John Mauldin argues the global central bank community’s policies have created an environment of risk that is looking more and more like a bubble in search of a pin

By John Mauldin*

The Federal Open Market Committee, to almost no one’s surprise, did absolutely nothing at its last meeting other than say that maybe, if the data allow, they will raise rates in December.

My cynical view on their dithering will be detailed below. And of course, the Bank of Japan met and decided that maybe they had gone a bridge too far; and rather than lowering already negative rates when the yield curve was flat out to 40 years, they decided to see if they could create a fulcrum around the 10-year Japanese bond at zero. So far, the move has not been a rousing success. 

This is partially because their banks are bleeding cash and screaming at them, and they have got to figure out some way to walk back what is becoming a very destructive program. When you look at what low rates have done to the Japanese economy and Japanese retirees, Kuroda-san’s coming to Jackson Hole and declaring that negative rates have been a success demonstrated a fair amount of chutzpah. But then he supplied only a small helping of the staggering amount of hubris displayed at Jackson Hole by central bankers from all over the world, who were celebrating the success of the most repressive monetary policy conditions in the history of mankind.

The International Monetary Fund, the Bank for International Settlements, and the World Bank are all revising their global growth predictions downward at a rapid clip. You get the feeling these guys could spin Napoleon’s invasion of Russia into a positive story and one they could take credit for. 

In today’s letter we are going to look at the FOMC’s decision-making process for monetary policy and survey the unpalatable future that our leaders are cooking up for us. But we won’t be living in the fantasy world they have created for themselves; we are going to have to live in the real world instead, where investment portfolios make a difference to our lifestyle and retirement, not only for ourselves but for our families and clients. 

I must confess, the more I think about where the “monetary policy community” of academic elites has brought us, the angrier I get. It has been a long time since I have been this passionately upset about something. And not merely because the policies are stupid. If I got passionately upset about every stupid idea I come into contact with, I would soon require serious blood pressure medication. Having been intimately involved in the political process for almost 25 years in a prior life, I daily came into contact with stupid ideas and thought myself somewhat immune. 

No, what the Fed has done is to destroy the retirement hopes and dreams of multiple tens of millions of my fellow US Boomers, and when we include the effects of the destructive policies of the rest of the world’s central banks, the number becomes hundreds of millions. The secure and protected world our central bankers live in is far removed from that of the American or European middle class retiree. The purity of their theory and the clarity of their economic thought is evidently far more important to them than people’s wellbeing is. 

However, numerous thoughtful scholars and those in the business community are mounting a serious pushback. They may be considering the wisdom of Winston Churchill’s remark, “However beautiful the strategy, you should occasionally look at the results.” 

Central bankers of the world look around them and see nothing but confirmation of their brilliance. Mostly they see it reflected from the stock markets, but some of us are beginning to think they are going blind. 

This week I want to expand on my recent Federal Reserve criticism. I’ve talked about the mistakes I think they will make in the next recession (whenever it starts). We need to think about that future in the light of the Fed’s mistakes in the wake of the last recession. That is really where our disagreement with them began. The Fed believes its policies worked. I say those policies did not work, and the dismal recovery we have suffered through occurred in spite of the Fed, not because of it. Federal Reserve policy has actually thwarted the normal recovery process. 

The Fed’s fruitless follies 

If the Fed had really believed their own post-recession forecasts, they would have been normalizing interest rates by 2012. Instead, they went on devising, deploying, and now winding down various shotgun stimulus tools. Maybe they honestly believe they hit the target, but the rest of us aren’t convinced.  

Almost everything the Fed did to us since 2008 falls into two broad categories: interest rate repression and quantitative easing. 

Here is the federal funds rate from 2007 to 2016. The shaded area is what we now call the Great Recession. 

The Federal Open Market Committee entered 2007 with the rate target at 5.25%. They starting lowering it in August of that year – months before the economy went into recession. Why was that? Recession or not, many folks weren’t doing well. Even then there was talk of banks having difficulty, though the worst was yet to come.

