Vicious Rants of an Angry Yellow Man

Paul Krugman wins the Nobel Prize. So since 2000 an American has won or share the Nobel Prize for economics every year. So with all these great minds, why is our economy in such trouble? Maybe economics is not a science at all. It certainly is not an exact science like chemistry and physics. Despite the smart people at places like MIT who build all these mathematical models to predict the direction of the financial world, we are still in the Dark Ages when it comes to economics.

To begin with I think the whole financial system is a reverse Ponzi scheme. A Ponzi scheme depends on the confidence of the people at the bottom that someone else will come along and pay them eventually. Our financial system begins with the Central banks of each country printing out money, not backed by anything valuable like gold usually. The largest banks get the money and loans them out to the smaller banks who loans to other banks and businesses. This eventually trickles down to the peasants who work for a living. People are supposed to pay taxes which gets back to the Central banks. But if things breakdown along the way the Central banks have to intervene, like they are doing throughout the world right now. Of course the government will usually run a deficit under normal conditions. But in a situation we are in now the deficit is going to be much worse. It is only the confidence of the people at the middle and bottom that the government will solve problems that the whole system will work. I am not an economist but this seems like a reverse Ponzi scheme to me and eventually it will fall apart. It won't fall apart during this crisis but who knows in the future?

Another reason not to trust economics is because it is heavily influenced by politics. There are liberal and conservative economists whose views are tremendously different. Chemists and physicsts may be liberals or conservatives but when they run an experiement the results will be the same. In economics this is different. Krugman, for example, is very liberal and he attacks the Bush policy every chance he gets. But the liberals have not come out with anything that is impressive in trying to get us out of this crisis. Obama, for example, has the same idea as McCain of allowing people to take some money out of their pension or IRA without penalty. This does not seem like a good idea to me as this will weaken the stock market as more people will cash out. These people will have to sell more shares as the price of each share is much lower than before. This will hurt them in the long run. As I said before, the best the president can do is inspire more confidence. He will not have any great idesa. Whoever he is.