Philip Pilkington: When Economic Journalists Get Out of Their Depth

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Working as a journalist and as an opinion writer each have their charms. Journalists have the pleasure of discovery and revelation: uncovering new facts, talking to people, sometimes acting as a catalyst to move events forward.

Opinion writing, aside from being a comfy way to make a living, gives the writer greater stylistic freedom, and the challenge and opportunity of making a dent in readers’ views. The problem is that you have a limited amount of space and, often, an easily distracted readership. Now, that’s fine for something like, say, an observation about an upcoming election or the loutish behavior of a major sports figure but it is a patently awful format from which to raise Big Questions.

The normally sound Clive Crook fell into this trap in an opinion piece at Bloomberg, “A Crisis of Leadership, Not a Crisis of Capitalism.” Bluntly, this article is a train wreck.

Why? Because Crook broaches one of those Big Questions. Actually, no, he broaches several of those Big Questions, but he stepped up to – or should I say: into – one that really yanked my chain. He asked whether mainstream orthodox economic theory should be subject to severe criticism or not.

According to Crook it shouldn’t be. Why? Well, first of all because:

Proponents of this cliché are dealing mostly in straw men.

Read the piece again. Now look at that sentence. Clichés and straw men? For shame, Mr. Crook, for shame. Because Crook’s discussion on this issue is filled with the former and populated only by the latter.

According to Crook the mischaracterisation of mainstream economics that bounces around the bad corners of the internet is the one that claims that mainstream economics “says markets are always right.” No, Crook. What characterises mainstream economics and why many of us strongly disagree with it is that it says that the market is always right in the long run.
Big difference. Orthodoxy can claim that the market is filled “with externalities, imperfect competition and other forms of market failure” and consign these to the short run. But it can then steamroll right over these inconsistencies in the long run. In the long run, according to orthodox economic theory, there is equilibrium.

Having defeated his straw man, Crook moves on to his next cliché:

Orthodox economics, according to its critics, says investors are rational and prices embody all information, so bubbles are impossible and the crash we just experienced never happened.

What a mess. Again, Crook confuses the long run and the short run. Sure, little bubbles – foam, if you will – is expected to occur in some variants of orthodox theory; some variants coming out of the Chicago school, on the other hand, do indeed deny this completely. Regardless, no mainstream economic theory can account for major debt deflations like the one we are currently experiencing. Indeed, how can a debt deflation occur in a model that doesn’t include debt – because, if Mr. Crook doesn’t remember from his schooldays, let us remind him: mainstream economics does not take private sector debt into account at all! And some critics don’t like that much.

See how misleading this caricature is? But it’s not surprising. Crook wants to dip his toes into the water but he doesn’t want to jump in – after all, he’s a journalist and, well, he just bought that suit. Academics in heterodox economic departments have been working on these failings of the mainstream construct for over 80 years. You’re not going to deal with them inside 1,200 words. Next time, tell your editor that you’re taking the day off.

One more thing. Crook spent a good half of the piece mumbling incoherently about why we should have a mixed economy with strong regulation. Great. Gold star, Mr. Crook. Here’s the problem: in order to get a mixed economy we need to run some pretty nefarious deficits. This is one of the biggest issues surrounding the economy right now – and it’s one that is getting lots of play in the media because they love drumming up hysteria over government debt to flog their papers so I’m sure Crook is somewhat aware of it.

Mainstream economics and heterodox economics have VERY different ways of looking at government debts and deficits. I won’t get too far into this (it’s a complex topic and I don’t pretend to nail it inside a paragraph) but in order to establish a mixed economy today with anything close to full employment the deficits that would have to be run would be enormous. If you have a meaningful government sector, it will need to accommodate the desire of households to save and businesses to invest (we’ll simplify the problem and assume imports and exports are balanced). If businesses don’t invest enough, or worse, are net savers, as they have been in the US since 2003, you need the government to run deficits. And with households working hard on delevering and businesses cautious about spending, we really need deficit spending to stave off deflation.

Like it or not we will end up running these deficits eventually. We will just run them over the course of maybe ten years – that’s what happened in Japan after their debt deflation which began in 1991; they now have a government debt-to-GDP ratio of 220%!

Actually this might be a good opportunity to mention Crook’s friends in this regard. No mainstream economist can coherently explain why the Japanese are not experiencing (a) skyrocketing interest rates and (b) high levels of inflation. I repeat that: no mainstream economist can explain this coherently. For years mainstream economists have been warning of the ‘dangers’ of these deficits – all the while interest rates and inflation have been at historically low levels for twenty years.

