What Economists Still Don’t Get About the 2008 Crisis

They know what they are doing, the main players are extracting wealth. The financial market is one big casino were the bankers can extract as much wealth as possible in the name of providing liquidity. The suckers(masses) are the rest of us via our 401/pension funds. They know what exactly they are doing.

When does an economist get sworn into this evil cabal? Are all economists part of it?

" If something goes wrong, we can juice the economy by engaging in extaordinary activities which generate the illusion of wealth resulting in increased spending."

This is not what Keynesian economics is. It's perfectly rational for the government to step up their investment in things like bridges and roads as the private sector weakens for a bit. This restores confidence in markets, and keeps money flowing through the economy.

So long as there are savings during the good times, and the projects are not wasted (even though in some extraordinary cases it would actually make sense to dig holes and fill them) ... it makes sense.

Of course the governments ability to 'save' during the good times and to necessarily spend efficiently is questionable.

"Zero Interest Rate conditions are not normal. Never in this history of humanity have interest rates been held this low for so long."

Central banks as we understand them are a very new phenom. Who's to say 'what's normal' when the very construct of our current version of monetary policy is really only a few decades old?

Maybe this is the actual normal.

Maybe because we are getting older, and working an ever decreasing share of our lives, our net productivity is going down and that's being reflected in rates?

Maybe the amount of debt hanging over every economy is a drag on productivity? (Because debt levels are high and this is new)

Maybe surpluses are being pushed into the real economy and captured by consumers who are getting a good deal, so bonds and stocks just aren't getting the great returns they were before.

Maybe we haven't had a war in a long time, which leads to fixed/stagnated human organizations, and without the opportunity for 'ground up renewal' every once and a while, we can't leap forward.

Maybe the benefits of carbon fuels + industrial revolution have mostly been had, or at least, fully priced into stocks.

Maybe we're just measuring inflation the wrong way.

So many maybes.

This could be very normal.

We probably won't know until another 50 years and then only in hindsight.

I remember distinctly the moment I realized the housing bubble was going to end badly. I was wondering in the early 00's how house prices, more or less everywhere, could continue rising past what most people could actually afford to pay. I hadn't really being paying much attention to the financial world, but sometime in 2004 or so, I saw an ad on tv for a mortgage deal that seemed to make no sense. I looked it up and discovered they were selling a negative amortization loan. On late-night tv.

It's a pleasure to read an article by a writer who understands of the history economic thought, though I suspect I will disagree with him on a lot of things.

Anyway, this is interesting. I'll look up these economists.

On the face of it, I think it's interesting how economists are hesitant to consider money real. Money is fictional to most economists. What's real is consumer surplus, utility or some other abstract way of reasoning about consumption. ...skeptical eyebrow.

I liked David Graeber's book about money. First, because I like his intellectual shit-stirring. Second, because I think he's right about the origin of money. Money evolved from debt. Debt did not evolve from money, as liberal 17/18th century thinkers assumed.

Beyond this relatively simple point, I don't think he had much of anything concrete. But, as he talked about little local revolts and the role debt played... idk. Makes you think.

In any case, from a reactive european perspective in the post financial crisis world... I suspect that what business cycles are is a system wide insolvency. It turns out tat some of the money isn't real. That is, some of the debts floating around the economy are not going to be paid. The dollar isn't worth a dollar, your bank doesn't really have your money, the stock will never pay a dividend, the national debt will never be repaid, someone isn't as rich as they think they are, the mortgages are in arrears.

The crisis, whether it's a on banks, devaluation of assets, currency inflation... this is a bankruptcy proceeding, a negotiation determining who really owes who what, given that not everyone can get paid.