I've been doing TV for a long time and I can tell you that sometimes the best conversations occur during the commercial breaks.
Last Friday I was on "Rewind" on Bloomberg TV. My co-host was Joe Brusuelas, Bloomberg LLP's Chief Economist. He says he has a PhD in economics, but it's not posted after his name, nor does anyone over there call him "Doctor." Anyway, it doesn't really matter because as we all know Warren Mosler only has a Bachelor's degree in Economics, but he's the most brilliant economist I've even met and he can run circles around these PhD's. Even Keynes didn't have a formal degree in economics.
Anyway, during the break we got into a discussion about the economy and what could be done to get growth up. We were talking about the "fiscal cliff" looming out there next year and I said that I thought it was a big problem if not addressed and he said something was going to be done, but it wasn't going to be on the fiscal side. He specifically said that fiscal was off the table yet he didn't give a reason why, however, I sensed it was not because of political reasons, but more a question of "means," at least in his mind. Then he laid it out to me and said, "The Fed will do it."
I said, "The Fed? How?"
He said, "monetary policy."
"Monetary policy?" I asked, incredulously. Then added, "That's worked well." Of course I was being deeply sarcastic.
I followed quickly with, "There is no direct channel from monetary policy to demand."
He says, "Of course there is. There's at least six."
(So this guy is saying to me that there are six channels to demand from monetary policy.)
"Name one," I say.
He said, "interest rates."
(Me, laughing), "That's it? That's what you got? Interest rates? That's worked well, too," I repeated, making sure I said it in my most sarcastic voice, while laughing.
I could tell he was getting peeved. He must have been thinking, who was this no-name economist, former Fox News Contributor talking to me about economics? After all, he was the Chief Economist of hoity toity Bloomberg. Who was I? John Thomas who?
I pressed, again (I love doing this as you can see), saying, "QE, doesn't do anything for demand."
Then he said (get this), "That's because house prices have not risen."
House prices have not risen???? That was his PhD response. In other words, his channel to demand was blowing up an asset bubble and hoping that it would cause people to go out and buy things. Ridiculous. Didn't we see this before? It didn't work the last time and it's not working now, for different reasons. Demand is demand. It's the direct purchase of goods and services. And that can only be done by, well, directly purchasing goods and services. By someone.
Then I hit him with the "pushing on a string" metaphor. Surely as a PhD economist he knew about pushing on a string? That's where the central bank lower rates, but nothing happens to demand. In other words, you push on one end of a string and the other end does not move, thus the metaphor. He seemed to be getting really annoyed at this point. Before I knew it the break was over and we back to the show. At that point we watched a clip of an interview that took place earlier in the day between some econommist whose name I forget and Bloomberg anchor, Tom Keen.
I sat and listened as the guy Keen was interviewing painted a gloomy picture of the economy. Then Keen asked him if there was anything that could be done, policy-wise, to add 100 basis points to GDP. Well, 100 basis points is not a lot. It would put GDP at 3.2% from the current, 2.2% growth rate. It could be done quite easily via fiscal policy, i.e. tax cuts, more spending, etc. But this economist guy would have none of it. He was taken aback by the very question. Then he blurts out, "Hey, don't try to make me into a Paul Krugman."
I couldn't believe what I was hearing. To this guy a simple question alluding to some form of intervention in the economy turns him into Krugman? And intimating that he would look at the problem like Krugman just made him the victim of the most vicious type of slander. To all of these guys, Krugman is, of course, Keynes. And if Krugman is Keynes then he is the most hated figure according to the neoliberal, economic mainstream.
So after reacting as if he was just handed some poison he recovered and said the thing to do with the economy was to do nothing. That's right, there is nothing we can do. Just step back and let it all play out, unencumbered by the hand of any economist, and surely don't do anything as horrid as "artificially" supporting demand.
In both his reply and attitude was a complete and utter admission of how dismal, arrogant and failed mainstream economics has become. It is no longer the dismal science, it's just dismal, period. That the only thing the discipline can offer from its most highly paid, lauded and professional elite is to say there's nothing we can do is reason enough to euthanize the whole creed. They are useless and reprehensible.
Think about what the world would be like if we embraced that attitude in other areas of human endeavor. What if Orville and Wilbur Wright said, "If God intended man to fly he'd have given him wings." Or if Jonas Salk said, polio is good, because it will end up cleaning out the weak of the human race. We don't need a vaccine." Or if Churchill, rather than saying, "we will never, ever, give up," said, "Let's just surrender to the Nazis."
These economists are the weak, arrogant, cynical losers running our world today. These are our "great economic minds." What a joke. What a complete and utter joke. Economics...not a science, not even a dismal science. Just plain dismal.