Now, since most of the West is going down this path I wouldn’t mind a school of thought that can explain this. And there is a school of thought out there that is very hostile to orthodox economics and can explain this perfectly well (a certain prominent member of this school was also the man who theorised our recent bubble and collapse over 60 years ago).

But hey, what do I know? These days I’m just a blogger. And all these criticisms are just straw men and clichés… right?

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  1. Benedict@Large

    I had hopes for this article too when I picked it up. We certainly have lacked leadership, at least as far as departing from the orthodoxy, and there’s been way too much kicking around of the word “capitalism” by people who don’t bother to define what it is they think they are kicking. But no, there was nothing there. My comments after reading the article were somewhat briefer than yours. I simply wrote, “Completely shallow.”

    1. sgt_doom

      Very well stated, Benedict@Large.

      It appears obvious from Crook’s writing that he has never read Adam Smith’s Wealth of Nations …. and I’d be willing to bet a large sum on that observation!

    2. rotter

      Oh its not bad system. Its the best and most nearly perfect wonderful system ever inspired by God himself, its just some bad men in ther mucking it up..PP, paging PP, a faith based economic belief system is in need of the Pilkington stamp of religion status.

  2. F. Beard

    mainstream economics does not take private sector debt into account at all! Philip P

    Yep. A major blindspot. The saying “For every debtor there is a creditor so debt does not matter” is misleading:

    1) The money lent – so-called “credit” – is created as it is lent. How is this different from counterfeiting except the money is lent, not spent into circulation?

    2) The loans do not create the interest in aggregate. Where is that to come from? The possibilities are:
    a) from government deficit spending thereby increasing (under the present system) the national debt.
    b) from additional private borrowng thereby increasing private debt.

    1. digi_owl

      Careful on number 2, as that is the old stock/flow confusion.

      Interest can be managed as long as the flow/churn of money in the system is higher than the interest.

      1. F. Beard

        Interest can be managed as long as the flow/churn of money in the system is higher than the interest. digi_owl

        Nope. If essentially all money is earning interest at all times (and it usually is) then interest must be continually created and every faster too. That requires either government deficit spending or new private loans.

        1. digi_owl

          You may look up the research of a person that has been mentioned on this blog a number of times, Steve Keen.

          1. EconCCX

            Link to Keen’s piece please, if you have it. Soddy did not confuse stocks and flows; and Keen had not read Soddy as of Keen’s visit to NYC in September.

            Money is an overdraft, created from a debt that grows with time. Sure, pass it from hand to hand as many times as you like. That churn is mere reciprocity for goods and services. Until somebody you pass it to uses the money to pay back a bank debt, that bank debt grows, unpaid. Once somebody does pay back a bank debt, the bank either restores the status quo ante — extinguishing the money — OR makes a new loan, multiplying the interest burden. Debt-based money is impossible to repay with recursive interest. Flow to flow. The bank has given you five, and the amount you owe is six and growing, and it doesn’t matter how many times the money churns for goods and services. Once it is used to repay a bank loan, the money dies, the interest still owed.

            Keen, a very great economist, will get it in time, if he hasn’t yet.

          2. digi_owl


            On the Keen claim, i think it was made during one of this lecture videos. That or while demonstrating the computer modelling he has done. Either case means it may take some time to track down the exact source. But i think the central issue is what the bank does with the money payed to them to cover interest. Said money do not just go up in smoke, it sits on the bank books to be spent in various ways.

            As for Soddy, i guess this is the person:

            and that this is the text in question:

            i am going to make an attempt at reading it, but i suspect it will take me some time.

          3. F. Beard

            But i think the central issue is what the bank does with the money payed to them to cover interest. digi_owl

            Do you think a banker will not collect interest on the interest he receives? Or that he will spend all the interest he receives? Or that the stockholders will spend all the dividends they receive?

            But suppose the bank does spend all the interest it receives? Are we therefore to be happy that we work so the banks can spend?

          4. digi_owl

            @F. Beard

            Spend it all? highly unlikely.

            But as long as the flow is high enough that everyone can keep their books in the black, the economy keeps on going.

            As for liking or not liking, that becomes a whole different issue. I was just saying that from a maths standpoint, compound interest alone would not break the system.

            Now from what i can tell, Sobby’s argument that EconCCX points to seems to be one of compound interest vs thermodynamics. And in that view, thermodynamics wins.

