Neoclassical Economics Cult

Two Articles on This Page:

1. Neoclassical Economics Is a Cult and a Fraud

Neoclassical economics is a cult, a vestige of Protestantism. The neoclassical economist, aka, Alan Greenspan, says that the markets always function benevolently. This is the classic libertarian view. Libertarian economists use mathematical formulas to prove the goodness of markets. That was the same bogus practice that was used in determining that all housing loans can't go bad at the same time.

The neoclassical view opens up the financial system to bogus risk management!

This neoclassical view has a false faith that there won't be fraud in the system. I would go so far as to say that Alan Greenspan created fraud in the system. As I said here:

3. Greenspan advocated that easy money loans continue at Lincoln savings and loan in the S & L crisis. He was a consultant for Charles Keating, and testified that the bank was fine. He then used this same method of operation in the housing bubble leading up to the financial crisis as Chairman of the Fed. He refused to allow a peek into the derivatives while he was in charge during the big bubble. Those are similar behaviors.

In other words, Greenspan knew the outcome of toxic loans in the days of the S and L crisis and advocated that they continue anyway. He said Lincoln S & L was safe, even though bogus bonds were sold to elderly investors who didn't know they weren't insured. One slit his wrists and left a suicide note saying his government had let him down after he lost it all.

Greenspan, based on the S & L crisis, knew banks would fail, then, so there is no reason for him to believe the same would not happen in the Ponzi Housing Bubble! Greenspan had to know he was putting the financial system at risk again! He allowed bogus bonds, the CDOs, to be spread far and wide knowing full well what had happened with the bogus bank bonds of Lincoln S & L! Greenspan certified that Lincoln was just fine against the views of the Federal Home Loan Bank who wanted the toxic loans stopped.
The disturbing conclusion is that, at the highest reaches of economic decision making, the wizard is from the land of fraud, not from the land of Oz. Or one could say that the Wizard of Oz was a fraud, and that Alan Greenspan was that wizard!

Ultimately, Keating was hauled up on racketeering charges for the bogus bonds and sent to prison, and then the pro business Supreme Court overturned the conviction in 2000. The regulators were correct in the first place. But since that overturned conviction of Keating there have been no RICO charges against the investment banks who packaged the bogus fraudulent CDOs!

When Steve Keen says that the Fed and Greenspan had no clue about the deterioration of the financial markets I proved that was wrong. They knew the financial markets were in trouble by data they accumulated, by warnings they gave about the markets in the FOMC minutes of 2007and by the fact that they were involved in the fraud of off-balance-sheet-hiding-of-bad-loans. They ignored the signals, and failed to act forcefully.

But based upon their religion of market goodness, Keen likely interpreted that they had no clue because they didn't believe the markets could go bad. That was their rhetoric and religion, but it doesn't hold up under the examination of Greenspan's deeds:

1. Greenspan manipulated the Savings and Loan scandal as others sought to stop the easy money and predatory loans and shore up the teetering Lincoln Savings and Loan's finances.  Supposedly Greenspan felt regret about the Savings and Loan scandal, but it didn't stop him from looking the other way in the Ponzi Housing Bubble in the same manner! The man is a fraud throughout his very being.

2. Greenspan advocated that you get an adjustable loan in the Ponzi Housing Bubble, and then refused to allow an examination of the derivatives behind the easy money loans.

3. Greenspan and the Fed issued warnings that the housing bubble could slow the entire economy in 2007. They knew. He knew.

Want to know what I think of neoclassical economics? It is in and of itself a fraud. It started out as a false view that man is good. Even knowing that the Bible said children speak lies from the womb, the religious neoclassical economists ignored that reality. That opened up the door for the fraudsters to take the doctrine and use it for economic class warfare. Greenspan was just a fraud. Plain and simple.

Clearly the science of the economists, with their tidy equations, was used to establish a religion based upon false assumptions. The folks best at speaking lies from their mothers' wombs went into this field, banking. They served the world of big finance, and while they mostly behaved themselves after the Great Depression, due to REGULATION, they couldn't wait for their opportunity to manipulate banking with the help of elected representatives, such as McCain, Gramm, Clinton and W. Bush.

