Word Out to Economists - 2 + 2 = 4

I have been a bit entertained this week by bloggers taking shots at a piece put together by Kartik Athreya, a PhD in Economics who does work at the Richmond Fed. Now these shots are deserved as this PhD took shots first at a host of bloggers claiming they should not post on economics, in essence, because we know not what we are talking about. Mind you, these bloggers include the likes of Paul Krugman, a Nobel Prize winning economist, but, hey, this PhD seems to not care too much (I personally have a lot to say about Paul Krugman but not that he is not qualified to speak to the issues). Now I am an attorney and right up at the top of every one of my blog posts I note that I am not an economist, so I can appreciate up front someone not appreciating what I have to say. (Mind you, this guy never mentions me and I assume has never read my work, but let me imagine for a moment his piece is aimed at me.) Nonetheless, let's talk a moment about his piece.

First, let me note that his piece has - from what I have seen - gotten a rather universal trashing from the blogoshpere, including by those with economic credentials. Don't believe me, look, this is from "Economist's View" blog site:

http://economistsview.typepad.com/economistsview/2010/06/dont-let-fed-economists-tell-you-otherwise.html

They are not taking the PhD from Richmond lightly. I highly recommend following the links on this post as they show a lot of well known and respected blggers taking shots at this piece.

Second, and more importantly, I have no interest in studying the niceties of economic modeling and other specfics of this science as I really see no need to. I focus personally on a few macro aspects of our economy and so far they seem to be telling the story quite well. Now I expect in different economic times different focus may make sense but right now my focus does not seem to be too bad.

My focus, if you want to know, is debt. I simply cannot understand - in my itty bitty non-economist brain - how the world economy can do well when by-and-large the largest economies have for 10-20 years been built off of debt. This is where 2 + 2 comes in. Over the past two decades in the U.S. wages have been stagnate, yet spending has increased. This was largely enabled due to easy credit, in no small part due to folks borrowing against their home piggy bank. At this point most piggy banks are broken, many homes are under water, credit is dried up for all but the most credit worthy and the math has changed. Easy credit no longer leads to a stable or expanding economy, it leads to a long and sustained recession but, hopefully, not a depression. Perhaps an economist can explain to me why I am wrong why debt will not lead to a sustained downturn.

So let's look at the record. Did economists at the Fed predict the worst recession since the Great Depression in 2008? I saw it coming and posted about it but I am no economist. That was an easy hit, so let me look further. If you have read this blog you have seen me, on regular basis - including in the past week - astounded by economists not seeing what is happening. Lest you think I am full of bull, just look at today's headlines. Economists did not see the drop in comsumer confidnece that was announced today:

http://www.conference-board.org/press/pressdetail.cfm?pressid=3949

How can they not see this coming. How can they not see the real estate market falling off drastically after tax incentives ended in April? I ask myself weekly how can they not get it! I am not railing against all economists. My point simply is that this economy is not subject to models built on the past. So I suspect that PhD economists are no better in these times to predict where we are going than the average man on the street - and perhaps in some respects less qualified.

Disclosures: None