The Death of Economics
A fatal case of hubris.
Jul 8, 2013, Vol. 18, No. 41 • By DAVID M. SMICK
Some questions to ponder: How could the experts be so wrong? Over the last five years, after fiscal and monetary stimulus, global public and private debt increased by a stunning $48 trillion (global GDP is $85 trillion). Stock market capitalization jumped by an astounding $26 trillion. Yet the world economy is actually slowing.
What are the factors (exchange rates, macroeconomic conditions, level of real interest rates, direction and level of capital flows) that might provide clues as to whether a nation’s debt has reached the danger zone? Or is the only choice before reducing debt simply to wait until a crisis sets in?
How do we understand the almost metaphysical nature of entrepreneurial risk-taking, the source of most new jobs? Is such risk-taking facing death by a thousand legal and regulatory cuts from Washington?
How do we survive a global capital system with ever expanding oceans of money and seemingly few rules of the road? Are central bankers irrelevant? Is eye-popping financial volatility, therefore, the “new normal”?
And, in the process, is the little guy in America the permanent fall guy?
How do we assure that the emerging U.S. energy revolution transforms the competitiveness of American industry and raises real wages and salaries across the board?
An economic policy rethink won’t be easy. But the first step is to deep-six the hubris. This year should mark the death of all government five-year economic forecasts.
David M. Smick, a macroeconomic adviser to a number of global investors, is founder and editor of the International Economy magazine and author of The World Is Curved: Hidden Dangers to the Global Economy.
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