What Economists Still Don’t Get About the 2008 Crisis

The global economy left to its own devices would likely have entered a full-blown depression, and deflation usually accompanies this. The decrease in demand across the economy puts a great downward pressure on prices, this puts pressure on decreasing costs, this puts pressure on decreasing wages, and so on. You have a real threat of a deflationary spiral as demand further dries up due to people having less money to spend on goods and services.

So, as a lot of economists argued, there was a significant threat of a deflationary spiral facing the economy, more than any threat of inflation getting out of control, which had already been low to begin with.

Money and credit can both can be used to buy goods/services. Role of credit here is/was underestimated by economists.

In 2008, bunch of credit was destroyed. In response, central banks printed money, bought assets These things generally netted out.

He basically wrote two paragraphs with the most oversimplified and honestly often wrong intellectual history of economics.

> First, because I like his intellectual shit-stirring.

You mean you like it if somebody writes a book criticizing another profession even while he clearly has not studied either modern economics or even the history of intellectual thought in economics. I wish more people would do that, sound like a healthy thing for science.

> 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.

That was one of the nice tricks he pulled. If he actually bothered to read the history of economic thought and not the 2min cliff notes he would have found tons of interesting and complex thought about money and its origins.

He later claims that anthropologists had studied gift giving and debt economy then were the once that studied these things, while economist had done so 50 years earlier and were far more nuanced and with greater integration with economics then the the later anthropologists.

However Graeber is so anti-economics that he literally refused to read that literature to such extend he made the incredible embracing mistake and mis-characterizations that I could not take him seriously.

He didn't know the primary economist who wrote about origins of money and when writing about him he claimed 'he only added math to Smith argument'. That is particularly embracing because Carl Menger was known for not using a lot of math. So where did this notion of 'adding math come from'. Well there is another Carl Menger (the son) who was a mathematician.

So quite simply Graeber is so certain that he is correct and all economist are stupid that he never read the most influential economist on the very topic he claims to criticize economist about.

Graeber himself has admitted that money can arrive both from sustained interaction and trade, as well as from debt systems. So his whole me against the economist argument never even made sense, most economist didn't disagree with his main point.

What he did was trying to make this simple point and the argument that debt is not always good (Britain in Madagascar and so on) and then he hoped people would buy the rest wholesale.

It's going to mean people who were getting 3% on their bonds and are now getting 0% will go looking for 3% in whatever other financial assets they can find - San Francisco property, shares, etc.

> inflation happened but it was all concentrated into financial assets, real estate

... because demand remained static while supply (of yield bearing invesment assets) was restricted.

That was basically the whole point of QA. It bailed out the banks without needing to give them taxpayer cash by bumping up asset values until their loanbooks started to look healthy again.

Economist do actually quite a bit about studying these shocks, and trying to explain what they are, where the come from and so on and so on.

Take a simple example, tomorrow there is war between Iran and Saudi Arabia and there is no more oil coming from the middle east. That would be a supply shock.

It is true that sometime we can only observe that something change and sometimes its hard to say why that happens, but that is a problem you have in all complex systems.

Your asserting that economists invent 'shocks' when the evidence doesn't fit there models is totally incorrect and leads me to believe that you don't know anything about modern economics.