Thursday, 29 April 2010

Abject macroeconomic failure

Remember America’s stimulus package(s)?

Remember how it was described as “essential” to”save jobs.”

So how’s that job-saving going, I wonder. Answer: 15 million Americans remain out of work.

Just so you know, the original graph was issued by Obama’s team in January 2009 to show what would happen both with and without most massive economic intervention since every other intervention put together (bigger, in fact, than the sum of all interventions put together).

The really sad thing to note here is that resources amounting to more than the Apollo programme, the post-war Marshall Plan and the cost of the Iraq War, the Korean War, and the Vietnam War put together were taken away from resource-owners, where they could have been put to productive use, and used instead to … to what?  Well, to have no effect whatsoever, at best—and, at worst, to make the economic situation worse.

Now, the graph comes from the blog of Greg Mankiw--former adviser to George W. Bush and as mainstream as a mainstream economist can get—who rushes to the defence of both his profession and the Obama administration, saying no-one should be held accountable here because it’s all just “a reflection of the inherent uncertainties associated with macroeconomics.”

Perhaps a better word than “uncertainties” would be “failures.”  As in, the complete and abject failure of the whole mainstream theory.

Failure by practically all the world’s mainstream macroeconomists to see the global economic and financial crisis coming.

Failures of the advisers to both Bush and Obama to know what to do when it hit.

And now failure to know what the hell would happen when the world’s biggest ever “stimulus” programme was thrown at the US economy like one giant golden shower, at the recommendation of most of the mainstream macroeconomists Prof Mankiw calls “colleagues.”

But all of this is just abject, flatulent nonsense.  We here at NOT PC were among those saying at the end of 2008, as clearly as we knew how, that “A pump primed means a recovery delayed.” We were saying, while all thestimulunacywas being talked up, that there is no choice at all about the pain of recession—the only choice is how long the pain is going to take. Meanwhile, the mainstream economists were insisting on making the situation worse while pretending they knew how to make it better, even as (they confess now) their own hopes and expectations were riddled with all “the inherent uncertainties associated with macroeconomics.”

Perhaps it would be time, then, for those failed macroeconomists to reflect on one basic principle when considering action in the face of abject ignorance: First, do no harm.

And to take the only action that would really be appropriate in the circumstances: to pack up their theories, their excuses, and their record of abysmal failure, and get the hell off the world stage.

NB: Also for the record, here are the unemployment figures for the US civilian population by sex and age, not seasonally adjusted, March 2009 to March 2010

Overall: 9.0 to 10.2
Men over 16: 10.6 to 11.8
Men over 20: 9.9 to 11.2
Women over 16: 7.3 to 8.3
Women over 20: 6.9 to 7.1
Both sexes 16-19: 21.5 to 22.0

As Jeffrey Tucker comments, “It’s a heck of a time to have raised minimum wages three years in a row.”

And the only reason these unemployment figures look better than the figures for the Great Depression? Because the headline figures are measured differently now. Measure them as they used to, including the underemployed and long-term unemployed (as the BLS's U6 measure of unemployment does) and we discover that “unadjusted” unemployment reached 17.5 per cent in March, higher than it was in every year of the thirties apart from the peak unemployment years of 1932 and 1933, when the figures were 22.9% and 20.6% respectively.  [FYI, the series from 1929 to 1938 was, in percentage terms, 3.9, 8.7, 15.3, 22.9, 20.6, 16.0, 14.2, 9.9, 9.1, 12.5]


  1. I thought Mr. Soros was part of the Obama economic advisory team? Soros had been a critique of macroeconomics but then he keeps supporting & cosying up to prominent macroeconomists.

  2. Just a question about your graph or whoever did that projection/forecasting. The graph is a forecasting (projecting the unemployment rate likelihood into future time-steps) no doubt about it.

    I thought that Austrian economists would dismiss that graph immediately as rubbish. Ha, I think that Austrian just nitpick when prediction/forecasting of future likelihood suits them, but dismiss them when it doesn't.

    From the objectivisit website, Importance of Philosophy, it quoted in the page for existence something like this, one cannot deny existence, while using his/her brain (which exists) to do the denying.

  3. @Falafulu Fisi

    Just to be clear, this is a graph advanced by mainstream 'economists' using their own data. By their own standards, their theories (and models) have been found wanting.


  4. Thanks for clarifying Julian. I suspect that they (macroeconomists) used DSGE to generate that graph. I know that the US Feds use it in their advisory role to the US government. I am sure that our Treasury Department here in NZ is using it, again for its advisory role to the government. It is based on equilibrium and as you said, its been found wanting.

    Any mainstream economist here would care to comment, if it is indeed the DSGE that Obama admin relied upon in their projection? I thought I read it somewhere that consultancy firms BERL and may be Matt Nolan's employer Infometrics' are using it. Anyone here from those 2 firms can confirm or perhaps I read it incorrectly.

  5. FF

    The blue curves were the forecasts undertaken by B Obama's little people.

    The dots are the figures released for "actual unemployment data" (real unemployment data is higher).

    The Austrians among us would merely say that the stimulus was lunacy. It didn't work. Never has. Never will.



    "one cannot deny existence, while using his/her brain (which exists) to do the denying."

    Watch Obama's little people try to do exactly that!

  6. "one cannot deny existence, while using his/her brain (which exists) to do the denying."

    Obama and Liberals annoy me, therefore I exist.


  7. Not even fucking Keynes would have supported a stimulus from borrowing!

    Keynes wanted governments to build up actual surpluses during boom times, and then use those surpluses in depressions.

    Not borrow and hope in good times
    Borrow more and hope more in bad times

    The lefty cunts are getting what's coming to them.
    Hopefully with piano wire from the lamp-posts.


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