Counter Economics

Wouldn’t it be nice if deliberately misleading and biased economics and financial information released by concentrated power came with this warning label?

We think now is an appropriate time point out the massive amount of false information that surrounds all of us. Here are a few of the main sources:

• Academics: Focuses on teaching overly mathematical classes on economics and finance that distract students from understanding the government created monopolies in banking and finance.
• Magazines such as Business Week, Fortune and Forbes are so consistently wrong and so late uncovering businesses that are fraudulent, that they can be seen as simply PR mouthpieces for companies. One wonders if companies can influence coverage simply by taking out adds in these low standard publications.
• Institutions like AIG and Goldman Sachs that promised that they could manage risk and that the rest of us lacked the intellectual firepower to understand their financial creations. Not coincidentally, Skilling used the same line of reasoning to try to explain why Enron’s books made no sense..because they were so complex they were a “black box.” That turned out to be false. Enron like Goldman Sachs and AIG were simply a fraud. The fact that they were fancy well heeled frauds does not change that fact. All of the large financial institutions have what are called “Chief Economists.” Their job is to have a PhD and shill for whatever products the company is selling (stocks, real estate, etc…) The conventional media is so compliant to power and so lacking in journalistic standards that they quote these paid spokesmen as if these individuals are simply performing academic research. David Lereah, the former Chief Economist of the National Association of Realtors now says he was pressured into writing overly rosy projections. (http://online.wsj.com/article/SB123152099299568447.html)

Economists like David Lereah can be given titles like “Chief Economist”
and will write rosy projections for and work as prostitutes for
institutions like the National Association of Realors. David Leheah
rode the housing bubble to frequent television appearances. However,
with the housing bust and his reputation in tatters, he left the NAR.
The NAR’s new economic prostitute is Lawrence Yun, who unsuprisingly,
now thinks housing market is looking up.

Economists like Mr. Lereah and Mr. Yun give this lady’s profession a bad name.

• Investment advisers that are paid to put people into funds. One of their favorite techniques is to show people funds that did well the past several years and then put them into these funds. The fact that buyers are often buying into a bubble is not apparent to them. When their funds tank, the adviser’s response is often “stay in for the long term.” However, it turns out that big investors do not follow this advice and move in and out of investments taking the returns from smaller investors. Another favorite statement by advises after they have fleeced their customers is “my clients are adults, and no one put a gun to their head.” Furthermore, advisers never explain the “yield disparity” to investors. That is that most of the returns in the stock market go to the most wealthy because that is how the system is rigged. (Explained here http://counterecon.com/2008/01/11/yield-disparity/)
• The Fed: this institution is not part of the federal government, but rather is a bank for banks. It somehow was given the power to create money, but is not a democratic institution. 100% of the time it sides with banks over individuals. Predatory loans issues were brought to the Fed branch in Cleveland, and they could not have cared less. After all, banks were making money from predatory loans. I can recall reading a book about the Fed called “The Temple” when I was young and impressionable. The book make the Fed sound like it was splitting atoms. This is a serious misrepresentation or reality. All of the Fed’s supposed complexity and secrecy disguises the fact that not much is going on — intellectually or economically. The Fed is there to keep inflation low and to enrich a select few. They change interest rates….no big deal. Why the government does not take back this function is not well explained. They have recently taken on $2 trillion in bad loans, but did not need to go to congress to do this. They also have not communicated this, or provided transparency as to the these loans. These loans will be owned by taxpayers, and most will be worth pennies on the dollar, because they can not be paid back. The Fed’s statements are unreliable, and it frequently violates economic principles in favor of creating asset bubbles. Nothing they say can be taken at face value. 

If you want to be propagandized and tired of thinking for yourself, Fortune can help you accept the corporate line that what is “good for GM is good for America.” Fortune does no much care about being correct, they are primarily concerned with promoting companies at the expense of individuals. You can look at them as a very large brochure for the Fortune 500. If you get taken advantage of following their advice, they have done their job.

Creating a Filter

This is only a partial list of course. The important thing to remember is that the financial and economics world is filled with self serving and false advice, and there is a literal army of people employed to misinform you. This puts a tremendous burden on the general population to decipher and repudiate this false information. If not educated in finance in economics, individuals have virtually no chance of breaking out of their spell. However, even for those educated in these areas, the education consists primarily of faulty and institutionally biased information.

Against this type of misinformation, its important to create a filter

There are ways of having a deeper understanding and creating a “filter” against faulty finance and economics information and advice. The best way to navigate these troubled information waters that we have discovered is to:

1. Understand the underlying principles of economics
2. Question everything, particularly from large institutions
3. Find sources that are not corporate controlled
4. Ask how consistent the statements are as time passes. For instance previously when stocks were appreciating executives justified their compensation based upon this. Now that stocks are declining, the new line is “in this environment, stock appreciation is not a fair measurement of value add.” Do these two statements make sense? Are they consistent with one another?
5. Evaluate people and institutions on the basis of track record. Track record (being right, when others are wrong) is the single best determinant to future likelyhood of being right
6. Annual reports (need we expand on this one?)

Here is the annual report of GE for 2007. Its filled with false financial information designed to defraud people by having them invest in their stock. KPMG-Deloitte-PWC-E&Y (pick one) were happy to sign off on these fake numbers for cold hard cash. You don’t keep your partnership position at a bit firm by losing an account like GE….so you sign off on whatever GE puts in front of you. As you can see we have applied our warning symbol towards the bottom. All annual reports should have this cautionary icon.

Publications and Individuals that Have Been Right

1. CEPR.net (Center for Economic Policy Research)
2. Dollars and Sense
3. Michael Hudson
4. Naomi Klein (not a finance or economics person, but a specialist on concentrated power information distribution systems)

One thing to notice is that none of these information sources is selling anything, and none of them take advertising. These are two important components to having objectivity. Dollars and Sense has a fantastic track record, but only takes in rough $150,000 per year. Consumer Reports, a non-financial publication, has a sterling reputation because they do not take advertising, and do not accept free products from manufacturers. This is critical. So no statement by major companies like Goldman Sachs, AIG or Lehman Brothers can be taken seriously, because they have something to “sell.”

References

http://online.wsj.com/article/SB123152099299568447.html

Things must be rough at NAR. Their Chief Economist can barely speak English.

Silly doubletalk from Yun.

This excellent chart of the NAR’s house predictions was complied by http://lawrenceyunwatch.blogspot.com/2008/03/history-of-wrong-predictions-by-chief.html