RIP Chicago School of Economics
By John Amato Saturday Dec 27, 2008 3:00pmI always enjoy reading a good repudiation of Milton Friedman's Chicago School of Economics:
Some time ago, I asked if “Milton Friedman was the next economist whose once lauded reputation may soon slide ?”
Turns out it happened much quicker than expected. A long Bloomberg piece, Friedman Would Be Roiled as Chicago Disciples Rue Repudiation, discusses the tarnishment of the Chicago school of thought...read on
The Saturday FOX News stock shows are full of Milton's disciples. Is it any wonder that our economy is in the shitter?
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Naturally, if you're looking at it from a middle class point of view, or from a humanitarian point of view, or even from a simple patriotic point of view-- it looks like a failure. But it was never meant to improve *your* life, or spread democracy, or increase wealth and prosperity.
It was meant to be used as a tool of empire, to undermine democracy, and to consolidate wealth and power into a very few hands. It's accomplished those tasks very well.
exactly. That's a great argument. I'm always surprised people don't see it that way - denial?
and to think the Chicago School is in retreat?
No way.
because of the CDOs gone bust we (meaning our Fat Cat Wall Street Crooks) sold them. There have also been loads of Credit Default Swaps. The banks sold them because with each swap they could synthesize another phony mezzanine CDO.
Real estate prices fell and the system imploded.
You hear it said that vast trillions have been 'lost'. The money wasn't lost, it changed hands.
There is a group of people and I predict it is a small group that saw it coming and has been gaming this system thoroughly.
Those are the ones who are making off with the most loot. Trillions. Trillions that to others have been lost and there could be a direct traceable exchange. But in order to pay off Credit Default Swaps held by people who did not even own the underlying security, there are trillions being created out of thin air. That is the money the Central Bankers are busy printing.
The Financiers themselves made vast fortunes, they lost them trying to pay their gambling debts, now they have them back. For the most part.
They were the bookies in a vast book making scheme and they bet badly, now we bailed them out.
They knew we (meaning our corrupt Congress) would, so they didn't care how they bet. We are the dummies.
WHO PLACED THOSE BIGGEST BETS. That is what I want to know.
Who bought the biggest Credit Default Swaps. Who are the WELFARE KINGS.
Who are the unseen GAMBLERS we are paying off?
Who are the ultimate recipients of all that money the Central Bankers are printing?
I'd imagine it's the very owners of that Central Bank who have made off with the most money. Remember, the Central Bank is first and foremost a PRIVATE bank. It's owners are anonymous by federal law. That is quite handy for them isn't it? They can rape the country blind, steal billions or trillions and walk away laughing at us poor stupid sheep.
I would think that the top two idiotic premises that have led to economic chaos were 1) the moronic idea that deficits don't matter - which by the way was embraced by the American public too, who went from having net savings ten years ago to having every credit card maxed out now. and 2) the idea that you could sustain a healthy economy without producing anything - outsourcing all the good jobs to India and China.
Running up a massive debt while simultaneously relinquishing the wherewithal to repay said debt - how could anyone have ever thought that to be workable?
A - As much as can be entered in a central bank computer terminal.
The derivatives market is between 531 trillion and one quadrillion dollars.
Bloomberg here says $683 trillion.
The good news is that not all of those derivatives will go bust. After all it is more than ten times the worlds GDP.
The bad news is that it may be $20 trillion before Bernanke is through printing money. I have seen suggestions that even that may be an understatement.
Here is my previous thinking on lots of money.
It's all been one big ponzi scheme, and now the bottom of the pyramid isn't contributing (that's you/me), so it'll crash hard. That was the "Ownership Society", buy into our plan, on credit. Those at the top got theirs and they're out. And you still owe them for your credit cards and mortgages. It's win-win for them, and lose-lose for you/me.
I predict 2009 will be one of the worst (financially) years ever!!
Here here! I'll 2nd that. And the "liberal" MSM media will be blaming it all on Obama and the democrats - 24/7, gauranteed!
The first three comments all get an A+: move to the front of the class.
(it's the teacher in me)
Really just pull numbers out of their asses to "prove" their theories work. It's like weathermen. Always right. Give a percentage and always have an excuse if your prediction was wrong. Debts and deficits are nothing more than pretend world. We might as well just use Monopoly money.
It strikes me that people of a certain character just LOVE to operate in arenas where there are no rules, no structure, no oversight by anyone else, and these people have had an iron grip on our country's doings for decades.
There's been a trickle-down effect into GW's presidency, where he set up agencies and projects with absolutely no oversight or regulations. He did it for his friends -- will we ever forget Dick Cheney's secret meetings with energy bigwigs who developed the Bush energy policy? All planned and then carried out in secret. I've absolutely no doubt that Cheney told them of their plans to invade Iraq and confiscate their oil operations and promised the energy giants that their piece of the pie would be extremely rich.
