Elon Musk: "People get confused sometimes they think an economy is money , But money is a database for the exchange of goods and services and for time-shifting the exchange of goods and services. Money is a database. Money does not have power in and of itself

You can run the thought experiment: if you are shipwrecked on a remote island and you have a trillion dollars in a Swiss bank account, "it's worthless"

You’d rather have a can of soup. You can have all the Bitcoin in the world and you’re still going to starve

The actual economy is goods and services”


https://x.com/XFreeze/status/2011807966630990247

Prof. Steve Keen explains why Neoclassical economists are ruining the economy, while claiming to be properly managing it. (They claim "TINA - there is no alternative" you see...):

https://profstevekeen.substack.com/p/equilibrium-is-for-dummies?utm_source=post-...

Equilibrium (is) for Dummies

In recent months, there has been a resurgence of Neoclassical economists tweeting about equilibrium, and championing their approach to economics over that of heterodox economists like me. This includes both established academics, and new graduates from undergraduate degrees.

Here’s the “Howard Marks Presidential Professor of Economics at the University of Pennsylvania”, Jesus Fernandez-Villaverde, asserting that anyone who doesn’t know what an equilibrium is—as defined by Neoclassical economics—should be ignored:

(graphs and images in this article are all available at above link)

University of Warwick Professor of Economics Roger Farmer chimed in as well, asserting that “An economic model requires an EQUILIBRIUM CONCEPT”:

At the other end of the economics pecking order, a recent graduate economist opined that “Economics is possible as a scientific study only if the economy has a prevailing tendency to move toward equilibrium”

Equilibrium, equilibrium, equilibrium…

I wondered why this was happening now, and then I realized that we are approaching the 20th anniversary of the Global Financial Crisis. It will soon be 20 years since the most recent spectacular failure of Neoclassical economics—the failure to anticipate the biggest economic crisis since the Great Depression.

Far from indicating where the economy was actually headed—into a severe economic downturn—their models told them that a great year lay ahead. This was Bernanke’s Report to Congress on July 18, 2007—just 3 weeks before the crisis began on August 9, 2027:

"The U.S. economy seems likely to continue to expand at a moderate pace in the second half of 2007 and in 2008… forecasts for the increase in real GDP [are] 2¼ percent to 2½ percent over the four quarters of 2007 and 2½ percent to 2¾ percent in 2008". (Bernanke 2007)

This spectacularly wrong prediction—the rate of economic growth in 2008 was not 2.75 percent but minus 2.5 percent, and the recession he didn’t see coming was the longest in US post-WWII history—was not unique to Bernanke. Virtually all Neoclassical economists were caught completely by surprise by the crisis (Robert Shiller was about the only exception), and for the next decade many posts by Neoclassical economics wondered whether their “Dynamic Stochastic General Equilibrium” models were fit for purpose.

But 20 years later, they’re back selling equilibrium analysis as if the GFC didn’t happen. Their students are falling for it, because they were infants when the GFC hit. They don’t have the experience or the memory to realise that this approach has been tested and failed, and they fall for the apparent but illusory sophistication of the mathematics.

Their predecessors did the same thing after The Great Depression: 20 years after it happened, they revived the equilibrium approach to economics that had failed them in the 1920s. This is despite the most famous Neoclassical economist of the time, Irving Fisher, concluding that equilibrium thinking was the problem:

"Theoretically there may be—in fact, at most times there must be—over- or under-production, over- or under-consumption, over- or under spending, over- or under-saving, over- or under-investment, and over or under everything else. It is as absurd to assume that, for any long period of time, the variables in the economic organization, or any part of them, will stay put, in perfect equilibrium, as to assume that the Atlantic Ocean can ever be without a wave". (Fisher 1933)

Fisher’s criticisms of equilibrium economic analysis in the 1930s were ignored, and ironically, the definition of equilibrium that Fernandez-Villaverde asserts you have to know, and understand, and use today to be worth taking seriously on economics, is Fisher’s definition, which Fisher rejected because it led him into catastrophe in the Great Crash of 1929!

Similarly, Farmer champions John Hicks’s definition of economic dynamics as a sequence of equilibria over time:

"I organize all of my thinking around the concept of *temporary equilibrium theory*, an idea that dates to Hicks’ book ‘Value and Capital’ (and perhaps earlier)".

Clearly, Farmer is not aware that Hicks also rejected the use of equilibrium models in economics. Writing in the early 1980s, Hicks said, in reference to the first major post-World War economic crisis, that:

"We know that in 1975 the system was not in equilibrium. There were plans which failed to be carried through as intended; there were surprises. We have to suppose that … It is sufficient to treat the economy … as if it were in equilibrium… we are accustomed to permitting ourselves this way out. But it is dangerous. Though there may well have been some periods of history, some “years,” for which it is quite acceptable, it is just at the turning points, at the most interesting “years,” where it is hardest to accept it." (Hicks 1981)

.......

Full article available at top link.

Trump is really getting himself into hot water.

He's alienated mainstream economists by wanting to get rid of the reserve bank's independence.

And now he's alienated all his allies by wanting to muscle in on Greenland's sovereignty, against international law. 

With the former, he's on stronger ground: the central bank should not be tasked with controlling interest rates, inflation and employment, because these ought to be government responsibilities to achieve the general welfare.

Re the latter: Trump's BOP (Gaza) proposal is evidently an effort to bypass the UN which - with the UNSC veto - is unable to act on ....anything much...

So now the world is working out how to deal with a global emperor....