Henri Cartier-Bresson Trafalgar Square on the Day of the Coronation of George VI 1937
The Jackson Hole gathering of central bankers and other economics big shots is on again. They all still like themselves very much. Apart from a pesky inflation problem that none of them can get a grip on, they publicly maintain that they’re doing great, and they’re saving the planet (doing God’s work is already taken).
But the inflation problem lies in the fact that they don’t know what inflation is, and they’re just as knowledgeable when it comes to all other issues. They get sent tons of numbers and stats, and then compare these to their economic models. They don’t understand economics, and they’re not interested in trying to understand it. All they want is for the numbers to fit the models, and if they don’t, get different numbers.
Meanwhile, they continue to make the most outrageous claims. Bank of England Governor Mark Carney said in early July that “We have fixed the issues that caused the last crisis.” What do you say to that? Do you take him on a tour of Britain? Or do you just let him rot?
Fed head Janet Yellen a few days earlier had proclaimed that “[US] Banks are ‘very much stronger’, and another financial crisis is not likely ‘in our lifetime’. “ While we wish her a long and healthy life for many years to come, we must realize that we have to pick one: it has to be either a long life, or no crisis in her lifetime.
Just a few days ago, ECB President Mario Draghi somehow managed to squeeze through his windpipe that “QE has made economies more resilient”. Even though everybody -well, everybody who’s not in Jackson Hole- knows that QE has blown huge bubbles in lots of asset classes and caused severe damage to savings and pensions, problems that will reverberate through economies for a long time and rip entire societies apart.
But they really seem to believe what they say, all of them. Which is perhaps the biggest problem of all. That is, either they know better and lie straight-faced or they are blind to what they’re doing. Which might be caused by the fact that they are completely blind to what goes on in their countries and societies, and focus exclusively on banking systems. But that’s not where financial crises reside, or at least not only there.
How do we know? Easy. Try this on for size.
78% of Americans Live Paycheck To Paycheck
No matter how much you earn, getting by is still a struggle for most people these days. 78% of full-time workers said they live paycheck to paycheck, up from 75% last year, according to a recent report from CareerBuilder. Overall, 71% of all U.S. workers said they’re now in debt, up from 68% a year ago, CareerBuilder said. While 46% said their debt is manageable, 56% said they were in over their heads. About 56% also save $100 or less each month, according to CareerBuilder.
Haven’t seen anything as ironic in a long time as having a company called CareerBuilder report on this. But more importantly, when almost 4 out of 5 people live paycheck to paycheck, that is a financial crisis right there. Just perhaps not according to the models popular in Jackson Hole. What do they know about that kind of life, anyway? So why would they care to model it?
Yellen’s Fed proudly report almost full employment -even if they felt forced to abandon their own models of it. But what does full employment constitute, what does it mean, when all those jobs don’t allow for people to live without fear of the next repair bill, the next hospital visit, their children’s education?
What does it mean when banks are profitable again and pay out huge bonuses while at the same time millions work two jobs and still can’t make ends meet? How is that not a -financial- crisis? In the economists’ models, all those jobs must lead to scarcity in the labor market, and thus rising wages. And then inflation, by which they mean rising prices. But the models fail, time and time again.