            This because thermodynamics introduces finite resources into what until now has been a infinite cycle of numbers. So yes, compound interest becomes a issue once the industry runs out of raw materials for their widgets. But this because it basically cuts of the input, but insists that the output stays open. And that is like trying to squeeze water from a rock found in a desert.

          5. F. Beard

            compound interest alone would not break the system. digi_owl

            I did not say it would. I just pointed out that the current system requires ever more private borrowing or ever more deficit spending.

          6. F. Beard

            So yes, compound interest becomes a issue once the industry runs out of raw materials for their widgets. digi_owl

            Disagree. Industry is learning to do more and more with less and less raw material and energy.

            The true problem is likely to be unjust wealth and power distribution which is exactly what a government enforced counterfeiting and usury cartel would produce.

          7. F. Beard

            compound interest alone would not break the system. digi_owl digi_owl

            Only if the real economy compounded at least as fast as the debt but both Karl Denninger and Michael Hudson indicate that that is not the usual case.

          8. EconCCX


            I think we can see there’s some unaccounted banking taking place in Keen’s demo. Positive values end up in the deposit accounts of firms, workers and savers at the end of the term. That itself is a debt of the bank, the total of which he’s trying to demonstrate need not go up with time. Will there be a run on the bank? A bailout? Borrowing from another bank upstream? Does the bank simply issue its own notes?

            He also preemptively declares as “nonsense” the notion that principal is withdrawn from circulation as it’s repaid. Assuming a $10 reserve requirement, the bank has loaned $100 as an overdraft. That’s the famous “hole in the balance sheet,” debt owed to no one. What the bank has to do when that principal is repaid depends entirely on its regulator. If the bank does not have to extinguish it, then the bank loan is simply boosting everyone’s bottom line by inflation. If it does have to extinguish it, there’s no circulating medium, only ever-growing bank debt.

            Keen should make a model using a fixed value of bank notes or loaned gold, rather than deposits. Interest payable only in the same media. Otherwise it appears he has some shadow banking going on.

            Soddy made the financial case for the futility of compound interest, not just the thermodynamic case. The financial case is actually stronger, since we all indeed “profit” in the tangible realm, using money to facilitate the extraction and exchange of goods and services that support and enrich human life. It’s just that we become, in Soddy’s words, hewers of wood and drawers of water for those with the privilege of money creation. As do our representatives.

            Thanks for linking to an accountable source. Now I’ll have the tougher task of determining whether Graziani, the economist Keen is challenging, did indeed confuse stock and flow. Hope G is readable in English.

          9. digi_owl


            Warning, i am writing this at the edge of sleep but feel the need to commit it to server while i have it in mind.

            I skipped past Soddy’s writing about philosophy, and hit on what may be the crux of the disconnect between Keen and Soddy. Soddy treats all paper currency as IOU vs total wealth of the society that recognize said currency.

            That is if a worker is payed in paper he is then, in Soddy’s view, entitled to a share of that societies wealth equivalent of the amount on those paper notes.

            And this is what Soddy means with debt, not the kind that Keen talks about where a bank loans out a sum by fiat and charges interest.

            I must admit, this is a view of money that i have toyed with myself. But i failed to take it to the end point of what such a interpretation of money would mean.

            Also Soddy seems very similar to Marx in some aspects. I wonder if Soddy ever read Marx, or if it is two people coming to the same conclusions from different starting points. Soddy would be about 13-14 when Marx died.

          10. EconCCX


            Thanks for delving into Soddy on a Saturday night. I’ll work up a page with Soddy’s most apt clips — it fits a project I’m involved with anyway — and bring him up again on a future thread. (Will need interlibrary loan for Graziani, but his excerpt on Google Books is clear reading for the layperson.)

  3. wolverine

    Bearing in mind what the subject and author’s occupations are maybe the title should be :

    ‘When journalists.or those purporting to be journalists get out of their depth’.

  4. jake chase

    This guy’s name is Clive CROOK? Clive is clearly a man whose time has come. What did he change it from, Crock? Arguing with journalists is like swatting flies with a feather. Phil, you must have too much extra time.

  5. Diogenes

    Pilkington posits the inevitability of fiscal deficits in the years ahead. Given the amount of bad debt / bad assets stuck in our financial system together the unwillingness of our political leaders to let the market clear these bad debts (through markdowns and bankruptcies, etc.), I suspect that he is right (since, in effect, the government will continue “printing money” to paper over the gaping deficiencies in the private sector debt market). As such, there is far from any guarantee that these deficits will actually be stimulative since, in large part, they will be covering losses relating to pre-existing underwater private sector debt.