Look how fast rates fell. In July 2007 savers could buy Treasury bills, certificates of deposit, or other principal-protected savings instruments and enjoy a 5% or better risk-free yield. Longer-term fixed-income products actually offered even higher yields. A year and a half later, the fed funds rate was bumping the zero bound, and savers could make nothing without taking on market risk, which few wanted to do at the time, because iconic brands were blowing up everywhere. 

Here is the great irony and possibly the most iniquitous part of the Fed’s monetary policy initiative. They wanted investors to move out on the risk curve. But did they bother to look at the demographics of this country? We have a huge bulge of Boomers – retirees and near-retirees who do not need to be moving out the risk curve at this time in their lives. They need Steady-Eddie returns, and they need to be reducing their risk, not increasing it. 

A sober look at the current economic environment reveals overvalued, overbought, and illiquid markets everywhere. The global central bank community’s ultra-low and negative interest rates have created an environment of risk that is looking more and more like a bubble in search of a pin. If and when it bursts, it will take the retirement dreams of millions of Americans with it.

From the Fed’s perspective, super-low interest rates were economic stimulus. With borrowing costs so low, we were all supposed to race out and buy stuff. Companies should have expanded and hired more workers. Homebuilders should have been incentivized to build more McMansions in the suburbs, knowing qualified buyers would appear like magic. 

What was supposed to happen was a normal recovery. What we got was the weakest recovery on record. The Federal Reserve will offer the counterfactual that if they had not given us their stimulus, the recovery would have been even weaker. That, of course, is something that neither they nor we can prove, one way or the other. We can go back and look at a far worse recession in the early 1920s, when the government did nothing and the resulting recovery gave us the Roaring ’20s. Very few people remember what was called the Depression of 1920–21. Unemployment was close to 12%, and there was extreme deflation – the largest one-year percentage price decline in 140 years of data. Christina Romer estimates it was a 14.8% decline. Put that in your CPI pipe and smoke it. Industrial production dropped by 30%. And there was a horrendous bear market. 

By the time President Harding and his Commerce Secretary, Herbert Hoover, got around to calling for a conference and organizing committees, the economy was already recovering. Notably, the administration did cut income taxes, which helped reinforce the Roaring ’20s. 

A large part of the problem in the late ’10s was that the Fed was raising rates into the recession in an effort to protect the dollar and fight what they considered to be inflation. Central bankers of that era had a gold and hard-dollar fetish that led to massive policy errors. When they actually began to normalize their monetary policy, the economy took off. A normalized interest rate policy, what a concept… 

In our own generation, we got stimulus for Wall Street in the form of QE, and it led to an inflation of asset prices. No one really minds if the value of their stocks, real estate, and other assets go up; and there was the assumption that a rise in the stock market and real estate would trickle down to Main Street. Clearly, it has not. 

Speaking of asset price inflation, Peter Boockvar writes this week:

The inflation/deflation debate we know goes both ways for consumer prices. Where there should be NO debate is the asset price inflation we’ve seen over the past 5+ years. We also know that the asset price inflation was more than just in stocks and bonds. It also spilled over into high-end apartments, antique cars, and paintings. It also spread into other ‘hard assets.’ In 2014, the Action Comics #1 comic book that introduced Superman sold for $3.2mm up from $2.2mm three years earlier for another copy of the same comic in similar condition. That was a record high price. A few days ago a T206 Honus Wagner sold at auction for $3.2mm, also a record high price for the same exact card that sold for ‘just’ $2.1mm three years ago earlier. In case you missed it yesterday, the WSJ quantified the returns on Mickey Mantle baseball cards over the past 10 years. For the ultimate Mantle card, his Topps rookie year of 1952, the percentage increase has been 674% for a high-grade card. The average return for his 16 Topps cards was 544%. These returns compare with 85% for gold, 40% for home prices, and 59% for the S&P 500 over the same 10-year time frame. The Fed, though, has no reason to be fearful on inflation for as long as they don’t include asset prices in the CPI or PCE so we magically won’t have any inflation much above 2%.

