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Thread: weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

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    Default weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

    again trying to find and post potentially important economic topics that are politically neutral ... and again 'hiding behind' the assertion that the US FED is an independent body free of political influence thus still a suitable topic for Dollar Den discussion ...


    from

    (snip)Modern economics is analogous to the junk-science of 17th century medicine, and it serves a symbolic economy of phantom wealth and freedom.

    Back in the bad old days, the premier physicians of the age accepted and practiced the idea that the cure for illness was to bleed very ill patients, effectively weakening them. Countless patients who might have recovered if simply left "untreated" died as a result of the misguided "science of healing" of the era.

    Only with the advent of a true understanding of the nature of infection, the immune system and disease did the "folk" pseudo-science of bleeding pass from accepted medical practice.

    We are mired in a similar era of pseudo-science being accepted as actual science, i.e. as reflecting the underlying causal mechanisms of life and the universe, and that pseudo-science is called economics.

    As I have noted here many times, we are experiencing not just a standard-issue financial crisis but the failure of the entire pseudo-science edifice of modern conventional economics.

    The basis of pseudo-science is to mask unfounded, misguided and potentially disastrously dangerous ideas drawn from superstition and folk beliefs with the external trappings of real science. Thus economics presents itself as a "science" by invoking the symbolic magic of equations and quantification of data gathered from the real world.

    In esence, the "understanding" of junk-science is symbolic: the body is plagued with "humors" which can be drawn out via bleeding the patient, etc. The actual workings of the body, far beyond the conceptual reach of the folk/junk symbolic "science," are conceptualized symbolically via analogies: disease is "hot" or "cold," the body functions like a clock, etc.

    In the exact same fashion, conventional economics "understands" the workings of the economy symbolically, and its "cures" play out in its artificial construct, the symbolic economy.

    The symbolic economy is based on the cargo cult of "animal spirits", the magical "humors" which ignite the economic activity quantified by the pseudo-science. The witch-doctors at the Federal Reserve (the eminent, highly educated "expert" bleeders) have been busy painting radio dials on rocks for the past four years, hoping that their increasingly desperate pleas will magically reach the gods of "animal spirits."

    The true nature of conventional economic's symbolic economy is best illuminated by the cargo cult's increasing dependence on managing perceptions as the "tool" to influence financial behavior. In other words, the "physicians" rely on fundamentally symbolic actions to influence the symbolic economy.

    One of the folk beliefs of the cargo cult priesthood is that ruthless pursuit of self-interest to the point of worshipping self-serving pathology is the foundation of a "healthy economy." The end-state of such a quasi-religious faith is of course the purchase of the machinery of governance to the point that government at all levels is reduced to a battle between self-serving concentrations of wealth.

    The cargo cult priesthood's primary goal is to preserve the symbolic wealth created by the symbolic economy. One way to understand symbolic wealth is that it is phantom wealth created in symbolic form.

    Simply put, no economy can consume more than it generates in real surplus. Rather than face up to this constraint, the Fed creates phantom financial wealth which ends up in the hands of politically influential concentrations of wealth--in essence, a self-referential cycle of creating phantom wealth to serve the interests of current holders of phantom wealth.

    Everyone with phantom wealth is of course committed to maintaining the fiction that the symbolic wealth they "own" holds sway over real wealth, i.e. minerals, water, skilled labor, productive land, etc."(snip)


    For anyone unfamiliar, the 'cargo cult' referred to by author Charles Martin Smith is a reference to the reaction by native pacific islanders to GI's landing their cargo planes on their islands during WW2 ( for refueling ) and dispensing food, trinkets etc. to those natives. As soon as WW2 ended and the cargo planes stopped landing, the native pacific islanders began building wooden replicas of airplanes and began 'painting radio dials on rocks' in hopes of causing the cargo planes ( and the food and trinkets they dispensed ) to reappear.

    The author is arguably thus making a double analogy to US FED policy ... i.e. that just like the 17th century physicians, and just like the post-WW2 pacific islanders, the actions now being taken by the US FED are based on a gross lack of understanding of the actual science / real world forces behind the US and world economy. However, like the 17th century physicians, but mostly unlike the post-WW2 pacific islanders, US FED actions can indeed inflict additional harm to the 'patient' they were ostensibly trying to 'cure'.

    ~
    Last edited by Melonie; 09-25-2011 at 05:53 AM.