    But Pilkington makes a potentially dangerous simplifying assumption when he assumes “imports and exports are balanced”. For the last 40 or so years, our imports have vastly exceeded our exports. This also corresponds, not coincidentally, with the period following President Nixon’s 1971 decision to cancel the direct convertibility of the United States dollar into gold. This decision had the somewhat perverse effect on elevating the dollar’s role as the world’s primary reserve currency.

    A decade earlier in the 1960s the noted Belgian economist, Robert Triffin, had observed (in what is known as Triffin’s Dilemma) that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfil world demand for this ‘reserve’ currency (foreign exchange reserves) and thus cause a domestic trade deficit.

    It seems highly probable that the role of the US dollar as the primary reserve currency is already beginning to end. The implication of this is a reversal of the “Triffin Dilemma” in which the US would be forced to run a domestic trade surplus for a great many years.

    It seems to me that one likely consequence of this involuntary trade surplus could be a dramatic drop in domestic consumer consumption (as fewer goods are imported and more production is channeled to foreign markets) together with substantial price increases for the goods and services we do consume (caused by the dollar deflating as a result of the supply released by the central banks and by the increased foreign demand for goods previously purchased by Americans alone). I don’t have a clear picture of how this will affect the size of the fiscal deficit. What does seem pretty clear, however, is that the average American will be much, much poorer than he is today.

    1. Ransome

      The Fed supplies the money, not the treasury. During a crisis it lends out trillions to other central banks. Once the crisis is over, back comes the money.

  6. Eleanor

    What about raising taxes? I realize it’s almost impossible to do in the current situation, but wouldn’t the kind of tax rates we had in the 1940s and 50s fund a lot of government spending and thus reduce the amount of debt the government would have to pile up?

    1. sgt_doom

      Not the way the Federal Reserve is currently operating and colluding with the major derivatives dealers (securitized debt peddlers), JPMorgan Chase, Goldman Sachs, Citigroup, B of A and Morgan Stanley.

  7. Antifa

    Modern economics begins with both feet up in the air and continues on that basis. Fiat money, commodities salable for monies, real estate, financial instruments, derivatives . . .

    Genuine economics is called ecology, and would focus on us running a planet for ourselves and at least seven generations ahead.

    How is our nation’s soil doing? How are those GM crops working out? Are we in fact affecting the weather, and if so, in what ways? Is our children lerning?

    Economics pretends to manage the business affairs of nations, when in fact it is not even connected to the real world, or to the gobsmacking damage and death to millions of species it is causing there in order to turn quarterly fiat profits.

    If we someday send a robot probe to an Earth-like sister planet light years distant, it will have on board little shovels and vials and test tubes to test the fungi, bacteria, minerals, atomospheric gases, temperature and a hundred other vital signs of a living planet.

    To see if we, the people, can thrive there.

    That’s the way we should be testing this planet, and adjusting our thinking accordingly. If we don’t, the planet doesn’t care. We will go the way of the passenger pigeon and the dodo bird and 99% of the critters who came before us.

    The economy of the planet is the only economy.

    1. Susan the other

      Very nice. In an ecology, energy completes a full circle. (The adenosine phosphate doesn’t get skimmed off before the amoebas can process it.) The energy cycle goes full circle. In the food chain very little is bottlenecked – mostly in human cemeteries. Our human culture could create this kind of coherent economy. There is no reason why not. Except it is complex and expensive to get started and corporations and governments are so craven they refuse to take up the cause.

      1. Antifa

        I often think there will someday be a merger of some of the intricate climate, ecology and other working models of our planet in action . . .

        with government.

        Consulting a supercomputer that is accurately monitoring the health of our spaceship Earth would help our elected Representatives (and all of us) keep our only living space in mind as we govern ourselves while we spin around the solar system.

  8. Jack Straw

    Capitalism is a word that is seldom defined, but it is fascinating how un-self-consciously the word is used. Listen to Rush Limbaugh or his ilk and every ten minutes of less they will proudly proclaim their faith, devotion and commitment to “capitalism.” Pretty much like Marx said they would. At least Groucho.

    As I said yesterday, I used to be politically conservative. Nonetheless, I always did find left-wing thought more interesting, more life-affirming and ultimately compelling, even if nearly all/all political applications of tended toward disaster in terms of war, civil rights and environmental degradation. As a practical matter, leftist political philosophy never produced results better than “State Capitalism,” a term I picked up from Mortimer Adler, a thorough bone-head, but he was right on this one.