(Okay, how many Boomers just like me are kicking themselves for not keeping their shoeboxes full of baseball cards? I had those Mickey Mantle and Willie Mays cards, and all the others. And because my dad had played semipro, I collected a lot of the older cards of several previous generations that he told me about. The Ty Cobb and Cy Young cards were the anchors of my portfolio. Ahh, but I dream…) 

Back to the real world. What did happen was the opposite of stimulus, at least for those who were not the direct beneficiaries of quantitative easing. That would be the people who actually wanted to be prudent and save and put money in fixed-income and certificates of deposits. Remember when you could invest in a CD at 5% to 6%? What a quaint notion. 

By reducing the incomes of retirees and terrifying near-retirees, the Fed successfully reduced economic activity. Hopefully, that was not their intent, but that is what happened. They claim they managed to save the banking system from collapse, and I would agree that QE1 was necessary and beneficial to the system. I guess that’s something to their credit, but it came at tremendous cost. They put much of the cost of rescuing the banks on the shoulders of completely innocent people. The cost was borne by savers and small investors. 

In the middle of a massive monetary policy error  

I would argue that the Great Recession was a result of a massive monetary policy error: keeping rates too low for too long, which, when coupled with lax or no regulation in the mortgage markets, resulted in a housing bubble and a crash, which bled over to global markets. This outcome should not have been a surprise to anyone. A number of us were writing as early as 2004–05 about the problems that were the primary triggers for the Great Recession. 

As noted above, it was central bank errors in 1919 and 1920 that caused the 1920-21 depression. And pretty much everyone agrees that the Federal Reserve had a big hand in causing the Great Depression. Certainly, the wrong monetary policies resulted in the recessions of ’80 and ’82. Note: it was not the policies of Paul Volcker that caused the back-to-back recessions but those of his immediate predecessors who allowed inflation to get out of control. Volcker’s hand was forced, and he had to act aggressively. I lived through that time as a businessman, and I vividly remember borrowing at 18%. It was not fun. 

I believe we are again suffering the effects of a massive monetary policy error. The error has already been committed, but we have just begun to endure the consequences. We are still living in a dream, but we’re nervous, much like we were in 2006. The Federal Reserve has repeated the mistakes of the last cycle. They have kept rates too low for too long, but this time they have outdone themselves, clinging desperately to the zero bound. In doing so they have financialized the economy and made it hypersensitive to interest rate moves. 

Ben Bernanke made a big mistake by opting for QE 3. Arguably, if he had begun to normalize rates rather than to create a “third mandate” for the Federal Reserve to support stock market prices during and after QE 3, we would not be in the situation we are in today, where the very hint of normalizing rates sends the markets into a frenzy. 

Bernanke should have looked the stock market straight in the eye during the Taper Tantrum, summoned his inner Paul Volcker, and told the market, “I am not responsible for stock market prices.” The markets probably would have suffered a rather quick, sharp correction and moved on. And it might not even have been much of a correction. Markets often correct, as they did in 1987 or 1998, without becoming lasting bear markets if there is not a recession.

Admittedly, a normalized short-term interest rate today would likely still have a “2 handle” or even lower. Short-term rates, at least in normal times, have tended to be in the vicinity of inflation. The 10-year Treasury bond rate has had a close relationship with nominal economic growth. 

I would prefer to allow a market mechanism (rather than a committee of 12 people who are prone to enormous biases) to determine short-term rates. A committee that prioritizes the interests of the stock market above the interests of savers and retirees and pension funds is a dangerous committee. 

If the FOMC had begun to normalize rates in 2012 rather than looking at the stock market as a primary indicator of the health of the economy, the economy and the stock market would be doing much better today, and savers would at least be getting some return on their money. And perhaps, if rates were normalized, the governments of the world would be motivated to control their deficits. (I know, that last statement proves I’m a dreamer.) 

Greenspan had monstrous confidence in the wealth effect and how it would trickle down. The data is now in; the papers have been written; and the nearly overwhelming conclusion is that the wealth effect is, at best, inconsequential. What we have is another instance of the Federal Reserve ignoring Winston Churchill’s maxim: “However beautiful the strategy, you should occasionally look at the results.”

Yet, the policy geniuses at the Fed appear certain that the wealth effect is going to trickle down to Main Street any day now.