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    Default Re: weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

    Excellent, Melonie. My name is Dennis.... this is only my second post. I've been lurking here for awhile, as a customer, but I never had anything to contribute, but I do enjoy talking about investing & economics so hopefully you will let me join for a few posts here, in this thread at least. I do enjoy all the posts on this thread. I know people get intimidated by this topic but there seems at least a few here who are interested and maybe it will rub off on some others. It's an important topic that I am really worried about... I hope to contribute.

    'Economics' is what they call a 'social science', a oxymoron. It is not the same as physical sciences, where very precise, controlled experiments can be made with all the other relevant variables kept perfectly constant, and then repeated over and over again. It is an attempt to predict not only human psychology and behavior, but human psychology and behavior in groups, in the context of institutions, history, and cultures. What is being attempted to be measured is hard if not impossible to define, let alone observe.

    Economists have in comparison to the physical or even biological sciences very primitive tools at their disposal. They can for example try to gather empirical data points and construct probability distributions, giving them an estimate about future behavior based on past results. We know this is not 100% reliable. They can try to begin by assuming certain axioms, and build up a model using the precise language of mathematics. That way even if they are not right in describing the world, at least they are precise in what they are saying!

    Wealth is a funny question because it is really what we have produced before, as well as what we are capable of producing today, as a society, which is more than ever before! The recession is because a lot of people who could be working aren't working, a lot of factories that could be making stuff aren't making stuff, and our rules and institutions are telling people they can't live in perfectly good housing but have to live in rents instead, while that good housing goes to waste in decay and lack of upkeep. There is no physical reason why any of this is so, it basically is so because we want it to be so. There is no real poverty or physical lack in the modern world, at least in the USA, a real physical lack would be like a drought causing a famine where people literally cannot get enough to eat. Even in that case it is usually a matter of food not being distributed, not the drought itself.

    The one exception is when countries are running a deficit on their trade account, like the US trade deficit. In that case we are physically consuming more than we are making. The Fed is actually aware of this problem and one of the effects of its policies is to bring down the dollar which does help correct this imbalance. But with the US as the world reserve currency, the dollar will rise every time there are problems overseas like in Europe. The Fed isn't the only central bank, the European Central Bank (ECB) is also out there, and the current mess is of their making. The Dollar is both a blessing and a curse.

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    Default Re: weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

    Hi Dennis and welcome. I look forward to your input !

    as to the US dollar ... from

    (snip)Perma-gold bugs and Internet 2.0 stock fans alike might wish look around the US of A and note that for now, people are clinging to their unbacked dollars as if they had value. No matter what the endgame of paper currencies has been throughout history, history is a series of timeless moments, and right now, paper money made in the U. S. A. (or the electronic equivalent thereof) remains one of the shrinking list of American-manufactured products in global demand. We pay our bills and buy our food with that product, and in some fashion so does much of the world when trading internationally or via an internal currency peg to the dollar (due to the reserve currency status of the USD), and during difficult financial times, that fact outweighs the argument that only gold and silver are "real money". Right now, the Fed is not creating new money ex nihilo. (snip)


    Arguably, this directly links to the earlier point about 'Symbolic Value' versus REAL value. At the moment, the symbolic value of US dollars is perceived to be higher than the symbolic value of Euros etc, thus international investors have started gravitating toward US dollar denominated investments ( and particularly T bonds lately ). However, the REAL value of US dollars is technically zero ... meaning that the future purchasing power of US dollars will ultimately be determined by those that have something of REAL value ( i.e. oil, food, commodities, manufactured goods etc.) to exchange. Thus the FED, the ECB etc. - as the financial organizations of parts of the world that are producing lower and lower amounts of REAL value but higher and higher amounts of 'Symbolic' value - are finding themselves increasingly 'impotent'.

    !
    Last edited by Melonie; 09-26-2011 at 03:07 AM.

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    Default Re: weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

    Thank you Melonie! You are the only one I know online who links to zero hedge. The US dollar's reserve currency status is still around and it's one reason why I'm wary of holding gold. Gold will go up as long as there is panic, but if there is a real depression I see the dollar going up and gold going down. What's holding gold up is the Fed. Also, there is a lot of speculation in gold... as you pointed out last week when the CME raised reserve requirements for gold and silver, they plummetted.

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    Default Re: weekend economy - Bleeding the Patient, Modern Economics and the Symbolic Economy

    Gold is going up because real interest rates are lower than the rate of inflation..... This is about the fourth (deflation / sell everything scare we've had since the bull market in gold really took off..... The future is inflation, and next to worthless currencies.

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