Let's face it: some, though not all, human beings prefer being "lawless" and they can no longer be allowed to set up the structures where they benefit from no law, no oversight, no stop or go signs. Might as well rescind all traffic laws and directions, and expect driving to improve. And that's true in economics as well as elsewhere.
I hope it burns in Hell!
I'm sure the people of Central and south America would agree.
Don't forget Poland, Russia, South Africa and the "Asian Tigers", Japan, South Korea etc.
The Nobel Prize for Economics used to belong to the Chicago School. When they awarded it to Paul Krugman, the demise of the Chicago School became official.
there is a "memorial" prize for economics. The economists made up their own award to give themselves some sort of validity.
Nobel already had enough of an issue with mathematicians as it was, he would be massive pissed if he found out that "frustrated mathematicians" (which is what most economists are) had used his name to justify their pseudo-science. At least mathematics is a real science, but they had the decency of respecting Nobel's wishes when establishing their top yearly award.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating".
[Thomas Jefferson]
Did you get a book of quotations for Xmas? I like this one. A+.
Scholastically speaking, I'm not very educated, though I do like too listen and then attempt to connect the dots. :-) Thanks
Yeah, well, a diploma is just a piece of paper, proving you paid some dues (like I did, but...) It does not replace common sense, or wisdom. Always be proud of common sense!! Look at the eggheads running the country into the dirt.
.. when I told them, "Your education is YOUR responsibility. I can help you, but YOU must do the learning."
You woulda loved me. I totally got off on exploring stuff.
I believe it was Mayer Rothschild who said: Give me control of a nations money and I care not who makes the laws. I'm paraphrasing but that's pretty close to the quote.
Man, I just love reading T.J.
As did Marxism. Until it didn't. I have yet to hear a devoted Marxist ideologue abandon it just because it didn't work well before.
Deficits don't matter... until they do.
Ever tried telling your banker, "Deficits don't matter: give me more money?"
Well, the Soviet Union lasted 80 years. Chicago School economics only took about 28 before it brought the world economy to its knees.
And then we can start talking...
A One-Word Explanation? Try 'Greed'
Not just greed - the kind that kills and walks a path like Sutek the Destroyer -- EGREGIOUS RAPACIOUS GREED.
You know - the re-Thuglic GOD.
*
As Janeanne Garafalo once said ~ "What's going on at the University of Chicago? Must be something in the water."
I'm glad to see the school is going to die, basically, of monumental international EMBARRASSMENT!
*
as previous commenters have noted - it is an embarrassment to you.
To its practitioners - it has been wildly successful and profitable.
Don't view the results in your eyes, because to the policymakers, you don't matter. View it in THEIR eyes.
They made a killing off it, and for the most part, they will get away with it, while you and I and our succeeding generations will be enslaved by this crushing debt.
When Naomi Klein came out with her book last summer, many couldn't believe what they were reading. Now that reality has set in, what are we going to do about it. Blather away on blogs, or send a clear message to Barrack Obama saying we're mad as hell and we're not going to take it anymore?
When you come right down to it Barrack has only one of two choices. Do the right thing, and take the power of money creation away from the Federal Reserve and return it to the people through the US Treasury, or risk not finishing your first term as the agent of change. My bet is on maintaining the status quo.
When I read The Shock Doctrine it really opened my eyes. Practically ever single page made my jaw drop with shock and horror at the travesties that were done to millions upon millions of people the world over. The Chicago School ruled the world. They got their people into influential posts everywhere. The World Bank and I.M.F. were riddled with them. For countries trying to deal with economic de-stability it was a double whammy. The IMF would only lend them money if they would institute massive budget cuts. Of course, those budget cuts hurt the poor and needy the most.
The greed and avarice necessary to rape country after country is shocking.
I would highly recommend reading The Shock Doctrine.
http://www.brasschecktv.com/page/512.html
Where all the money goes. Two sets of books
The government take over of the US economy
This video was originally produced on January 8, 2000 by Walter Burien.
The government, at all levels, is running a very simple financial con game.
If something produces revenue - like bridges, highways, ports, or successful investments etc - that revenue goes into off budget slush funds.
If it costs money, it's charged to the public via taxes.
This is being done at all levels of government - including state, county, city, and school districts.
The total "off budget" funds held by the various governments amount to trillions of dollars.
The real accounting is contained in what's called Comprehensive Annual Financial Reports (CAFR) which are not only not made available to the public, their very existence is never mentioned by the news media.
Why?
Trillions of dollars pays for a lot of corruption.Every time an elected official stands before you and tells you the government is out of money and they have to raise taxes, he or she is lying through their teeth.
www.brasschecktv.com/page/512.html
Start from scratch and look at the names that pop up...
After the war, a number of banks were chartered by the states under the Articles of Confederation, including The Bank of New York a.k.a. The Bank of New York Mellon Corporation and The Bank of Massachusetts, both of which were chartered in 1784.