How do you mess up the easiest prediction in the world?

A few weeks ago we got the new dot plots showing where FOMC members expect interest rates to be in the future. If you were to look at this predictive path in isolation, you would make the rational assumption that interest rates are going to rise by 2% or more in the next two years. The chart below shows their expected rate increases four months ago: In June, by a margin of two to one, FOMC members were expecting at least two rate increases, if not more, this year.

Has the economy changed much since then? Not really, but somehow, afraid of their own shadow, FOMC members are now projecting by a three to one margin that there will be only one rate increase this year, of 25 basis points or less. Here is the plot from the September meeting:

This constant rethink is not just a recent phenomenon. We have seen it ever since the FOMC began to give us their forecasts for interest rate hikes. Less than two years ago they were expecting rates to be around 3% today and to reach 4% by the end of 2018! Each subsequent quarterly plot is revised downward, but the pattern always remains the same. Rates are going to “normalize” in a time frame that is always just around the corner but never seems to arrive. The chart below, from Business Insider, shows the paths of their rate predictions, and the dotted line down at the bottom shows what has actually happened. 

This reveals an interesting dichotomy. The Fed determines what interest rates will be. So what they are doing is predicting what their own decisions will be. And while Federal Reserve economists have basically gone “0-fer” with all their predictions for the growth of the economy – a predictive task that is orders of magnitude more difficult than predicting what they will decide on interest rates – they have also gone 0 for 11 quarters with their predictions for their own monetary policy! 

While I have been known to change my mind now and then, the FOMC members have been thinking seriously about interest rates every quarter for as long as there has been an FOMC. They know they have to make forecasts. They meet regularly, and I am sure they have phone calls and private dinner meetings and conferences, just like any other board of directors would. The easiest prediction in the world should be to tell me what they are going to do with policy rates.  

The dot plot tells us what they think should happen, but between the time their forecasts are made and the time they actually have to make a decision, something always happens to keep them from pulling the trigger. I think that something is Yellen and her inside crowd of ultra-doves in the leadership of the Fed. 

Dr. Stanley Fischer, vice chairman of the Fed, when asked his views on negative rates, said:  

Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But we consider all that, and we have to make trade-offs in economics all the time, and the idea is, the lower the interest rate the better it is for investors.

Stanley Fischer is the intellectual leader of today’s Federal Reserve. He is one of the most respected members of the “policy community.” During the last crisis, when he was head of the Bank of Israel, in pursuing his quantitative easing he bought literally anything in Israel that was not nailed down. So when he says that he must put the interests of investors in the stock market ahead of the interests of savers and retirees because he thinks that is best for the overall economy, you have to realize that this is the dogma being whispered into the ears of every FOMC member.  

And while there is a growing drumbeat from banks and serious members of the “policy community” in Europe and Japan that negative interest rates are damaging the system, you are not hearing that from Stanley Fischer and Janet Yellen and the other leaders of this Federal Reserve. Yves Mersch of the ECB talked about the problems banks are having and said, “The longer [rates] remain low, the more pronounced the side effects will be.” Deutsche Bank and other major European bank economists are starting to sound semi-apocalyptic as they bemoan the policies of the ECB. Here at Mauldin Economics, we are doing some in-depth research based on a few small reports about how desperate the European insurance community is. Understand that European insurance funds are several multiples the size of their banking community.  

Low interest rates have traumatized US pension funds and basically made it impossible for funds to meet their investment targets. And the consultants to whom the funds pay large fees are still showing them models (based on gods know what assumptions) that say it is okay to project 7% to 7.5% compound returns for the future. 

So here we are, in a weak recovery that grows longer in the tooth with each passing month. I have discussed the assorted potential crises that could set off the next recession. You know the list: China, Japan, Italy, Germany (99% of investors do not understand how vulnerable Germany is), our own elections here in the US, or just a gradual slowdown as consumers lose the will or ability to spend. Something will happen to set off another shock, and it will probably happen in the next year or two. Then what? 

