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The Daily Reckoning

On the prowl for insight into economists

The folks over at The Daily Reckoning are on a mission. Their treasure? Insight. Insight into why it is that the smartest economists in the world are so stupid. Incidentally, they hope to understand why the GDP is such a fraudulent measure of prosperity

By Guest blogger / July 21, 2012

Federal Reserve Chairman Ben Bernanke appears before the House Financial Services Committee to deliver his twice-a-year report to Congress on the state of the economy, in this July 2012 file photo. Bill Bonner would like to know whether Bernanke really thinks he, personally, can improve the wealth and well-being of the world’s people by tinkering with his interest rates and bank policies.

J. Scott Applewhite/AP

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Yes, dear reader, we are working on a new book. And to save time and effort, we’re working on it right here in the pages of the Daily Reckoning.

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Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (dailyreckoning.com).

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What’s it about? Well, you might think that a writer has an idea… You might think he knows where he is going. Then, he sits down to write it. And that is certainly part of the story. But often the idea is more of an intuition…a vague feeling…a hint that there is some place where it is worth going, in hope of finding treasure. Where? What treasure, exactly? Often, the author doesn’t know.

The treasure we’re looking for is insight. We’re trying to understand why it is that the smartest economists in the world are so stupid.  Incidentally, we hope to understand why GDP is a fraudulent measure of prosperity…and why central banking is a failure…and why the governments of the developed countries are doomed.

There is one simple idea that explains all of this…an idea that is both intuitively self-evident…and demonstrably unrelenting. But we’ll come to it in good time…let’s get back to economists:

Does Ben Bernanke really think he, personally, can improve the wealth and well-being of the world’s people by tinkering with his interest rates and bank policies? Apparently so…

Do Stiglitz, Krugman et al really think they can help the debt-soaked economy to grow by giving it more debt at a cheaper rate? Yes…that’s what they say…

Does Jeffrey Sachs actually believe that he and other smart economists can develop a strategy for the entire world economy? That’s the way it looks…

Yesterday, we took up the role of numbers. The greater the precision, we asserted, the greater the lie. Why? Because these economists really don’t know anything for certain. The best they can do is observe…guess…and hedge their bets with a ‘maybe’ or a ‘possibly.’ The more precisely they claim to know something for sure…the greater the distance between what they can actually know and what they claim.

But numbers are to an economist what make-up is to an aging starlet…put on enough of it and maybe the folks won’t see the truth.

Behind every number is a wrinkle… Small numbers hide small ones. Big numbers hide bigger ones. A big number, such as the unemployment rate, has a whole army of other numbers behind it. There are the statistical adjustments…seasonal adjustments…and enough arbitrary definitions to make a corpse look good.

The Bureau of Labor Statistics says that 8.2% of the workforce is unemployed. Simple enough. But what does it mean? What’s the ‘workforce?’ And what does it mean to be €˜unemployed?’ Think of all those people who work for cash…like the Latinos you pick up at gas stations for day work. Are they unemployed? How about the guy who couldn’t find a job, so he went back to school? Is he unemployed? What about the housewife who would like to find a job…sort of…but isn’t actively looking for one? Are these people part of the workforce?

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