This essentially means that the state’s economic apparatus is now all about stimulus, all of the time. In fact, the state’s central banking branch has gotten so deep into ritualized Keynesian governance that it’s essentially attempting to micro-manage vast accumulations of GDP—-about $17 trillion each in the US and Europe—-on a monthly basis.That’s entirely what the meeting statements and post-meeting press conferences are all about.As a certified shade tree mechanic I not infrequently venture into projects on my beloved 25-year-old Honda, which is a machine of a certain complexity. With the help of a decent manuals and a little beer it's sometimes possible to bird dog problems in a satisfying way, especially when I realize that my efforts have left a decent amount of my money where it belongs – in my pocket. Admittedly, I would have more confidence had I attended Bailey Tech at some point in my meandering career but it is still possible to figure out problems as a rank amateur.Yet this is absurd. The information flow in a $17 trillion economy is far too vast to be digested and assessed by the 12 mortal members of the FOMC, and their policy control instrument—-the bludgeon of interest rate manipulations—- could not possibly shape its short-run course in any event. That’s especially true since the macro-economy is not a closed system, but one open to every manner of complicating and countervailing influence from trade, capital flows and financial impulses in a $80 trillion global economy.
Still, the Keynesian policy apparatchiks have not even an inkling that they are attempting the impossible or that their patter about objectives, forecasts and policy actions have gotten downright moronic.[1]
The point of saying this is that even with more knowledge, I would have my work cut out for me, especially where electronic components are possibly at fault or there might be an accursed short to chase down. Mr. Stockman puts his finger on the problem with "managing" a national economy when the complexity of the systems involved is several orders of magnitude worse. Cliff Notes version: It can't be done. Even a simple electrical problem in a single automobile with relatively ancient fuel injection technology is daunting and time consuming, whoever is chasing it down.
Thus, it's all the more reason to watch with some dismay as Janet Yellin speaks with glibness and confidence of how this economic lever will be pulled and such and such level of employment will hopefully result with this or that "desirable" target rate of inflation in her sight reticle. (That would be the "desirable" inflation rate envisioned by her predecessors that has caused the dollar to lose 97% of its purchasing power since 1913 in case your were wondering.)
Modern man has been intoxicated for well over a century with the idea that sufficiently smart and educated people can competently manage the affairs of other people. It's a delusion fast proving to be a disaster as statist busybodies find they are running out of options when economies stall under the regulatory and tax loads imposed, massive borrowing is necessary merely to pay the interest on existing debt, and existing debt can't be paid off but merely rolled over. The fiscal flexibility and cushion available to such as FDR and Lydon Johnson are no more. And the noxious seeds that they planted are now the mighty oaks that are about to fall across our path.
An old cartoon had an army sergeant remarking to his buddy while they were out on the town: "Just look at all those people walking around unsupervised." It's an approach that mystified the sergeant and terrifies the statists and their parasites. Liberty was once prized by our elites but now takes a back seat to sophomoric social, political, and economic tinkering by people who have no idea at all of their human limitations. And we all get to go down with them, worst luck.
Notes
[1] "Ritual Incantation -- The Economic Gibberish Of The Keynesian Apparatchiks." By David Stockman, Contra Corner, 11/7/14.
One doesn't hear much about "cybernetics" nowadays, but at one time it was a popular topic. One of the sayings of the cyberneticists was "it takes variety to control variety." That is, the control system must have as much variety (variables, feedback loops, etc.) as the system to be controlled. Clearly the Fed doesn't begin to have enough "variety" to control a $17B economy. No one does. Even Robinson Crusoe's bare-bones economy probably had more variety than Crusoe himself could muster.
ReplyDeleteIndeed, Joe. The Law of Requisite Variety might be Von Neumann's most lasting contribution to our knowledge of multiply connected, semi-cooperating systems.
ReplyDeleteIt's also important to note that the Fed was not created for the purpose of "controlling the economy." It acquired that impossible task through "mission creep," a process which a command-level officer will appreciate. Just one more of LBJ's unfortunate legacies to the United States.