Is the Global Super-Entity real ... By Martin Armstrong

Copyright Martin Armstrong All Rights Reserved October 27th, 2011 Reply To:
Is the Zurich Alleged Global Super-Entity Real?
Those behind the Zurich study have taken a lot of heat from many angles. Here is their reply. There is something that the academic community must come to grips with in the social science area. THEORY just does not cut it. In every other field, it requires actual investigation and proof. When it comes to social science (economics), there just is a complete lack of functional experience.
What I say, is meant to be constructive not antagonistic. We had over 240 employees. Those who came from school all had to be retrained in the real world. They would study for various exams and often ask me a question. I would tell them not to ask me for if they used what I said, they would flunk. My advice was to memorize the answers the exam wanted. Get the piece of paper, and then forget what was taught in the field of social science.
There have been these debates over ownership and control without anyone actually stepping out into the real world. Princeton Economics was about to go public for $3 billion in 2000 an IPO. In Asian culture, it was a matter of corporate educate that all the companies we dealt with had to be offered shares and they in turn would have to buy them. It was a ritual as old as marrying off your daughter to a rival to bring peace. By no means is there control. Wrong presumption!
In 1996, I testified before the House Ways & Means Committee. They apologized because they stuck me on a panel with academics. This week, I spent time again on Capitol Hill, and the attitude toward academics has not changed. Everyone is polite, but they pay no real attention.
The best way to explain this is the Euro. The academics saw the theory of a single currency. Lacking real world experience, they could not see that all they were doing was leaving in place virtual currencies in each member state. Perhaps most people with real world experience in trading were caught up in all the hype and did not articulate the danger. My position was always one of dealing with the problems when they blew up in someone’s face.
Nevertheless, if a young trader closed his ears to the hype and looked at the structure, he would have informed them he could sell any member bond and it would be a virtual
currency. It is far worse, for the decline that would take place in a currency
manifests in higher interest rates when the instrument is a bond. Thus,

Greek interest rates hit 80%.
The story of Heinrich Schliemann (1822–1890) is a wonderful example of reality v academic presumption. Schliemann was a German businessman and amateur archaeologist, who believed in Homer. The academics viewed Homer as a story for children. Schliemann took Homer and set out to prove it was history. He set sail from Greece where Homer said and arrived in Turkey and discovered Troy. He found Mycenae and just about everything else worthwhile. The academics had declared Homer to be a child’s story without ever stepping foot outside their office. His wife appeared in a photo wearing ancient golf jewelry he found at Troy. Of course he was labeled a fraud because he dared to show up academia.
Having trading experience, I can see the holes in the theories concocted by the academic community. For example, Hyman Philip Minsky (1919–1996), who was an American economist and professor of economics at Washington University in St. Louis, attempted to provide an understanding and explanation of the characteristics of financial crises. Minsky’s vision of the slow movement of the financial system from stability to fragility, followed by crisis has been called a "Minsky moment". However, his analysis was conducted largely covering the period of the 1960s and 1970s, when linkages between the financial markets and the global economy, no less the domestic, were still obscure. There was a presumption that FDR and the New Deal ended the Business Cycle. John Kenneth
Galbraith’s (1908–2006) book of the Great Depression seriously misled the entire field of economics into focusing on the mania of crowds. Charles Kindleberger (1910–2003) (1978), who wrote Manias, Panics, and Crashes: A History of Financial Crises only furthered this approach turning the field into a psychological expedition and away from empirical study. Minsky wrote in 1974, "that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles." In this respect, Minsky could see the two extremes and the swings between them. He did disagree with prevailing mainstream economists of his day, by arguing that these swings within the Business Cycle are inevitable in a so-called free market economy unless government
steps in to control them, through regulation, central bank action and other tools. The focus was on people and how they reacted rather than a systemic investigation of the global factors behind the event. This has contributed to our crisis today the presumption that government has the EXPERTICE, KNOWLEDGE, and CAPACITY to manipulate the economy and implicitly the behavior of man. However, it is man who is observing man, and in the process is incapable of dispassionate observation while still ever present remains a separate self-interest that motivates the observer.
The computer model that I designed has been successful for ONE reason. There were ABSOLUTELY no presumptions. I taught the computer HOW to analyze. I gave it no rules such as if interest rates rise then sell stocks. Consequently, being a globe trotter, I saw everyone acted in their own self-interest and that their profits would be measured in their OWN currency not dollars. Hence, I created a model to explore the world and to fashion its own knowledge-base not based on predetermined assumptions. Academia has to stop this presumption of knowledge and explore the world for what it is. Stop the Marxist-Keynesian idea that we can mold the economy into whatever we want, for what if we cannot do that at all? Let the phenomena reveal itself for what it is. Stop dictating what you would like to see.
What I discovered has shaped my understanding rather than the other way around. Some were fascinated by the use of computers. Here is a picture taken of me by the Australian press in the early 1980s showing one of the early IBM desktop computers back then in our Australian office.
Why so many in New York have hated me with a passion I assume is because I have been motivated not by money, but by the pursuit of knowledge. They just don’t like the idea of putting information that takes away their advantage. They
really did not like our investigations concerning their organized market manipulations. Unfortunately, when you own the regulators, they will do whatever they tell them.
When I meet with legislators on Capitol Hill, there is this sense of rolling the eyes at academics. They do not seem to listen with conviction. Something has to change. It is time that economics becomes a real science like physics. Stop the presumptions and stop the focus on human nature and assumed booms and busts are just manias. The response of the people is a response. It is NOT the cause! Stop the Marxist-Keynesian ideas that economists and government can manipulate society to create UPTOPIA. It hasn’t worked so far. Austerity to support the bond markets and banks to maintain at the expense of the social fabric of society leads to war. That is precisely how Hitler came to power. We have to start looking at the systemic interconnectivity and forget the theories to let reality be exposed for what it is! QE1 through 200 will never work because there is no way to assure that buying 30 year bonds will inject cash to stimulate the domestic economy because far too much debt is held outside the USA. The money you THINK you are injecting is going elsewhere which is why the whole program did nothing. It is a whole new world out there once you step out of the office and get a job in a dealing desk and just observe.

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