The Economic Crisis and its Implications for The Science of Economics

Not really. I really like the fact that Peter is not one of those posters who nitpicks about his posts, and furiously bangs them out at high speed without checking for errors. Given the speed at which these typos suggest he is writing at, his thought are pretty clear, his grammar excelent. Full marks. Bang it off and be done. So what if you have to wade through some mistyping? And as in the case of the "Middle English" above, its sometimes even charming.

Mots peopel haev no prolbmes redaing throuhg wodr jumbels becasue tehy idenfity the wrod as whole, and stopped redaing wodrs phoneticly sylable by sylabel when they were chidlren, maikng sense of the words in context as well. People react to typos mostly because it contravenes a certain officious sense of propriety.

Keep banging away Peter and fuck the spell check. Fast and furious. Its a post on a message board, not a university thesis.

Who cares, I can read it. So can you. So what. He's obviously flying along at insane keyboard speeds. No need to make an issue of it because most people stopped reading sylable by sylable long ago, capturing the meaning of words instantly as icons, and making sense of sentences by context and content.

Peter is a good writer, and you can see that his hand connect almost instantly with his thoughts, and they just spill out in clear and meaningful manner, hence the first comment on that typo-filled passage was: "Thank you for those Plain and Elegant words."

Sorry for my bad presentation - I needed to be brought up on that.  Let the thread flow back to its purpose, which  I understand to be  discussing to what extent economics can be considered a science, particularly given its inadequacies in predicting and describing the economic crisis. Part of that discussion could involve the difference between "hard" science (physics, mathematics, engineering?) that deals with certain forces that can be accurately charted and the "soft" sciences (history, sociology, economics) that deal with complex unpredictable humans

I think the poor around the world are beginning to realize that things just dont improve for them with capitalist globalization. On the news the other night, getto dwellers of Dharavi, India's largest slum, are refusing to be moved from their slum in making way for real estate developers. One man and his family began making pottery and rose a bit above the average situation of grinding poverty there. He realizes that if he has to move out of his slum dwelling, he wont be able to make pottery in any kind of volume in an apartment building. The squatters of Dharavi have the new liberal capitalism pegged for what it really is.

Forget the crisis, fells.  Wall Street has just solved it.

The New York Times reports this morning:

"After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.

The bankers plan to buy "life settlements," life insurance policies that ill and elderly people sell for cash - $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to "securitize" these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return - though if people live longer than expected, investors could get poor returns or even lose money.

Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.

The idea is still in the planning stages. But already "our phones have been ringing off the hook with inquiries," says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.

"We're hoping to get a herd stampeding after the first offering," said one investment banker not authorized to speak to the news media.

In the aftermath of the financial meltdown, exotic investments dreamed up by Wall Street got much of the blame. It was not just subprime mortgage securities but an array of products - credit-default swaps, structured investment vehicles, collateralized debt obligations - that proved far riskier than anticipated.

The debacle gave financial wizardry a bad name generally, but not on Wall Street. Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products.

In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones, called re-remics (re-securitization of real estate mortgage investment conduits). Morgan Stanley says at least $30 billion in residential re-remics have been done this year."

And so it goes. (Vonnegut)

neil_smith wrote:

I have seen little, in the intervening period, from most economists, to improve my opinion of their economic models. Models that have more to do with alchemy, perpetual motion machines or the Ponzi scheme economic equivalents

I think youre more disappointed in the politicos in North America's two-four old line parties running things into the ground for the last 30 years and more with neoliberal capitalism. Wall Street and bay Streeters don't buy economists so much as they buy whole stoogeocracies every four years.

To suggest that "this", what we have here in Canada and the US,  is the way it is around the world in general is false and misleading.  

Canadian William Krehm quotes Frances Hutchinson describing the [url=http://www.comer.org/2004/2004b/Bus.htm]"Stalinization" of economic theory[/url] in 1990's USA and Canada with history of economic thought particularly targeted.

