Sign in
Become a MarketWatch member today
Paul B. Farrell Archives | Email alerts
Aug. 30, 2011, 12:01 a.m. EDT
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) "” Yes, a New Economics. With new rules. Why? Classical economics is fatally flawed. So investors better learn the new rules that will win in the New Economy. Delay, deny, you'll lose.
After the coming global collapse "” the big wake-up call "” classical economics will be exposed as a fraud sabotaging investors, destroying America.
President Obama said he would unveil proposals next week aimed at spurring job growth in part through infrastructure improvements. He also named Princeton economist Alan Krueger as head of the Council of Economic Advisers.
Yes, new rules. Why? Because everything you know about economics is wrong. Everything. The old economics is a rigged game in a Wall Street casino. The cards are stacked in favor of the banks and their co-conspirators, political lobbyists, corporate CEOs and the Super Rich. The house always wins. You always lose. Worse, America is losing.
Here's why: All classical economic ideas derive from one central idea. Not a scientific theory, merely an unproven hypothesis. Worse, all economic conclusions are based on this illusion, a fantasy, myth, wishful thinking. Consequently, all economic conclusions are speculations.
This central hypothesis of today's economists "” from Ben Bernanke's Fed staff, economists in the World Bank, IMF, CBO and White House economic advisers, to economists at Wall Street banks, think tank and academic economists "” is the unquestioned acceptance of the dogma of "Eternal Growth."
Get it? All economic thought evolves from one unproven and fatally flawed hypothesis: The unscientific assumption that the global economy will continue growing indefinitely "¦ that the world's economies will be able support global population growth indefinitely "¦ and that all necessary commodities and essential natural resources will be available indefinitely to sustain the world's relentless economic and demographic growth.
Unfortunately, that's impossible. Absurd. Irrational. Unscientific. Just plain wrong. So are all the economic conclusions that follow from that hypothesis. Worse, most economists still refuse to see that their own system is not only fatally flawed, it proves the need for a New No-Growth Economics.
Here's the manifesto for the New No-Growth Economics: Twenty rules, trends and principles emerging after Wall Street and the American economy get hit by another, bigger meltdown, totally predictable in today's self-destructive political arena.
Warning: Even with another market meltdown, taxpayers may still get duped into bailing out the banks again. Eventually, however, they will wise up and revolt against this corrupt system.
Why shouldn't you trust economists anymore? After the 2008 meltdown it became painfully obvious that America's 15,000 economists were clueless (as were more than 50,000 portfolio managers and all government leaders in both parties). Not just because they're paid mercenaries. The real problem is their brains are short-term thinkers. They really cannot see the future. So they simply project old data. They're not future-thinkers. They missed the last crash. They'll miss the next one.
Seriously, we know a mere handful of America's best and brightest economic leaders, including the best and the brightest economists "” less than 0.01% "” predicted the 2008 meltdown that essentially bankrupted America.
But even worse, since 2008 they've done nothing to protect us against a new crash. Quite the opposite: The same banks and their economists are working feverishly with lobbyists, politicians and the Super Rich to kill all reforms.
So a few new meltdowns are inevitable, until our fatally flawed economics finally enters the 21st century and understands the rules of New No-Growth Economics are essential to our survival. Here's how the 20 rules will work:
Brutal as it sounds, we're "eating our young." Earth's resources can support about five billion people. We already have 7 billion. And heading for 10 billion by 2050. Demand (population growth) is rapidly outstripping supply (commodity/resources). This creates an inherent conflict that's certain to trigger disastrous world wars, starvation, poverty, pandemics, and more. In short, using their own basic demand/supply equation, classical economics is a failure.
If we do nothing: Population growth rages out-of-control. We continue using and wasting commodities and nonrenewable resources at a rate equivalent to six Earths. That conflict will trigger multiple catastrophic events, kill economics, trigger a global wake-up call
Earth has too many people. Like having huge debt. Disasters will soon end denial.
Here's the new third rail for politicians. In "The Last Taboo," Mother Jones columnist Julia Whitty asked: "What unites the Vatican, lefties, conservatives and scientists in a conspiracy of silence? Population." But soon, this massive "conspiracy of denial" will be shocked awake by economic, political and military catastrophes that threaten the planet and human existence.
What will tip the economy and markets? What will shock the collective conscience of all peoples? Get across the message that Eternal Growth is a fantasy: Global pandemics? Terrorist nuclear wars? Poverty, starvation? Or some other unpredictable Black Swan that we deny, we refuse to prepare for? We don't know what will shock the world, finally bankrupt America and wake us up. But we do know that it's dead ahead.
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The... Expand
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology. Collapse
Portfolio Insights by Brett Arends
Ten reasons to look on the bright side
Ways and Means
How to cut costs when coping with disaster
Tech Tales
Seismic shifts rocking the tech business
Writing on the Wall
Follow Buffett into B. of A. at your own risk
Behavioral Economics
A 20-rule manifesto for No-Growth Economics
On Canada
In pipeline debate, jobs trump environment
Speculations
Don't ditch those Treasurys yet
More buy signals in place
Read Full Article »