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The Keynesian Economic Model – it’s total HOGWASH! Why?

June 20, 2013

Ben Bernanke is obviously a Keynesian and he uses this math-based model to determine his monetary policies. The problem is that this model is now hogwash and non-predictive of future economic activity. Ben likens his monetary policy to driving his personal auto. He will press on the ‘gas pedal’ when economic conditions (per his opinion) declines and he will let off the ‘gas pedal’ when economic conditions get hyper. His Keynesian economic model projects some 3% growth into 2014 and a decline in unemployment to around 6.5% (if specific monetary assumptions are followed). His econometric model projects into the future as if we are all robots who follow his math based formulae without any independent thinking of our own. What hogwash!

The Keynesian Economic Model is based on Math and Assumptions about the Future! Hogwash for today’s interconnected and emotional real-time markets!

In reality we all live our lives in the NOW. All our markets are now electronic and trading is focused on real-time events (now events). A model which ignores the NOW and projects meaningless numbers into the far-away future is a worthless model for today’s speed of light world. All the markets are now interconnected in real-time and trading, investing, and speculations are done within a NOW environment. We need to view reality today as:  successive moments of NOW. This means that any economic model which attempts to project numbers into the future (as Ben’s Keynesian Economic Model does) is a worthless model for today’s markets. His forecasts will be misguided and his assumptions will be destroyed in our real-time electronic markets. We now need to think independently from Ben’s Keynesian Economic Model!

Our lives are now lived in the Now moment (also called real-time). The Future is unpredictable and the Past is a memory!

We also should be disconnecting any math-based model from our real physical/material economy. Since our money units are now ‘units’ of consciousness (non-material units) and totally within our MINDS (and the computer screen), we need to recognize that ‘prices’ and ‘values’ are now totally subjective, psychological, and volatile. We live within TWO realms of reality now that our money units are ‘no thing’ units. This type of market is much different from the old days when we used physical money units (paper, metal coins, and silver/gold as backing for our money). We now live within a virtual reality market where all our money is stored and distributed within Cyberspace. Our electronic markets have created markets where money is now within our computer screen. Laptops, smartphones, tablets, and similar devices now store our money units and function as real-time devices for trading, investing, and speculating. The click of an electronic key produces a monetary transaction!

Electronic devices are the wave of the future! Money units are now bits and bytes within the computer screen! Most transactions are now electronic transactions (and the speed of light creates our real-time world).

Since our markets are now mostly psychological and subjective we can expect human emotions to move the markets UP and DOWN in milliseconds as we trade and invest via our speed of light electronic devices. This type of market is a NOW experience and any type of projections into the future (as is being done via the Keynesian Economic Model) is out-dated and obsolete! All the Ben Bernanke’s projections are now mostly hogwash and meaningless going forward! He will need to react daily to the events that transpire. Is he and his FOMC committee prepared for this type of NOW experience for monetary policy? I don’t think so!

The markets are volatile and psychological. Emotions move the markets similar to a roller coaster ride!

We are now entering a new phase of economic activity going forward. Conditions will be volatile, emotional, and subjective. We could see ‘swings’ in the markets which are substantial in their magnitude. We could see a commodity like gold and silver crash one day to record lows and then reverse to a new upward trend that will surprise all markets. The emotions of the market could switch from one extreme to another in milliseconds as traders adjust their mathematical algorithms to the fluctuations of the markets. We are entering a completely new paradigm for monetary activity going forward. We now need to THINK in terms of  speed of light electronic markets where COMPUTERS rule the day. We live in a MACHINE driven world of economics!

The electronic computer has created a new investor/speculator for our Global Interconnected Markets! Virtual reality has replaced material/observational reality. We now need to THINK like an ALGORITHM.

The trends of the past will not be the trends for our future. The likelihood of a financial crisis of huge magnitudes is emerging. The negative emotions will eventually RULE over the positive emotions in this type of market. We need to recognize that we live in a Casino Economy which is much like the economy of Las Vegas. Betting and speculating is the nature of this type of market. The vast majority of investors will become speculators who LOSE much more often than they WIN. Playing with computers, real-time algorithms, and speed of light transactions does not lead to stability and prosperity for our Global interconnected economies. We need a NEW MODEL for today’s world. This is unlikely to emerge for some years! Now is the time to get yourself educated and AWARE of what has transpired these past 15 years. Everything is changing rapidly! That is my missive for today! I am:

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