By Pooky-this blog economics journalist
When I was at the university, it had this thing about only hiring people who actually have long-work experience. The reason is that they want the students there, to get both theory and reality. My economics professor, Dr Jonathan, was the economics editor for Voice of Reason, a highly critical magazine that literally trashes everyone and everything.
Voice of Reason is considereed America’s “Most Critical” media.
“There are the Economist and then there Management Economics. Economics are for beginners, but management economics are for Nobel Prize economist…. The word Management comes first because it is more important than economics…..But economist have a difficult time accepting that, and that is why the world is in such a mess,” said Jonathan, way back when I was at the university, when the US was in the savings and loan crisis, if you can remember way back then.
One day, Jonathan walked into class, and he wore a neck tie that was so long, it went to the floor. The students were perplexed and asked him, what it was about. Jonathan said it was so that he can hang himself when the US Congress bail out of the savings and loans fails.
And failed it did, because the US Congress allocated some in-significant amount of fund for the bail out and the crisis just exploded and the US Congress had to up the bail-out by about 1000% more than original allocated.
Jonathan just laughed-never hanged himself. But all of us got the message.
“In these turbulence times, it is important to establish the GDP into ranges of best case, expected case and worse case first. Then subscribe the right stimulus according to each targets…..The problem is that central banks and government are under pressure to perform the best, and so they will set the stimulus first, and then the GDP results…..That is a big mistake,” said Jonathan.
“The credit rating agencies have not caught up to this way of thinking and in fact, they do not accept it, because it looks like socialism and a planned economy that goes against capitalism……There is a great vacuum of risk in the global economic system because of this as this risk is not measured and taken into account,” said Jonathan.
“When you pump in stimulus to get a GDP goal, you are drawing resources of the future for current usage. That drawing has a cost associated with it. But if the GDP target falls short, that cost still remains and can in fact, increase, and this puts the entire economic system at risk,” said Jonathan.