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Monday, June 28, 2010

Nothing Much Seems To Change

I just found this mia culpa I wrote late last year. It is just as appropriate today.

Over the last two years, I have learned five lessons that you may, or may not, find interesting. Here they are;

1) There is a huge amount of ignorance, anger and fear in the U.S. The "birthers" continual insistence that Obama was born in Kenya, in spite of all the real evidence he was born in Hawaii, is just amazing. There is a woman here in Orange County who keeps bringing law suits to remove him from office. It is stunning how many people support this bit of ignorance. There is also a huge amount of anger in the country. Obama gets 400% more death threats than George Bush did. In one email that was distributed widely, I relayed a story from the NY Times about a thirteen year old girl who was denied a kidney transplant twice, but was granted one on the third application. The problem was she died before the third application was approved. One guy called me a Communist bastard for telling the story. He wasn't complaining about the facts, he was complaining about me telling the story! How can anyone be afraid of a dead thirteen year old.

In you want to experience a condensed immersion in ignorance, anger and fear, listen to Rush Limbaugh for an hour or so. Count the number of times he tells lies or distortions, how many times he tries to get you angry, and how many times he tries to leave you frightened. To put the size of this "ignorant, angry, frightened" segment of our population in some proportion, understand that roughly one and a half million people listen to him regularly. It seems to me that I was naive about how many of these folks exist.

2) Almost all economic theory is useless crap. I understood this intellectually by the time I had completed all of the required economics courses at the Graduate School of Management at USC thirty some years ago. But I didn't understand it viscerally until the fall of 2008 when all I could do was watch the Secretary of the Treasury and all his henchmen utterly fail to find some guiding theory to deal with the Wall Street Bank Problem. The ONLY reaction they could come up with was to shovel billions of dollars to Goldman Sachs, et al. And that absolute lack of any useful economic theory is being played out right now by the new gang in Washington. They are holding a group session to figure out how to deal with the fact that some fifteen million people are unemployed, and more than one-third of them have been unemployed for over six months. Another fifteen million are working shorter hours, or have simply given up looking. None of Obama's economic wizards seem to understand that our infrastructure is falling apart. If they simply took the returned TARP funds and created a pool for infrastructure repair, and distributed it directly to the mayors of the countries' cities, millions of jobs would be created immediately; the numbers of jobs created would be reported accurately.

The problem is that some economist thinks he/she has found some way to describe a certain kind of behavior, either with words or math, and they announce they have discovered a new "theory". But every time, it turns out that the "theory" only applies under certain conditions and nobody can specify what the conditions are and when they apply. Here is an example; I have always been fond of the Tragedy of the Commons economic theory. It postulates that when there is some "common" resource that nobody specifically owns, the resource will be destroyed by over use since it is in everyone's best interest to make the biggest possible use of the resource. That certainly describes most of the international fisheries today. Now comes along Elinor Ostrum (who is not even an economist) to prove that there are lots of situations when the Tragedy of the Commons does not apply at all (for which she won a Nobel Prize).

So what happens is that when hot shot economists like Larry Summers are confronted with real life problems, they have no idea whatsoever which of their fantasies, or theories, applies, and they end up tied in knots of inaction.

But here is the real bad news. Except for the plucky Elinor, there are no economists who can say The Emperor Has No Clothes because that would be a career ending activity. Basically, we are screwed!! We will have to live with these pompous fools forever.

3) Goldman Sachs runs the U.S. Treasury Department. This came as a major surprise to me, but as I did more research, it turns out lots of other people know this fact. It seems to have begun when Clinton appointed Robert Rubin, then the chairman of Goldman Sachs, as Treasury Secretary (but it might have been earlier). Anyway, Rubin filled the Treasury and the Council of Economic Advisors with Goldman people. Today, every person in an important job in the Treasury or the various economic councils, is a Goldman alumnus (with the single exception of Christine Romer, but since I don't have access to her personal finances I can't say for sure). Once you understand, and accept, this fact, everything the Treasury has done in the past eighteen months makes perfect sense (of a sort).

4) Nobody cares! When the confusion and panic seemed to set in with George Bush's Treasury Department (run by Goldman former Chairman, Henry Paulson), I started to write a simple explanation of what was going on in the economy, and what is likely to happen in the future. Along the way, I strong armed David Zetland into helping with the project. It took just under a hundred pages to explain Business Cycles and what you should do about these conditions. Existing publishers said that wasn't long enough to be taken seriously. What they really meant is that they would not be able to charge enough to make a big profit. And that was O.K., since it takes 12-18 months for mainstream publishers to get a book into stores and our economic problems were too immediate to wait that long. Accordingly, we decided to publish it online with a new electronic publisher called Scribd. David argued strongly for pricing the book at $4.95 to make sure we didn't lose any readers because the price was too high. So The Great Recession Conspiracy was published at and as a Kindle Book at Amazon.

I announced the book to everyone in my email address list. I had some little book cards printed that explained how to access the book online and we sent them to everyone we knew for which we did not have an email address. That would have been a total of 90 to 100 people. Exactly eleven people bought the book at Scribd. Three more have bought it on Kindle. Now it is quite possible that everyone who knows me think I am too dumb to understand economics, politics, or anything else for that matter. And there would be an argument to be made there.

But there is hard evidence on this question. As of today, 3,075 people have looked at The Great Recession Conspiracy at Scribd. They have read the TOC, the rationale and samples of chapters. Exactly 1 out of 3,075 people who reviewed the materials on Scribd bought the book. (Incidentally, the woman who bought the book loved it. You can read her review on Scribd.) You got the idea? Nobody cares and it has nothing to do with David or me.

In addition, I wrote a blog almost daily (at for months, a total of 77 entries. I announced the blog on every website I could find that had anything to do with the recession. As far as I can tell, I am the only person in the world who has ever read any of the material on the blog.

I sent copies of the book to all the major newspapers, and the Economist and Business Week. No response.

I wrote Op-Ed pieces for the NY Times and the Washington Post. No response.

I sent copies of the book to Barack, Joe Biden, and assorted senators and representatives. I got a form letter from Barack. It said thanks for your material (whatever it was),

I can't come to any other conclusion. The country is going bankrupt while Wall Street Bankers get incredibly rich, and NOBODY cares!

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