The Irving Fisher Award

Irving Fisher, a famed economist, is best known for the predictions he made just days before the stock market crash of 1929. “Stock prices have reached what looks like a permanently high plateau” was one of his predictions.

Today we have many vying to be the Irving Fisher of this century. The Irving Fisher Award winner must be an economist, famous and visible to the public, and he or she must issue an erroneous prediction for the ages. Paul Krugman is no doubt the front- runner. In a speech he gave on Sunday, Krugman declared, “We have managed to avoid a second Great Depression.” He is confident that the worst of the crisis is behind us.

Before you rush out to buy stocks, be reminded of the distortions caused by the Keynesian lens that Krugman is looking through. Krugman has fully endorsed—in fact, he has even called for more of the same—the reckless monetary policy of the Fed and the piling up of deficits that will never be paid.

Would printing pictures of food and handing them out to hungry people ease their hunger? If you answered, “Of course not!” then you might ask Krugman how the Fed’s printing of yet more paper money will strengthen the economy?  If printing money was the answer, Zimbabwe would be the most prosperous country in the world.

Our economic crisis arose from the Fed’s policies in the first place. Speaking of debt, on Monday, U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt saying that, “It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

So let’s get this straight. According to Geithner, a lender’s confidence goes up if an out-of-control borrower borrows more.  Fortunately for Krugman, Geithner is not an economist; Geithner is not eligible for the Irving Fisher Award.  Krugman’s place in history is likely secured.

Of course, this is gallows humor. We should all fervently hope that no one will be worthy of the Irving Fisher Award. If the fearsome third wave of this bear market begins (the first wave took us to the March 09 stock market lows; the second wave is this strong countertrend rally), no one will be laughing.

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5 Responses to The Irving Fisher Award

  1. James D says:

    I personally find the gallows humor quite funny. Especially since they are using what means they have to recreate the conditions that got us here in the first place–trying to get consumers to over-leverage themselves to buy more stuff they really don’t need (like cash for clunkers). I didn’t realize that when the wolf is blowing down your house of sticks you should keep trying to build one. Even the three little pigs finally came to realize that brick houses, while they take longer to build, certainly withstand the trials better!

  2. According to Wednesday’s WSJ “the majority of the economists The Wall Street Journal surveyed during the past few days said the recession that began in December 2007 is now over.”

    The Awards Committee will have to decide if a group is eligible for the Irving Fisher Award.

  3. LEE says:

    The best survey recently of economists was by Queen Elizabeth with one question in a room full of economists. They knew not in total silence why economists could not and did not predict the collapse. The only exceptions appear to be a few self-proclaimed economists in email newsletters who say that their forecasts of future stock market movements in the past were right.

  4. Lee,

    While I agree with you that the accuracy level of stock market pundits is often very low, there are economists who warned against the housing bubble before it burst. Of course, pointing out that the bubble was not sustainable does not necessarily translate into predicting the exact top.

  5. igli1969 says:

    When I attempt to explain the essence of Austrian economic thought to a non-economist (often, they are also non-scientific if not outright innumerate), I sometimes say, “Austrian economics will tell you that, if A and B, then C will occur. Not when C will start or stop, or how much C you’ll get, but definitely C.”

    Econometricians are as full of hubris (and maybe other substances) as long-range climate modelers. Computer simulations that make enough simplifying assumptions to make the progam runable almost always have an output that has little congruence with the real world. Or, in lay language, it’s fantasy. To be blunt and crude, mathematical masturbation.

    Back in the 1980s, when I was in grad school, a professor (obviously NOT Dr. Brownstein) hopped into our class one evening, all ecstatic that he had “finally got the results he had predicted” from an economic forecasting program. (Remember punch cards and reams of oversize printouts?) It was “proof” that then-president Reagan’s policies would lead to hyperinflation. I don’t recall that particular disaster, do you? (And it couldn’t be the drugs, because mine are chocolate and french fries.)

    As someone said, forecasting is difficult, especially about the future.

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