From a religious perspective, true predestinarians* viewed men as speaking lies from the womb. So, for these economists to build a system where man is good from the womb and thus satisfy Protestant thought to further free and deregulated markets with an invisible hand is quite odd. And even if these economists believed that man was evil from the womb, to make the leap that this evil would only work for good by an invisible hand is impossible in reality and in logic.

The hidden hand is a perversion of predestination which understood the fallen nature of mankind. The hidden hand assumes an inherent goodness in greed, that selfish behavior would work for the good of mankind. But the truth is, selfishness may work in building a better light bulb, but it does not work when it comes to bankers and deregulation.

The hidden hand is not God predetermining the world and its events. The hidden hand is an imaginary process, and is in no way real! It isn't a god and it isn't logic. It is simply a con and a fraudulent way to make some religious people happy with selfishness. 

If there is an election of grace, and I believe there is, it doesn't include the economists who put forth a moral framework for the invisible hand of selfish greed. Sorry, that is just disgusting idiocy. Predestination in the hands of a selfish cult lunatic does not negate predestination. If anyone is not predestined, it is a predatory economist and the pundits who try to absolve him of fraud.

But even if you don't have the same religious views that I do, the argument against the neoclassical economists still holds up. They essentially taught that self interest could be fashioned into good in virtually all situations. With banking deregulation and with massive fraud in the world, that view is simply false and repudiated.

Even Washington's blog, where an article there inspired this one, the author admits that a cult leader like the neoclassical economist who tries to make greed holy, and the fraudster (Greenspan) who comes to power in this cesspool of deregulation, are not the spokesmen for religion. They are simply cult economists.

With regard to the fraud of these economists, all models are too simple, and subject to mistaken and even lying assumptions to ever work properly. Modelling without a continual comparison to reality is useless, and even fraudulent. That is what we can learn from the housing bubble and crash.

*The 1646 Baptists of the First London Confession did not consider themselves Protestant and their confession of faith is unique. They viewed Protestant sacralism as being a most aggravated evil. This strongly biblical confession was repudiated by the corrupt 1689 Protestant-like Second London confession.


2. Krugman and Hayek Are Libertarian Idiots

Paul Krugman is a neoclassical idiot and so are the libertarians. Krugman has converted to Keynesian spending after realizing that neoclassical economics is bankrupt of ideas. The libertarians/Austrians are for strict austerity and have not converted. But their religion of self rather than of class, of deregulation instead of law, blinds them to many obvious truths in economics as they stew in their neoclassical views

While you may think it odd that I speak with such emotion, crap economists need to be buffeted around the head and shoulders, in a symbolic way of course.As this article may prove, Keynes will have trouble operating within a system that is up to its eyeballs in deregulation.

With the libertarians, it is easy to determine their neoclassical fallacy. They believe demand will always come back, even in a severe bust, so a depression won't be so bad. But in a credit depression, sometimes demand is crushed, and so a credit depression is dangerous, while just some retooling from war to peace after World War 1 was not a dangerous economic depression.

And David Glassner has exposed those who have tried to paint Hayek as being something other than a neoclassical economist:

 So let me assert flatly that F. A. Hayek was a neoclassical economist through and through. He was also an authentic Austrian economist, schooled in both branches of Austrian theory by way of his association with his primary teacher at the University of Vienna, Friedrich von
WeiserWieser, one of the two principal successors of Carl Menger, the founder of the Austrian School, and through his subsequent collaboration with Ludwig von Mises, a leading student of Eugen von Bohm-Bawerk, the other principal successor of Menger.
Unfortunately, Glassner still clings to neoclassical economics himself, even after the meltdown of demand. But neoclassical economics holds to the idea of rational economic agents. The libertarians, or Austrians, believe in the invisible hand of self interest. There is not a lot of difference in modeling economic behavior based upon the idea of rational economic agents and believing in the invisible hand of self interest guiding the markets to rational behavior.

The natural equilibrium so touted by Krugman between supply and demand looks pretty foolish in light of the housing bubble and crash. There was a massive misallocation of capital because of easy credit and low interest rates . 

The Keynesian neoclassicals look at the models and say that the Fed can fix everything. They say the Fed will fix it and demand will always be there. That is just down right stupid coming from economists who win Nobel prizes.

