 50 basis points. The Dow Jones Industrial Average surged roughly eight percent over the next four weeks. In hindsight, this rally represented the final bull trap, as underlying credit market stress continued to deepen out of sight.
October 31, 2007 – Marginal New High With Weak Momentum The Fed lowered rates by another 25 basis points. The Dow managed to notch a marginal new high, but momentum was already fading. Market activity displayed signs of distribution, signalling that the advance was losing conviction.
December 11, 2007 – Cuts Lose Their Stimulative Effect Another 25 basis point cut failed to deliver sustained support. Within weeks, the Dow fell approximately eight percent. This was the first clear indication that monetary easing was no longer acting as a stimulus and that broader forces were dominating market direction.
January 22, 2008 – Emergency Cut Sparks Panic
In an unscheduled move, the Fed cut rates by 75 basis points. The Dow fell about five percent the same day. Emergency action served less as reassurance and more as confirmation that policymakers were reacting to a deepening crisis. The market interpreted this as a sign of eroding confidence.
January 30, 2008 – Brief Bounce Then Renewed Decline
A further reduction of 50 basis points produced a short-lived rebound. The underlying trend, however, had already turned bearish. Selling pressure soon resumed.
Final Outcome
The Dow Jones peaked in October 2007 and went on to fall roughly fifty-four percent by March 2009. Rather than halting the decline, the sequence of rate cuts confirmed that the financial system was under severe strain.
What we can learn from this ? Accelerating rate cuts often coincide with rising risk rather than diminishing it. In times of systemic stress, monetary easing alone may be insufficient to halt the downward momentum.