To be an economist with integrity means having to say things that people don’t want to hear and especially to say things that the regime does not want to hear. It takes more than technical knowledge to be a good economist. It takes moral courage, and that is in even shorter supply than economic logic.
~ Llewellyn H. Rockwell Jr., “Economics and Moral Courage“
It can quite reasonably be said that at no point in economic history has technical knowledge ever been less relevant to being a good economist than today. Mainstream economics is in complete disarray. In the UK, economists are reeling in shock as their predicted third-quarter recovery has failed to appear, while in the USA, Nobel-winning Keynesians are first calculating the need for a $600 billion stimulus, then turning around and declaring a $787 billion stimulus is insufficient. A report from the Kiel Institute entitled The Financial Crisis and the Systemic Failure of Academic Economics has concluded that a “reconsideration” of the “basic premises” of standard macro and finance models is required due to their inability “to provide any insight into ongoing events." And even the venerable Economist has been wondering aloud where economics went wrong.
Garbage in, garbage out. The truth that is known to every computer programmer is finally beginning to penetrate the economic elite. Keynesian models have failed. Monetarist models have failed. Neo-Keynesian and Post-Keynesian models have failed. The only known concepts that have not completely failed – yet – are the financial instability hypothesis of Hyman Minsky, Richard Koo’s concept of a balance-sheet recession, and the credit-focused cycle theory of the Austrian School.
In “Economics and Moral Courage," Lew Rockwell told the story of an extraordinary man with remarkable moral courage, Ludwig von Mises. Instead of imitating the greater part of his profession and drifting with the Keynesian tide of the times, Mises rejected what he knew to be false and devoted his formidable gifts to determining logical economic truth. He did so at great personal and professional cost, and yet, as Rockwell describes, his ideas and his influence have lived on well beyond the grave, while those who appeared to have professionally eclipsed him disappeared into obscurity. His persistent dedication to the truth did not reward him with tenure, but with the much more precious prize of intellectual immortality.
At present, the mainstream consensus is that the structural flaws in the global economy that caused the financial crisis 2007 have been solved, that the recession is over, and that the recovery has already begun. While a few famous economists are hedging their public bets by speaking incoherently of a jobless recovery, virtually no one is willing to assert that not only are there no jobs being created, there is in fact no economic recovery occurring! As Mises himself argued in Economic Calculation in the Socialist Commonwealth, money cannot reasonably be utilized as a criterion of national wealth and income, which means that GDP is an intrinsically unreliable measure of domestic economic activity. The fact that the National Bureau of Economic Research refuses to declare the beginning or end of recessions on the sole basis of GDP would be sufficient evidence that positive GDP growth is not equivalent to economic recovery even if it were not the case that both growth and contraction have been reported in four out of the last six quarters for which the full range of Preliminary, Advanced, Final, Revised, and Second Revised reports are available.
And there are many reasons to believe that the mainstream economists are just as wrong in declaring the recession to be over as they were previously in declaring that it did not exist in the first place. There has been no substantive change in the system anywhere in the world, only an increase in the dosage of the same two poisons that endangered the global economy in the first place. But more government intervention and more debt cannot solve a problem that was created by too much government intervention and too much debt. The zero-interest monetary policies and the massive stimulus plans that governments are enacting around the world may disguise the true nature of the crisis for another quarter or three, but they will only exacerbate it in the end.
In writing The Return of the Great Depression, I was not only informed by the works of Ludwig von Mises, I was also inspired by his example. I know that if I am wrong and the global economy is actually in the process of a return to shining health and wealth, I will look like a fool and an economic illiterate. But, if I have learned anything from Mises and the courageous example of other great men such as Henry Hazlitt and Friedrich von Hayek, it is that one must speak the truth as best one understands it even at the risk of one’s perceived credibility.
So, if you are interested in economic or financial matters, I invite you to consider taking a look at The Return of the Great Depression, which is being published today on the 80th anniversary of Black Tuesday. My publisher, WND Books, is committed to making it available as widely as possible so they are offering the ebook for only $1.99 at Scribd and on Kindle; the hardcover is now available at WorldNetDaily, Amazon, Borders, Barnes & Noble and many local bookstores. You might also like to consider visiting the dedicated book site at returnofthegreatdepression.com, as it contains reviews, historical columns related to the development of the crisis dating back to 2002, as well as a daily economics blog with up-to-date analysis of GDP variances, bank failure rates, and other statistical matters.
If I am not an economic illiterate and we are still in the early stages of an economic event that is developing at a larger order of magnitude than anyone presently contemplates, this will have tremendous implications for all of our futures. I certainly hope that I am incorrect and the Great Depression 2.0 is not in the process of unfolding, but unfortunately, I have yet to see any evidence suggesting otherwise that is not based on the very same assumptions and models that caused mainstream economists to fail to foresee the current recession. We cannot know the future, but thanks in great part to Ludwig von Mises, we can anticipate the all-too-familiar patterns of conventional human action.