    “Capitalism” is more of a phenomenon than a theory. Adam Smith didn’t invent it, he just described it, and had interesting things to say about the ways it ought or ought not be moderated. Marx was dead right, however, about most of what he said, too, but in particular (and I’m not sure he ever said this explicitly) that “capitalism” is the system that ultimately screams that work is for suckers. The penny saved deserves favorable treatment to the penny earned from wages. That is the key policy from which everything else flows and it influences and arguably determines the way people think about EVERYTHING else.

    Marxist thought seems surreal in one of the claims that it made, but bear with me, it was, IMHO, quite real, or at at least figuratively real. The logical consequence of capitalism (its historical dialectical conclusion) was that capital would eventually be concentrated in the hands of one capitalist. That arguably has happened, and that one capitalist is Warren Buffet, the avuncular sage. Again, bear with me.

    Neo-liberal, “free marketeer,” or laissez-faire thinking, whatever you call it, has hit a crisis point. The notion that the market would regulate transactions by rules of economics, rather than the government regulating them via politics is what is being played out. The free market – essentially Hayekian – position was that politics was a particularly poor way to regulate the complexity of financial markets and would strangle the ability to conduct business. I’m not sure that isn’t right, as far as it goes.

    The flip-side, however, is that the “unregulated” (relatively unregulated) market – take as an example the residential home mortgage market – has transactional risks that need to be dealt with. Lets assume or describe the market solution for the following transaction: A borrows money from B and gives B his residential real estate for security of the loan. This is an attempt to list all (strike thru “all”) some of the risk points that go along with this transaction:

    1) B needs assurance that the property has casualty insurance and is a loss payee; Call that insurer D.

    2) B needs assurance that its lien/security interest is insured as enforceable; Call that insurer E.

    3) B needs assurance that its loan is commensurate with the property value; Call that insurer F, who is indemnifying the appraiser whose opinion itself, strictly speaking, is not insurance.

    4) B needs assurance that its exposure to A’s credit risk is tolerable; Many parties are on the hook for this, but for the sake of simplicity, call that insurer F, the mortgage insurer who may be getting paid by a pass-thru fee from the borrower, but maybe not.

    5) B needs assurance that once it makes the loan – B’s real business – that it has money to make new loans, so it has a hedge on this, or a line-of-credit, or some other way to make loans. Call these parties G, H or “I” (this guy I know).

    6) B needs to minimize the interest rate risk so that A’s x.y% loan can be sold at a profit, or at least without losing the net fees it earned in the loan origination, say 1-2%, all the while not knowing what environment it is selling this loan into.

    7) B didn’t really use its own money to make the loan, but rather used C’s money, and B’s lending probably can only be profitable if it abides by C’s requirement that B make, say $25M in loans, at an average target interest rate and credit risk profile. If it doesn’t hit that target, B isn’t going to get paid by C, and may very well owe C money instead.

    Damn, this is exhausting.

    8) B made the $25M target, made its individual loan fees, it getting paid a bonus from C for completely using the $25M pool, but the pool itself requires insurance against losses. Needless to say, B has multi-faceted incentives to get that $25M loaned out, however it does it, regardless of the detrimental effects or elevated risks to A and C thru F. All this creates a known risk, and B’s day-to-day operations must be insured for errors and omissions. Call that insurer J.

    There are more, but I gotta finish this up and get working.

    Q: Who’s the richest guy who sells insurance?

    A: Uh, isn’t it that old dude with the wrinkled suit?

    Q: Wasn’t he the “one” who essentially legitimized TARP? That is to say, he didn’t oppose it, and had plenty of good reasons why it was pretty damn excellent for him.

    Was there anybody else who had the “credibility” that he had?

    A: Uh, you mean, like, uh, more than Ken Lewis, John Stumpf, Lloyd Blanfein, Jamie Dimon, that Indian dude with the yoga studios who’s also the Citi CEO, or that weird looking orange guy? I see your point.

    Q: Wasn’t TARP pure capitalism, that is, wasn’t it favoring the penny saved, and throwing everybody else under the bus?

    A: They canceled bus service in my neighborhood last year. I can’t afford the fare anyway.

    Maybe Marx’s prediction wasn’t so surreal.


    Note: for a different, but complementary take on this, Mike Rowe of “Dirty Jobs” has a video on TED that gets to the heart of this which, in turn, is complementary of Michael Lewis’ piece on the Icelandic fisherman who became investment bankers.

