Frederick Sheehan is the co-author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve.
His next book, Panderer for Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, will be published by McGraw-Hill in November 2009. He was Director of Asset Allocation Services at John Hancock Financial Services in Boston. In this capacity, he set investment policy and asset allocation for institutional pension plans. He wrote the monthly Market Outlook and Quarterly Market Review for clients from 1990 to 2001. He has written several guest articles in Marc Faber’s Gloom, Boom & Doom Report. He has more recently contributed to Whiskey & Gunpowder and the Prudent Bear website, among others.
Federal Reserve economist Kartik Athreya has written what all Federal Reserve apologists believe: “Economics is Hard. Don’t Let Bloggers Tell You Otherwise.” This paper of June 17, 2010, penned from the Research Department of the Federal Reserve Bank of Richmond, was not so much a beef with economist-bloggers, just those who are not blindly devoted to the supernatural authority of the Federal Reserve.
Athreya observes: “[I]t is exceedingly unlikely that these authors have anything interesting to say about economic policy.” However, “Greg Mankiw and Steve Williamson are two counterexamples.”
And rightly so. Minkiw, Professor of Economics at Harvard University, past chairman of President George W. Bush’s Counsel of Economic Advisers, the Uriah Heap among would-be Fed chairmen, wrote in the New York Times on December 23, 2007: “The truth is the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team as we are ever likely to see. They will make their share of mistakes, but it is too easy to find flaws when judging with the benefit of hindsight. The best Congress can do now is to let the Bernanke bunch do its job.”
When Mankiw’s article appeared, the dream team was comprised of Ben S. Bernanke, Donald L. Kohn, Kevin M. Warsh, Randall S. Kroszner, and Frederic S. Mishkin, all of whom had completely missed any sign of the mortgage meltdown during 2007.
This was of no importance to Mankiw, nor to Athreya. In his paper, the Richmond-branch staff economist tells the “open-minded lay public” just what an economist is good for. A professional research economist has “a very precisely articulated model that has been vetted repeatedly for internal coherence…whose constituent assumptions and parts are visible to all present… [including] explicit, careful reasoning, its ever-mindful approach to the accounting for feedback effects, and its transparent reproducibility.”
This is nonsense, but is it the right kind of nonsense? According to Athreya, whether the model works or not does not matter. He is a macroeconomist. The government bureaucrat explains: “Macroeconomics is most narrowly concerned with the tracing of individual actions into aggregate outcomes. What makes macroeconomics very complicated is that economic actors…act.”
We, the people, are what Athreya calls “economic actors.” This silly jargon is necessary since macroeconomists cram people into mathematical equations, a preposterous way to make a living, which is completely lost on Athreya: “Of course, all parties may be terrible at forecasting, that’s certainly a possibility, but that’s not the issue.”
Philosopher George Santayana wrote: “It is a marvel that mathematics should apply so well to the material world, [but] to apply it to history or ideas is pure madness.”
Today, the Federal Reserve Board is monopolized by mad professors. This is simple to understand, and impossible to ignore, by any non-economist who reads their ravings. However, it seems that the hypnotic spell under which Americans revere academic credentials blinds the public to the utter incapacity of the Federal Reserve Board of Governors to accomplish any activity beyond finding the men’s room.
Kartik Athreya’s promotion to Federal Reserve chairman may be our last hope to destroy this malignant body of pillagers before it destroys us. Current Federal Reserve Chairman Ben Bernanke has not attracted the scorn he deserves. There is an allure to Athreya sitting in front of the Senate Banking Committee and stating, as he does in this paper: “Why should anyone accept uncritically that Economics, or any other field of human endeavor should be easy…? Would anyone tolerate the equivalent level of public discussion on cancer research?” The poor child seems not to recognize that even he is permitted to sound like an inebriate on the field of cancer, as he does here, in this analogy between his destructive field of study and cancer research, which, might or might not save a patient from the disease, but in the worst case, does not stomp on the patient’s body and fling it into a car crusher.
Bernanke acquired his degree in post-graduate economic studies by spouting a single idea that mimicked his professors’ obsession: the Great Depression would have evaporated by 1931 if the Fed had printed more money in 1930. Having put this half-baked theory into practice, both Bernanke and his comrades have received an “F.” Despite his failure, Simple Ben has never deviated from the doctoral thesis, and, he never will. The senile professors who rule the academic community see no reason for him to do so. Athreya writes, on behalf of this petrified field of study: “[W]riters who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”
Any meaningful advance would eliminate the Federal Reserve and employ Athreya in a government-sponsored soup kitchen. Economics, if it is nothing else, at least studies how to make the most from the least. A liquidation of all “decent economic departments” in the country would dismantle the architecture that has ravaged the country with the most ruin since Sherman’s March to the Sea. If Athreya is in command, his scorn for the unwashed may spur the public to a popular uprising. If not, by the time Bernanke is through plundering the middle class of its savings and investments – a staple tactic of desiccated ruling classes since the beginning of time – Sherman will be a footnote in history of American destruction.
Frederick Sheehan writes a blog at www.aucontrarian.com