I have written about the destructiveness of neoclassical economics, because it is simply a cult of idiocy and it is a fraud. It is a fraud because it relies on models of behavior instead of laws to stop the bad guys from giving folks predatory loans. Models have assumptions that don't work out in the real world.

But Krugman said:

Personally, I consider myself a proud neoclassicist. By this I clearly don’t mean that I believe in perfect competition all the way. What I mean is that I prefer, when I can, to make sense of the world using models in which individuals maximize and the interaction of these individuals can be summarized by some concept of equilibrium. The reason I like that kind of model is not that I believe it to be literally true, but that I am intensely aware of the power of maximization-and-equilibrium to organize one’s thinking – and I have seen the propensity of those who try to do economics without those organizing devices to produce sheer nonsense when they imagine they are freeing themselves from some confining orthodoxy.
That of course, looks like a really stupid statement in the light of the housing bubble and crash, which destroyed orthodoxy. 

Krugman confesses, sort of, in a New York Times article:

He says mathematical beauty, a tidy way of organizing thought, was not really the truth! That is an astounding thing for a Nobel prize winner to admit. He says that Ben Bernanke and Robert Lucas of the University of Chicago had said that the Fed had it all under control. Free markets were achievable, with a little manipulation of the Fed, I should add. Funny that laws governing bad behavior could be swept aside, while the Fed and manipulation could bring us to the promised land of economic bliss. What a crock!

Why didn't they study Enron off balance sheet accounting, or the Japan housing market? Didn't they learn stuff could crash after the NASDAQ reached 5000? WTF?

But Krugman says that the mainstream economists were divided over whether the system was perfect or whether it could be put back on track by the Fed. It never occurred to these bozos that the system was not perfect and it could not be put so easily back on track by the Fed!

The thing I cannot swallow about Krugman was his statement that the mistake of the economists was beauty, or mathematical bliss. There is nothing beautiful, Mr Krugman, about fraud, about bogus assumptions. Faith in the Fed as the solution is now dead. It never should have been given life.

Keynes first said the financial markets were a casino. Now we see he was right. Between the Great Depression and the Great Recession, capital markets were glorified, and I believe that was a giant fraud, a way to suck peoples' hard earned dollars into the system.

Krugman gets the obvious right, that recessions are caused by a lack of demand. He is repudiating his very foundation.The Fed, with supply side tools, and tax breaks for the wealthy, which are more of Andrew Mellon's percolation, cannot help demand much. Nothing percolates when there is a credit crisis and no demand.

But Krugman is ridiculous in his defense of the neoclassical economics, saying they just didn't see the bubble and crash coming. There was a belief that markets were perfect, but Greenspan knew banks making toxic loans could fail as they did in the Savings and Loan Crisis. Yet, he advocated toxic loans in 2004.

Keynesians were not neoclassical and believe stimulus is crucial when interest rates reach zero. So, the Keynesian response has been too weak. On that I agree with Krugman, with one issue. Much of the stimulus is going to speculation of futures. It is doing more to destroy the standard of living in the USA than even the dollar depreciation.

So, between libertarian encouraged speculation and neoclassical/libertarian hatred of stimulus, we have a real problem going forward. How big that problem gets no one knows. How much can main street take before it breaks? That is the question going forward.

If we look at those neoclassical economists operating today we see that they have adopted the playbook of Andrew Mellon, who, with Hoover as his president, was run out of Dodge, meaning DC.

Andrew Mellon believed in three things that are also adopted by the Austrian/libertarians. First, he believed that recessions or even depressions are good. He believed they are cleansing. But the Depression of 1921 was based upon a retooling from war to peace, and there was credit available. Credit depressions are not cleansing and they are not good.

Second, Mellon believed in in supply side economics, percolation. And third, he believed in speculation and the freedom of the casino. Is it any wonder that his descendents are opposed to any manifestation of FDR. These folks would rather have wars and perpetual cuts to the budgets in order for banks to profit, even if it has the potential to destroy MainStreet USA.

Since neoclassical economics has been totally undermined, and really there is more fraudulent assumptions to it than Krugman admits in his article, there must be an economic solution going forward. Look what we have now. We have irrational investors. We had irrational investors who bought crap CDOs. And they were made irrational, mostly, by lack of information about the complexity of the investments.

