I’ve had a lot on my mind since the last, I’ll try to get some of it down here, and I’ll try to revisit stuff I just touched on earlier.
Something that someone said last week stuck with me. A handful of coworkers and I were in a car heading out to lunch, a rare event for us, or at least me. On the way, we were talking about the bleak outlook of presidential candidates. My mind jumped to the seemingly inevitable effect on the economy, and I mentioned something about the mental state of economics society today. Someone in the car immediately interrupted me with “you sound like you care, why care?”. He sounded aggravated that I was “taking everything so seriously”. Since I tend to do that, I replied “eh, maybe you’re right”, laughed it all off, and let the conversation wander to the normal fluffy topics those kind tend to do. It hasn’t sat well with me I guess, because this morning I was mulling back over the conversation again for the second or third time. Only this time I consciously noticed what I was doing.
One change I’ve put into my life in the last year has been to practice what I preach with regards to transparency: transparency with the self. I’ve been digging deeper into myself–into less-than-conscious places we normally don’t dig into–to try to surface things that concern me on deeper levels that I don’t normally think about. The result has been surprisingly nice. I feel a little less mentally “backed up”, a little less deeply concerned over things in a resolution-less way, and more…a little more content I guess you can say. Another nice side effect is that I’m tending to act less on ‘unprocessed’ emotion, something we seem to do on a daily basis that isn’t so healthy(!).
I think that’s why I caught myself dwelling on that car conversation. What was bothering me about it is that my work friend seemed to be expressing apathy over the situation, a feeling that’s been a major reason why I stopped doing this, writing down thoughts. And more than that, the message he conveyed was “I’ve given up, you haven’t, and you should, so shame on you”. This election season has been an excuse for me to address my apathy over our condition (a result of confirming that yes things appear to be in as poor order as they smell) and at least try to do something positive, be a positive influence on the situation, divorced from expected outcome. I’ve been spending more time mulling over “best candidates” regardless of overall quality as opposed to deciding not to vote in apathetic protest like some friends are planning to do. I still don’t know what my lunch friend plans to do, but I hope he decides to do something. And I hope he decides to change his view on leadership, since it also sounds like his new philosophy has taken on that narrow, stubborn tint political views tend to take in us.
Before he stopped me, I had been trying to talk about the apparent social trend in economics professional circles, and I was leading into how the next president may likely promote more of the current trend. That trend seems to be more towards the irrational, gambling side of economic policy and less towards the fiscally responsible side. Socially, there seems to be more agreement in the last few years over conclusions that seem to defy basic concepts of economics. These are professionals mind you, people that have devoted their education and profession to the field…people that have allowed themselves to be exposed to a large portion of the vast field of observation in economics, a field with now hundreds of years of history to mature out of adolescence.
Here’s one example of the trend. The Economist published a piece a few years ago titled ‘The death of inflation’. It should still be out there, although it might require membership with the publication tightening its reigns on public access. The article talked about how given what we know from inflation in the 1970s we should be seeing deflation today. What they observed about the 70s was that as unemployment rose near the end and into the early 80s, labor began to accept wage cuts to get and keep work, and so business felt safe to drop prices in order to stimulate demand (the idea being that they could afford to drop prices if their labor costs were to decrease). However, in the late 2000s as unemployment rose, competition for jobs increased, and labor accepted lower pay, business did not cut prices and inflation did not change pace. The article concluded that because economic policy was so effective in ending the inflation of the 70s, people began gaining confidence in *economic policy itself* or at least in resultant economic trends, and that inflation has become “decoupled” from the factors we thought it was tied to. While the IMF is cited as the core seed of this belief, it’s obvious that the article author agreed, and it’s obvious that socially the idea has since taken hold in economics circles.
Of course factors well outside of the discussion were not mentioned (and likely never considered): the fact that at the same time inflation wasn’t changing, the administration and Congress were erasing debt incurred by business and the Fed was pumping new money at a record pace into banks for borrowing, all while making up excuses as to why it wasn’t leading to more employment. Economic policy leaders in America never seemed to understand that business won’t budge from their contraction in a climate where their balance sheets aren’t currently compelling them to and they *expect* both demand to decrease and overall outlook to become more grim. After all, everyone has access to unemployment figures, and if that isn’t an indicator of future demand then who knows what is. Some economists, notably the most visible, stopped just short of throwing a tantrum and flat out encouraged people to just spend as a solution, disregarding all aspects of the current climate.
Instead of acknowledging that giving business money and pumping money into the economy is an incentive for business to not drop prices even in a depressed climate, a popular conclusion by economists has been that since unemployment is high and deflation hasn’t occurred that inflation no longer exists. It’s been like this social bow wave of disassociation from basic economic tenets has swept over us.
Here is a basic truth of trade: any time a currency of an overall non-constant amount is used to exchange value, currency equilibrium vs value is disturbed and inflation/deflation is possible.
A most elementary tenet of trade, an obvious conclusion of logic, was being wholly dismissed by the majority of economists while they either failed or refused to acknowledge the consequence of current economic policy. These are people with PhDs.
While debt continues to increase and economic policy continues to prolong economic reaction to the last bubble, other bubble potentials increase. Meanwhile, popular economic thought has continued to disassociate from basic aspects of reality. Paul Krugman himself just released a piece in The Guardian in response to the Brexit claiming that austerity doesn’t work. He reasoned that every economy that enacted austerity as a policy has suffered since, and that all research showing that austerity was a positive influence on economic recovery has been proven false. One of our most notable economists actually cited economic figures of only the last ten years to back a belief about the current condition of an economy that has been subjected to adverse policy for over thirty. That type of thinking is…less than scientific at least. What’s worse, he observes the current record levels of debt and spending and advocates more of the same as the obvious solution. There is no room in this mindset for acknowledging the natural reaction of business to recent economic policy, the resultant lack of employment, the natural reaction of labor to their own losses, and the gamble he and others advocate as the solution. The linchpin in all of this is the stubborn refusal to acknowledge that psychology–a major driving force of economic behavior–cannot be controlled by policy. The simpleness of this observation apparently eludes our most respected economists.
In a climate of currency divorced from value, debt climbing to record levels, economic damage to the populace at immeasurable levels, and even investment in business decoupling from rationality, we are advocating more spending. This is the best advice our economics leaders can muster. And when you look at our presidential candidates, none seem to exhibit a better insight into economics.
Back to the original question: why care? Well, anyone that doesn’t want to possess value with which to exchange for things like food and water into the future probably has no reason to.