[FoRK] What it means...

Bill Stoddard wgstoddard at gmail.com
Tue Sep 29 05:26:24 PDT 2009


Jeff Bone wrote:
>
> (re: Tom  / economics / faith)
>
> To be clear, I'm not an economist (except in some applied sense;  I'd 
> rather say "complex systems enthusiast" at this point) and I don't 
> have anything *resembling* faith in conventional economics or 
> economists of any particular school.
>
> The *idea* that large, complex systems --- be they galactic clusters, 
> ecosystems, or economies / societies --- adhere to some kind of laws 
> that make them not entirely random and to some degree predictable --- 
> *that* I agree with in principle, tentatively.  What those laws might 
> be are well beyond me or anybody else on this planet at present.  But, 
> we try.  Discarding those hypotheses that don't fit the (eventual) 
> evidence is an essential part of the process.
>
> $0.02,
>
> jb
+1

btw, thanks Jeff for the replies.   There's practical value in doing 
armchair analysis of the economy; being able to make reasonable 
predictions about future and how to position personal finances to either 
profit or soften negative impacts. 

Professional economists are rightfully occupied with developing and 
quantifying models and theory; what happens next month, or next year is 
only interesting in the context of whether their models correctly 
predict outcome.   If a particular variable in a model cannot be 
accurately quantified, it's perfectly acceptable in the pro's world to 
make ridiculous simplifying assumptions to allow the model to be 
quantified (that's my observation anyway. The pros might have a 
different perspective...).  Armchair economists (like Mike Sheldon for 
example), since they are held to a lesser academic standard,  are free 
to 'guess'  those hard to quantify variables, enabling them to make more 
accurate (if unquantifiable) predictions.

I've been following the inflation/deflation debate closely and as John 
Mauldin says, correctly calling the outcome (and timing of the outcome) 
will determine the success of ones investment strategy.  So far, I've 
been firmly in the 'deflation' camp.  However..... it is damn 
significant  to realize that deflation is an -existential threat- to the 
Fed.  It's also relevant that the Fed is not a government entity... it's 
a cabal of private bankers whose life blood is 'credit' and they have 
interests that do not necessarily coincide with the interests of the 
public at large.  What are the chain of actions the Fed will take if 
deflation persists? 

Bill

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