This brings us to perhaps the biggest danger of all: People are losing faith in the Federal Reserve. Not without reason, either. Ben Hunt says the Fed is “losing the narrative.” By that he means that most Americans are skeptical of the Fed’s happy talk and no longer believe that Fed policies will result in the economic growth projected. 

Sadly, that group of “most Americans” does not include Federal Reserve governors and bank presidents. All evidence suggests they believe their policies are working out swell. Unemployment is down, so Janet Yellen is happy. Stocks are up, so Stanley Fischer is happy. They invited all their friends to Jackson Hole to plan the next party, in which they will spin the bottle on negative rates and try to get Congress to eliminate $100 bills. They think it will be fun. Many in the economics profession want to party with them. 

We will have another financial crisis and/or recession, probably soon, and we can’t trust the Fed to respond correctly. We’ll be lucky if whatever comes out of their Frankenstein lab is only ineffective. There’s a very real risk they will make the situation far worse. The masses of unprotected people are in no mood to swallow more monetary policy medicine, much less any additional remedies that globalist plutocrats may try to shove down their throats.  

In an ideal world we might be glad to see the Fed stand aside and let markets adjust themselves. The problem is that said adjustment will now be extremely painful for a large part of the population. So the Fed may be damned if it does and damned if it doesn’t. 

I have no idea how the election will turn out. It seems to me that Donald Trump now needs a very good debate Sunday night. But win or lose, Trump is a huge canary in the political coal mine, and the political and monetary-policy elite should listen up. Brexit was a warning, and Austria and Italy and Germany – indeed all of Europe – are sending a similar warning. The Unprotected are beginning to push back, and not just at the edges. The center is not holding. A new center is going to be created, one that the elites may not appreciate. 

The Protected elites of both major US political parties may genuinely think they are acting in the best interests of the country. But middle- and lower-class Americans are learning that politics and economics as usual mean diminished lifestyles and futures, not only for them but for their children. 

The best-laid schemes o' Mice an' Men
Gang aft agley…  

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* This article is taken from Thoughts from the Frontline, John Mauldin's free weekly investment and economic newsletter. It first appeared here and is used by interest.co.nz with permission.

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20 Comments

It was interesting listening to the Chicago Fed guy on Q&A. They seem to be wanting to raise rates to give headroom to lower them for the next bubble. Looking back, the pattern has been that the easing to cope with one crisis gives rise to the asset bubble that causes the next crisis and so on. It seems to me that this is resulting in economic behaviour that, in engineering control theory terms, is symptomatic of a system with too much negative feedback. (i.e. they are cutting or raising interest rates too much in response to any particular circumstance) Typically, a system with these control settings becomes totally unstable, oscillating between overshooting and under shooting a desirable stable condition at a fixed frequency. As you have observed before these people are well versed in the mathematics of economic systems, so you would reasonably expect them to be aware of what I am saying and able to control the economic system better. So why are they doing this? Again I say follow the money. Who benefits from this instability? I would suggest that it is the large investment bankers with their equally mathematically capable economic modellers and complex economic instruments. An economy that is totally stable would offer far less opportunities for them.

This analogy makes sense Chris.

The problem for the Chicago Fed guy is that when the last bubble burst they had to drop the funds rate by 525 basis points to avoid a complete collapse.

Even if they increase 25bps they will still have only 75bps of headroom.

They have backed themselves into a corner with this mad doctrine blowing up an asset and credit bubble.

There is no simple fix. If they do not raise interest rates asset prices will ultimately have to fall anyway as pension and insurance companies, starved of yield, will be forced to sell assets to meet their liabilities.

Sadly, through CBs flawed model of how money works we are at the top of the mountain.

Who benefits from the instability? Traders. The instability has allowed the rise of traders to sap profits from actual productive activities. This is also part of why banks have gone from a secondary function in the economy to being a substantial sector (27% or so of our GDP).

I am no economist but have an interest in monetary policies and like to follow the comments on this website. I have recently returned from a trip to North America, Canada to be precise. We visited five main cities in different provinces and I couldn't help but notice that in all cases the main buildings downtown in these cities were banks, in some cases side by side. The other main "industry" if that is what you Cld call it, were restaurants, falling over each other. Money being printed so the populace can eat? And totally agree with your comments dictator.