The Bank of New York was founded on June 9, 1784, making it the oldest bank in the United States
The bank opened for business at the Walton House in Lower Manhattan only a few months after the departure of British troops from American soil. It opened with a capitalization of $500,000
The Bank of Massachusetts, founded in 1784 in Boston, Massachusetts, was the second-oldest bank in the United States. It is a predecessor to the modern Bank of America (merged 2005), through
Bank of Boston(1903),BankBoston(1996) andFleetBoston Financial(1999).In 2008, due to the financial crisis, and to encourage businesses and high-net-worth individuals to keep their cash in the largest banks (rather than spreading it out), Congress temporarily increased the insurance limit to $250,000.
Bankers felt the real problem was that the United States was the last major country without a central bank, which might provide stability and emergency credit in times of financial crisis. While segments of the financial community were worried about the power that had accrued to JP Morgan and other 'financiers', most were more concerned about the general frailty of a vast, decentralized banking system that could not regulate itself without the extraordinary interventions of one old man.
Panic of 1907 Alarms Bankers
Early in 1907, New York Times Annual Financial Review published Paul Warburg's (a partner of Kuhn, Loeb and Co.) first official reform plan, entitled "A Plan for a Modified Central Bank,"
Jacob Schiff, the chief executive officer of Kuhn, Loeb and Co., in a speech to the New York Chamber of Commerce, warned that "unless we have a central bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history." "The Panic of 1907" hit full stride in October.
Morgan Stanley (NYSE: MS) is a global financial services provider headquartered in New York City, New York, United States. The corporation, formed by J.P. Morgan & Co. employees Henry S. Morgan (grandson of J.P. Morgan), Harold Stanley and others, came into existence on September 16, 1935.
On September 21, 2008, it was reported that the Federal Reserve allowed Morgan Stanley to change its status from investment bank to bank holding company. On September 29, 2008, it was announced that Mitsubishi UFJ Financial Group, Japan's largest bank, will take a stake of $9 billion in Morgan Stanley equity
Banks are not allowed to go bankrupt in the United States. Accounts are generally insured up to $100,000 per individual per bank by the Federal Deposit Insurance Corporation. Banks that are in danger of failing are either taken over by the Federal Deposit Insurance Corporation, administered temporarily and eventually sold off or merged with other banks. A List of banks seized by regulators and the assuming institutions can be obtained at Federal Deposit Insurance Corp - Failed Bank list
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC).
The OTS took the action due to to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008).The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which re-opened the bank the next day.
By Saying Yes, WaMu Built Empire on Shaky Loans > http://www.nytimes.com/2008/12/28/business/28...
Lots and lots of people always knew that Friedman was full of shit, but it didn't matter. Any economic theory that rationalizes the financial schemes of Wall Street (no matter how irrational) is immediately canonized in the temples of Mammon. Heretics are left outside to wail and gnash their teeth in utter darkness.
Very good. Especially that Mammon part.
I've been a fan of M. Friedman and a libertarian for the last 18+ years and all that I've seen during that time is the size and scope of government grow under every administration. So if the current financial problems are a result of the implementation of the 'Chicago School' of economics what did I miss? I follow current events as a hobby/obsession and I sure don't remember any major shrinking of our federal government. Can someone tell me when that happened? Our national debt has done nothing but skyrocketed in my lifetime. Also there's a big difference between deregulation and not implementing the rule of law. The Bush administration in particular has not been investigating/prosecuting white collar crimes. Part of the blame for the current economic problems is old-fashoned fraud. We should be seeing hundreds/thousands of criminal charges being filed against brokers, bond-rating agencies, etc. But because of the bailout most of these criminals will get off Scott-free. Also the bail-out is only delaying the inevedible and worsening it. Instead of having a mini-recession/depression now we're going to have a much worse one later. You can't create trillions of dollars out of nothing and think that there will be no consequences.
You missed that no matter how much libertarians try to antrophormize markets, systems are not self regulating on their own, people are greedy, and that there is no such thing as an "invisible" hand.
Deal with it, evolve... I am not in the mood to go through another round of this hubris.
If only Strauss, Rand, et al had decided to stay at their respective homes.
was destroyed for deregulation. You missed it. Lawful barriers between investment banking and stock analyis being removed (1995) caused dot.com implosion. Lawful barriers between investment banking and commercial banking were removed by Gramm-Leach-Bliley Act causing housing bubble. Lawful barriers in commodities trading resulting in deregulated off the books futures trading were removed by Commodities Modernization Act of 2000 resulting in speculative commodities bubble and resulting collapse.
Size of government increased with privatization of govt functions through privatization schemes resulted in more expensive and bigger government (aka blackwater and multitudes of contractors).
Economics is a form of mathematics and nothing more. The idea that we should run business, government, and society as a whole based on economics never added up. Now we have to look for another structure for the business of business and life and as The Great It is my witness I think what we will see next will be a religious based economy and I have neither the imagination or the stomach to think how that is going to look.
will occur when friedmanite theories are buried with the dead quack of economics. The friedmanite minions will vainly try to keep the failure going but protectionism barriers are being put up all around the world as we speak...US is the slow ones to realize their folly because they initiated it.
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