Now we have irrational hedge funds buying up real estate like they have a burr up their asses. It is irrational. It is possible that they are buying low and will sell lower. It has been my understanding that the housing market is broken, and that it may be perpetually broken. Unless everyone is rich enough to pay cash, a market is broken if it has some cash buying, some easy money buying and little 20 percent down fixed buying. The 20 percent fixed 30 year mortgage is a relic of the past.

Using Keynes with hedge funds going around buying up all MainStreet real estate, investing in oil and investing in food commodities up to their eyeballs, even to the cornering of the markets, is very dangerous. Keynes works with those behaviors under control, and they are not under control.

Krugman wants to forge a new role for economists going forward and worries about their place now that their models and false assumptions have been crushed.

But, until the economists get this speculation under control, reformed economists like Krugman and his Keynesian heroes are, going forward, as worthless as tits on a boar. Think of where that leaves the neoclassical boobs.

#krugmaninwonderland (Austerity does not work. But Keynes in a deregulated environment doesn't work either. All we get is more speculation. I could support Keynes, but without regulation of speculation it will be bad. It may have to be done, if we go into a massive depression, but regulation must come first!)

See also: Time and Money--The Cobden Center--My Analysis



  1. I studied economics at Harvard as an undergraduate. I agree with you totally here. Economics is a kind of wishful thinking and idolatry. I am persuaded that the economics profession is a kind of PR lobby for the banking industry. I remember Galbraith giving us lectures about monetary policy. He would rattle off statistics about the Fed without once ever explaining what it is and why we need it! He seemed brainwashed himself, utterly unable to think outside the box.

    Economists are like the prostitutes who service the pagan temples, drawing in the crowds and making the scam seem enticing.

    You are so right about how they idolize the marketplace. My freshman advisor was a graduate student at the Harvard Business School, and when I told him of my interest in economics he smirked: "In B-school we learn the opposite of everything they teach you in Econ. We learn to manipulate markets, to create monopolies, to influence people's preferences via marketing and advertising."

  2. are saying we should return to sound banking?

    1. I am not sure that would not bring down the financial system. A much easy way would be to jail the bankers. If they screw up, jail them for a long time. That will make them work more carefully within the system.

    2. Jail people who make the laws and have all of the money? Not to mention they just send their whistle blowers to jump off of buildings, as if they all had chips in their heads. Sorry, too many Satanists with photos of themselves left over from the Franklin Case working in DC put any bad bankers in jail anytime soon. You have to go back to making only God fearing Christians and Jews (Torah not Talmud) eligible for political office. I don't see that happening any time soon. Seen this one?

      They want an international court of justice, in Israel.

    3. Yes, the seat of justice was the goal of David Ben-Gurion, the self avowed atheist. Scary stuff, but God will put them in their place. It looks dark now. But bankers went to jail throughout history. Question is for me what will happen if a really bad national housing bubble happens again. Will the American people demand jail for the bankers? I could wish it.

    4. They won't because they don't know Jesus anymore. (which was the goal) The kids are all taking Alice Bailey's World Core--Common Core starting a few years ago. The entire educational system is an evil example of globalism.

    5. Well, while I certainly support separation of church and state in our pluralistic society and am against sacralism, it is certainly a pursuit of self interest and pleasure and an unwillingness to think for oneself that has allowed the bad side of globalization to exert itself.


    So the Bahai temple overlooks Ben Gurion Blvd huh?

    Jarret is Bahai she was born in the town where it was founded. The US headquarters is in Illinois:

  4. I liked the last link showing Jeb Bush and Rupert and the WSJ lady. I don't go for most conservative issues except gun rights, but that was a great and revealing picture. And Baha'i is a globalist religion or could be fashioned as such when the time is right. Baha'i isn't about tolerance, it is about inclusion of all religion together and that is not right. Tolerance does not mean acceptance. I am tolerant. I don't accept Baha'i.

    1. There are no conservative issues. It's all controlled. If right and left could bypass the brainwashing, they would agree on everything.

      "or could be fashioned as such when the time is right." You got that right.