Almighty Dollar

Now Or Never

Posts tagged academic economists

39 notes

10 Things You Didn’t Know About Economics

But really should! It’s not the science economists often make it out to be.

By secularist10

 

The ongoing economic crisis has occurred against a backdrop of flawed economic theory. Much of this faulty thinking on the part of professional and academic economists has been obscured from the general public by the impenetrable jargon and complex mathematics that has become part and parcel of the profession.

However, the profound implications that economic theories have for society’s prosperity mandate a solid understanding of the field and its assumptions. So, without further ado, here are 10 big ideas and assumptions in the modern economics profession that you probably didn’t know about: 

1. Economics secretly wants to be Physics

2. Economists think you’re a computer

3. Consumers are all-powerful… no really, they are

4. Information is perfect

5. Competition is perfect

6. Financial markets are… you guessed it—perfect

7. It’s all about the money!!

8. The Efficiency obsession

9. Economists don’t study history

10. Economics has two options

Economist Ronald Coase is quoted as having said:

Economics has been becoming more and more abstract, less and less related to what goes on in the real world. In fact, economists have devoted themselves to studying imaginary systems, and they don’t distinguish between the imaginary system and the real world. That’s what modern economics has been and continues to be. All the prestige goes to people who produce the most abstract results about an economic system that doesn’t exist.

So it would seem the old joke really does hold true: an economist and his friend are walking down the street. The friend spots a dollar bill on the ground. As he reaches down, the economist grabs his arm, and says “Don’t pick it up. If it were really there, somebody would have taken it already.”

Got it?Got it?

Read more:  10 Things You Didn’t Know About Economics: Numbers 1-3                          10 Things You Didn’t Know About Economics: Numbers 4-6                          10 Things You Didn’t Know About Economics: Numbers 7-10


Filed under economics economy economists Economics 101 economic crisis academic economists

14 notes

Federal Reserve economists predict a 15-year bear market for stocks

I love what the author of this report has to say about academic economists.

                                       

TUESDAY, AUGUST 23, 2011

By Bruce Krasting

The San Francisco Fed has come out with a research paper connecting the dots between the retiring baby boomers and stock prices. The thinking is that the boomers will divest themselves of stocks as they retire and eat into their savings. This is an old argument, but I still found it interesting.

The authors, Zheng Liu and Mark M. Spiegel have attempted to quantify the implications. [Among] their principal conclusions: 

The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices follow a downward trend until 2021.

On the brighter side, as the M/O ratio rebounds in 2025 (BK: M/O = Baby Boomers die), we should expect a strong stock price recovery. By 2030, our calculations suggest that the real value of equities will be about 20% higher than in 2010.


These conclusions are just horrendous! 
The suggestion is that there is a 15-year bear market in front of us. Multiples will fall by 50%!! I loved the “good news” from the report, that stocks might be 20% higher than 2010, but we have to wait 20 years to see that improvement.

Bloomberg interviewed Spiegel about this report. There was one comment that I thought was telling:

“We do see it as something of a headwind as the economy is attempting to recover.”

This is worst kind of "Fed Speak" in my opinion. These deep thinkers have it completely wrong. They think that the key to having a stronger economy is higher stock prices. So they spend all of their efforts dreaming up ways to keep the S&P ramping up. I think it is the exact other way around. If the economy were to be growing, it is reasonable to assume that stock price might rise. It is completely false to assume that attempts to jigger stocks higher will lead to a stronger economy.  

The dog wags the tail. The tail does not wag the dog.
This is what we get for having academics from Princeton running the show. They have the cause and effect backwards. No wonder the economy sucks.



Read more: Federal Reserve economists predict a 15-year bear market for stocks

Filed under economy economics Federal Reserve Fed Fed economists academic economists Federal Reserve economists baby boomers bear market Fed Speak S&P