“Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
- John Maynard Keynes
John Mauldin has written what I consider to be one of his most refreshing columns to date (well, at least of the ones that I have read (PDF). I will only offer the subject and certain of his reactions, followed by a concluding thought. Hopefully I tease you enough to read the whole thing.
The subject is the recent meeting of central bankers in Jackson Hole, Wyoming. He finds no new thinking coming out of this recent event:
A very small sampling of his reaction:
…the unthinkable policy that I have been warning about since last May – yes, we’re talking negative rates – was not only discussed at Jackson Hole, it was discussed in a positive, even slavishly approving, manner.
I trust that by the end of this letter you will better understand just how bankrupt – and disastrous – what passes for sound economic thinking among the world’s central bankers actually is.
Let’s read that sentence again: “… the idea is, the lower the interest rate the better it is for investors.” They are sacrificing mom-and-pop middle America, the hard workers who have played by the rules and retired and saved and now want to live out their lives enjoying their grandkids and a little well-deserved relaxation, and they find they can’t do that because the Federal Reserve thinks that protecting Wall Street and wealthy investors and bankers is more important. (Emphasis in original. Yes, his blood really is boiling.)
That’s enough. There is much more where that came from.
Sadly, however, having reviewed the speeches and the interviews that came out of the gathering, I found few if any fresh ideas, or at least none that would truly be helpful.
Mauldin has no idea what would be “truly…helpful.” No individual does or can; no group of central planners does or can.
Regarding attendees at the conference, Mauldin notes:
What you won’t see on the list is anyone who looks like a “private market participant.”
This will not improve the situation. Neither Mauldin nor any “private market participants” holed-up at a conference can offer “solutions.”
When the dust settled, I was left with a profound sense of sadness over our global economic leadership’s obvious lack of understanding of the real world.
No need to be sad about this; it is inherently true in such a circumstance. There is no “understanding of the real world” to be found at a conference. The “real world” of price and quantity of money and credit can only be found in the “real world” called the market.
Interest rates are prices; prices can only be properly determined in this thing we refer to as “the market,” not at a conference – not matter who you invite.
The quantity of money and credit is a good, economically indistinguishable from any other good provided by this thing we refer to as “the market.” The quantity, quality and manner of production and delivery of any good can only be properly determined in the market, not at a conference – no matter who you invite.
Mauldin is saying everything one needs to say about the disaster of the current situation without verbalizing the only solution to the problem at hand; it is as if he is purposely avoiding the politically incorrect.
Go ahead and say it, John: End the Fed.