"Hyper sensitized to interest rate moves..." hence why we haven't seen nor will see any significant moves higher. Load up on that high yielding Palmy real estate if you haven't already, before rbnz outlaws rental purchases

Monetary policy ultimately can't deliver CHEAP abundant energy OR resources, both essential for actual growth. Growth is dead. The world is finite apparently.
Far from blaming central bankers, you can congratulate them for giving 8 years post 2016 of some sort of normality - they know their options are now non existent. It was either crash earlier or later and harder. We are broke and the future can not pay. When a crash comes, theres unlikely to be any reset options left.

And no one should feel sorry for boomers and their retirement dreams .. they have plundered abundant resources, the gift of billion years in the making fossil fuels and outlived every generation ever before them with unprecedented consumption levels....Its the generations coming which are now stuffed.

I should add monetary policy CAN deliver the appearance of cheap energy temporarily ... but at the expense of a robust market.

Which is where we are now at; no "free" markets, no price discovery and where everything included data and statistics is manipulated to prevent contagion.

“When the economy falls, there should be written on its tombstone: ‘Died of a Theory.'” ( thanks to Jefferson Davis for the concept)

Someone send this article to Roger Kerr!

Ray Dalios' view of the future which I tend to agree with is that rate rises will cause ALL mkts to go down ( simply because % rates set the discount rate to determine present values)..

SO... initially rate increases beyond mkt expectations will cause the mkts to shit themselves...
AND then... as Central Banks try to push MORE money onto the system ... there is a very good chance that there will be a movement away from holding financial assets....

A Global financing "squeeze" is coming to a head.as a result of slow growth, low returns, and an acceleration in liabilities coming due both because of the relatively high levels of debt and because of high pension and healthcare liabilities. the pension and healthcare liabilities that are coming due are much larger than the debt liabilities in most countries because of demographics...

SO... In coming yrs expect, initially, ALL mkts to decline in the face of rising % rates....
AND then.... as govts and Central Banks respond by destroying currencies , Capital will flow out of Financial assets and into non financial assets.... in a BIG way.. ( Hard asset mkts will increase rapidly )

AND then.... there will have to be some kind of Global "reset"..

Central Banks are at the .."pushing on a string" point..., and maybe they even see -ve % rates as being destructive....... so the next round of measures will probably be along the lines of helicopter money and fiscal policy.

please note: this is just my view on what he said ...and I do have my own biases...!!

Thou one Thing I think most of us, on this site, seem sure about is that at some point the Global economy is heading into some "dangerous rapids"..
I'm guessing recession mid 2018 or 2019.... ( we r at about midway mark in current business cycle )
Crashing over the waterfall in about 2025- 2026...

http://www.zerohedge.com/news/2016-10-06/what-bridgewaters-ray-dalio-tol...

There's latterly a veritable stampede of hitherto 'Noses in the Trough' ers giving their warnings on this folly; all trying to get on the right side of history before a big bang.

Nah it's when no risk is foreseen and priced in then suddenly appears is when things go pear shaped. Gfc was so bad everyone's memory has it stamped, and are over cautious... which draws the cycle out as it takes longer to convert all the bears into bulls . . You can't even pay the Japanese to borrow and spend for eg.

But take the Pollyanna view: there is enough Wind and Sun around to power us all for ever. Why, look at SA - they even run Smelters on breezes and rooftop PV.

Oh, wait.....

http://www.macrobusiness.com.au/2016/10/aemo-failed-transmission-wind-fa...

It seems that changing an electrical grid system engineered for few, large, synchronous power sources, by introducing lotsa windmills (asynchronous) and PV (completely opaque to central generation management) has unbalanced an entire generation ecosystem.

Systemic Risk has been introduced. With obvious analogies to the Financial system.

Where's the Precautionary Principle when ya need it?

What could possibly go wrong? "Germany’s Spiegel Magazin reported this morning that the country’s top legislative body was able to reach a bi-partisan agreement that hopes to allow only zero-emission vehicles on EU roads in 14 years. For the resolution to be instituted across Europe, it will have to be approved by the EU. But according to Forbes, “German regulations traditionally have shaped EU and UNECE regulations.”