    Finally, capitalism that professes “job creation” as a goal is either a lie or malpractice. Jobs are enemy number one for capitalists, and that is the real internal contradiction that we face today. Capitalism says that “jobs,” and more importantly “work,” are/is for suckers. Own an insurance company, and have friends in high place.

    1. sgt_doom

      Indeed yes, many would be surprised that Adam Smith, philospher, was against speculation, foreign investment (he would be aghast at the exponentially increasing jobs offshoring in America over the past 30 years), intellectual property (trade secrets and patent monopolies), inequitable distrubtion of ownership and income, and some other interesting stuff.

    2. A reader

      It’s politic man. It’s bloody politics like the murders of 2997 peoples 10 years ago. What press, what law, just anthrax and silence.

      A bunch of paid cowards, save your time. What kind of capitalism is this if there’s no rule of law ?

  9. Jack Straw

    In short, the libertarian dream is an insurer’ paradise, coupled with a government bail-out mechanism, and a police state.

  10. Knut

    I came across a neat little quote from Peter Diamond last night that puts the kebosh on the theory that in the long run everything turns out all right. Here it is, abbreviated:

    Robert Gordon has written that ‘there is no widely accepted explanation of the failure of markets to clear.’ …But it is the nature of the question that I want to underline; The question is based on a premise that one needs an explanation for why a theory that clearly does not fit the facts does not fit the facts. … This is a curious methodology, but one that seems to be widely shared.’ Diamond, On Time, p. 54.

    Just wanted to share.

  11. Michael

    Um, Clive Crook isn’t “normally sound.” He’s a Class Warrior, and when his columns touch on the Class War, he’s as disingenuous as the rest.

  12. UnlearningEcon

    Shameless plug, but my relatively new website, ‘Unlearning Economics’, is designed to deal with the arrogant dismissals and accusations of straw manning that often pepper mainstream discussion of heterodoxy.

    I’m an economics student, so if they accuse me of straw manning their theories then they are obviously ignorant of them themselves.

  13. A screaming comes across the sky

    General Corman (to Captain Willard) “Clive Crook was one of the most outstanding journalists this country has ever produced. He was brilliant and outstanding in every way and he was a good man too. Humanitarian man, man of wit, of humor. He joined the Atlantic Monthly. After that his ideas, methods have become unsound…Unsound.”

    1. craazyman

      I don’t deny there is a remarkable quantity of ivory — mostly fossil. We must save it, at all events — but look how precarious the position is — and why? Because the method is unsound.’ ‘Do you,’ said I, looking at the shore, ‘call it “unsound method?”‘ ‘Without doubt,’ he exclaimed hotly. ‘Don’t you?’ . . . ‘No method at all,’ I murmured after a while.

  14. Eric L. Prentis

    Market efficiency is a crock-of-shit, foisted on us by Wall Street psychopaths. My evidence shows the U.S. stock market, from 1871-through-2008, is only 15% efficient and 1.6 times riskier than it should be. Cognitive dissonance is pervasive. No U.S. academic institution has the intestinal fortitude to get out front on this crucial issue.

  15. craazyman

    Well Mr. Crook is like a wandering drunk, but it’s nice he keeps his word count down.

    Orthodox economics isn’t perfect but I have to be honest. I bought a used Money and Banking textbook for $5 at a church book sale in Greensboro, North Carolina 8 years ago. Money Banking and Financial Markets by Fred Mishkin.

    Mr. Mishkin is a famous orthodox economist. I think he made a cameo appearance as himself in Inside Job. He seemed a little fruity, but likeable, actually. I don’t know if he was there at the Oscars, but that’s his business.

    I read his textbook just as a back up to channeling. It was pretty good. He talked about moral hazzard in the financial markets and the problem of adverse selection. He talked plainly about how these impact financial firms.

    I guess it’s always easier to preach than to practice, and not just Mr. Mishkin. I’m not singling him out.

    It’s funny. If only the Fed, the OCC, the SEC, the ABCDEFG, the whoever, had read that $5 textbook by Mr. Mishkin, then at least they would have known what they were missing. But I still think they would have missed it, and no economic theory of any school will ever explain that.

  16. human909

    “If businesses don’t invest enough, or worse, are net savers, as they have been in the US since 2003, you need the government to run deficits.”

    I’m sorry but that thinking is just as flawed as the article he is criticising. Sound like it is straight out of a Keynes-esc orthodoxy.

    Yes there is imperfections. Yes there bubbles. But look at the source not the flawed ‘solutions’.

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