Everyone's in a box. Out of the box, we see this. First, Krugman and Keynes might be 'liberals', but that is a labelling trick you need to be careful of, and don't go running to them or quoting them when the big bad laissez-faire gang come marauding (laissez-faire basically means the big guys do as they like, and you shut up or we'll lay a beating on you), as they won't help with anything really useful beyond some kind of soma to lessen the pain. They are both also capitalists, benefitting from the capitalist system (one might even say flunkies) - capitalists light, perhaps, but still capitalists. Think of 'good cop bad cop' - you might have a carrot in your hand from the good cop, but you're still going to jail. And with capitalists light running things, as they did for a few years after the last huge meltdown the serious capitalists caused in '29, your masters might treat you a little better as they get you back under control when you're showing some small signs of 'this is freaking enough, you guys!!!', but you will still be powerless peasants in the capitalist system, which, basically by definition, requires a few wealthy capitalist-masters controlling the serious 'capital' and a great herd of powerless workers manning their factories and businesses producing that capital.

(Out of the box, as an aside, you need to get a bit better grip on what 'capital' actually is - it is not just money or property, although it can be either and is somewhat fluid, able to transfer from one to the other - but serious 'capital' is essentially the 'excess wealth' produced by workers beyond their daily subsistence - in a (true) 'socialist' system, we somehow arrange for that excess wealth to be stored in some kind of communal storehouse for 'our' use in the future - in a 'capitalist' system, the 'owners of production' claim that excess production for themselves, and the peasants just keep going to work, day after day after day - like a milkcow or something - never realising any benefit from their labour beyond some kind of bare subsistence - it's a too-long story for a short comment, but that's the basic situation.)

Modern 'economists' are either complete fools or complete traitors, it's hard to go anywhere else when you understand what is happening in our world, and the economic basis of pretty much everything nowadays (they can be well-meaning fools, but still supporting the system that enslaves us all). We can leave the fools as unworthy of much attention, but for the traitors, the big thing is the central lie they all propagate, primarily by omission, and by confusing the situation with a cornucopia of complicated but meaningless 'equations' - the single most important factor of modern political economics (and, as the man said, make no mistake about it, modern 'economics' is 100% about politics, which is the main reason they disconnected the words a hundred or so years ago, to conceal this) - the single most important fact is (drum roll!! -) money!!

You need to think about this a bit, or maybe a lot - it is all about money - but where does that money come from? The one central fact of our modern world, which is, it is no secret, controlled by money, is that that money is created almost entirely by private banks, for private profit, with essentially no serious government regulation. The bills and coins in your wallet that you use for day-to-day stuff is created by the government - and is about ~5% of our 'money supply' - the rest is various forms of electronic money, which is created entirely by the banks as loans, and which they demand and get 'interest' on - every year. Endless interest on our money supply. And when you grok that fully, pretty much everything else becomes clear. In a society based on money, he who controls the money, controls everything else. And they are not exercising that control for 'your/our' benefit. And this is the one thing our 'economists' refuse (or are too indoctrinated - the 'fool' segment) to deal with.

The second major (and very much related) problem with modern 'ecomomists' is their insistence on living in some fantastical wonderland where everyone is some kind of honest robot, dealing in mathematically countable ways as they do their daily business - but the most salient fact of life in capitalistland is not the fact that most of us are honest citizens and workers and consumers, but that we are being run by a bunch of crooks, scamming us every way they can think of through their control of the money we all use for our daily transactions - and if 'economists' will not even acknowledge this in their theories, let alone try to devise some explanations about how this central dishonesty works through our economies, then the chance of any useful analysis of what is happening is zero.

I won't take up more time or space getting into details here - I've written a longer piece that gets into the first part of it all, the private money creation bit, a bit more here - Global Financial Meltdown: Forces beyond our control, or the greatest scam ever?
http://www.rudemacedon.ca/greatest-sting-ever.html - but if anyone has any comments etc (beyond the simplistic name-calling any talk of monetary reform usually elicits from apologists for their capitalist masters), I'll try to answer them.

Lee Smolin's article on arXiv.

Having read it, I find it amusing that the language of economics can be recast in the language of physics. That said a lot of it is hard going, mathematically, though the language he uses is familiar to me, having seen things like conserved currents in quantum electrodynamics.

I think caution should be taken in placing too much emphasis on the math. The ultimate goal of economics is to describe the monetary interactions of humans and how phenomena rooted in the exchange of goods, services, assets and money have broader repercussions (simple example: What happens if everybody saves money? You induce an economic recession, explained by the paradox of thrift.)