Greens party lawmaker Oliver Krischer told Spiegel, “If the Paris agreement to curb climate-warming emissions is to be taken seriously, no new combustion engine cars should be allowed on roads after 2030.”

For the layman: a 3 year old child breaks all the toys of other children and his own. Parents of the 1st child decide all the other children must pay for all the broken toys and their child is not to be punished. This goes on for several years and after a while the parents wonder 1) why the behaviour of their own child is not improving 2) why all the other children are unhappy. Now the parents are far too scared to upset their own child to stop the madness.
Anyone with me ?

The reservation I have about both sides of the debate is that they are all just opinion (and opinions are like arseholes - every one has one) - with little real hard unequivocal evidence. Economics ( like all the social sciences) is a pseudo science at best and quackery at worst ( perhaps there is sense of jealously within in the social sciences of the true sciences such as physics and maths). In the end it seems you have to take everything they say with a big grain of salt - it seems the only way to keep your sanity.

not all opinions are equal..!!
I dont think ur comment is valid , without inquiring into how much knowledge people have and how much focus they may have applied.... in reaching their views/opinions.

Take Ray Dalio as an example.... He has 1500 people doing research...crunching Data.... What he says is a considered view.... AND he is NOT an academic.. He trades with his knowledge..

When it comes to mkts... ( which I suppose is economics applied. ) there is no such thing as "unequivocal".
Of course ... take what everyone says with a pinch of salt..... But if u put your money on the line , you have to have a good feel about your own knowledge .... and use others views , particularly if they disagree, to test and alter your own view...

ie.. we all have to come to our own understanding ... else we are sheep ..who have to take everything with a pinch of salt... and make very few decisions.. or we can simply have an implicit belief in something ( which I think can be dangerous ) eg.. " real Estate always goes up "

Rubbish - you make an assumption that that economic theory is actually real - it is like much of the social sciences - an artificial construct - if you remove " economic theory" the world would still continue - you remove gravity and see what happens. You assume people's "knowledge" actually counts for something in the social sciences - it doesn't , much of it can not be proved with any sense of certainty ( I doubt it would meet the 40/70 rule).

Number crunching in social sciences - using a hard science to justify a soft science - sounds a little insecure to me.

badR

I'm not making any assumptions... I'm not even talking about economic theories....
You were going on about opinions... and my response was to that.
I'm not arguing that economics is a hard science..??

Not sure what your point is.... gravity existed before we understood it ... before we called it gravity.. called it "science".
Transactions and trade and self interest existed long before we understood things in aggregate and called that field of knowledge "economic theory".

Do u invest your money..?? If so... I'm curious to know your rationale for making decisions...?? Do u use unequivocal science..??

I have found economic principles to be really useful in both business and investment....
I have found that an understanding of Monetary systems is even more useful.

I don't care if this stuff is considered science or not science...

and yes..... whatever field of study.... knowledge counts for something...as far as I know.. :)

I think I get what u are saying thou.... and kinda agree but disagree as well..

U might be interested in this article.... which goes on about a certain kind of people within, whatever the field of study, that are the cause of grief. and the corruption of first principles and knowledge... etc.
http://pc.blogspot.co.nz/2016/10/the-intellectual-yet-idiot.html

I think there's an incorrect assumption in jm's article. Several times he uses the words "error" and "mistakes". Can it be true that we are in the middle of another "error", that the financial elites are stupid and incompetent? Or is it that they know exactly what they are doing, i.e. waging class warfare? The incompetence error explains little, while the obvious intentionality of the elite's actions explains everything. Indeed, how long do we have to endure the results of their oppressive monetary "policy" before we acknowledge what they're up to? How many more bubbles and crises and recessions? What else do we expect from a debt-based money system?

Meanwhile, the herald had an article on the debt "warning", global debt stands around $225tr. What they didn't say is that the global money supply is estimated at less than $100tr, that the debt cannot and will not be paid. Put that together with what jm outlines in his article and it's patent that the entire show is preposterous.