Yeah, compared to Dubya--my pick for the worst President of all time, move over James Buchanan--a LOT of people get an A+ for a lot of things. That being said, it's nice to post a headline from Stiglitz that compliments the current administration's economic policies; but, of course it
is all relative, right?
And, for all of you folks that wrongfully dismiss Zero Hedge as a libertarian looney bin--to which I respond that the blog breaks more pertinent economic news than just about anywhere and "Tyler Durden" is, in fact, a pseudonym for no less than 40 different writers, with 40 different points of view that run the width of the entire spectrum of political ideology--here's a lead story from Zero Hedge from last night featuring Joe Stiglitz, my pick for the leading voice on the planet when it comes to progressive economic thought.
Joe Stiglitz Slaps The Invisible Hand
Submitted by Tyler Durden on 03/07/2010 18:08 -0500
...Joe Stiglitz once again takes center stage, this time in this appearance at the Commenwealth Club, in which he discusses various things (among which are his grading of Obama, which compared to Dubya' administration, he gives an A+, and since this is roughly in line with where the rating agencies rate the US, it should raise all sorts of red flags). One of the key topics of discussion is his claim that efficient markets are a myth, and that Adam Smith's "invisible hand" appears as such because it was never truly there. Joe's bashing of economists with their hollow goal-seeked theories is one thing we can certainly agree with, and as to the market being propped by visible hands and other means, well, that is beyond the scope of this post (unless Chairman Shalom decides to grace the comment stream with his presence).
From Stiglitz...
"The theories that said that markets work perfectly were all based on very simplistic models of perfect competition and perfect information. My own work we show that the reason that when there is asymmetric information, the reason that the invisible hand often seemed invisible, was that it wasn't there. And I don't think today anybody would claim that the pursuit of self-interest by bankers, which is sometimes called greed [don't tell the screenplay writer for Wall Street] has led to the well-being of all of society. And yet this was the central notion taught in almost every graduate school in the country."
Back to Zero Hedge...
So there you have it - generations of economists brought up on flawed concepts, eagerly and blindly perpetuating the flaws with each new generation (and charging $50k a year in the process). Yet the notable issue here is, assuming one agrees with Stiglitz, that markets are imperfect, and benefit banks, precisely because banks, due to their unprecedented size and trading monopoly, now have unparalleled asymmetric information access, thereby cementing their position as the most lucrative establishments in the history of capitalism, which coupled with a government's unwillingness to touch these firms for fear of an imaginary Nuclear Holocaust, will likely persist as such until the onset of the real WWIII.
Once again we repeat what we have been saying on so many occasions before: banks, and here we envision Goldman Sachs, are now monopolistic institutions, whose existence leads to nothing less than their own incremental growth until such time as all competition is stifled and the firm iteslef implodes like a supernova. In the meantime, the management team (and equityholders if they are lucky to be repeatedly bailed out any time the firm's VaR models end up being horrendously wrong, see the following interview by Kathryn Welling with Jim Rickards) gets richer and richer, even as market participants (doomed from the beginning incipient retail and institutional competitors to the monopolist), and taxpayers (unwitting providers of bailout capital) just get poorer and poorer, until the inevitable revolution restores the status quo...
Here's the link to full Stiglitz program, and (IMHO) it's an education unto itself!
And, the following link will take you to a clip from a BBC miniseries with Stiglitz, concerning the European economy: RIGHT HERE.
Have a great week everyone! Peace!