The other day the Peterson Institute hosted a conference on “Rethinking Macroeconomic Policy“.  The speakers were a veritable who’s who of the individuals who lead the response to the Great Financial Crisis.

I won’t bore you with the nonsense they discussed.  I’ll simply observe the point of the conference was to shift the blame from the economists who lead the crisis response to the elected policymakers.

But what blame is there to shift?  After all, the global central bankers have been telling us all is well with the economy since mid-2009.

Oh wait…. The Bank of England’s Andy Haldane said part of the central bank’s response to the financial crisis was to engage in deception.  Did the central bankers try to deceive us that all is well with the global economy?

If all isn’t well with the economy, then naturally there would be plenty of blame for economists and the central banks they lead choosing the wrong response to the crisis.  Particularly, because economists tout their expertise and even to non-economists it was knowable in advance what was the right crisis response choice to make and what was the wrong crisis response choice to make.

Everyone knows the playbook for responding to a financial crisis is the Swedish Model.  Under this model, banks are used as they are designed to protect the real economy.  They do this by recognizing the losses on the excess debt in the financial system.  In addition, bankers who broke the law go to jail.

No expert is dumb enough to chose the Japanese Model for responding to a financial crisis.  Every expert knows this model for responding to a crisis has never been successful at ending the crisis.  Under this model, banker bonuses are preserved at all costs and the burden of the excess debt in the financial system is thrown on the real economy.  Of course, doing this undermines both the real economy and the rule of law.  It also undermines trust in experts and governments, particularly if these experts then try to deceive everyone by claiming all is well with the global economy.

Aditya Chakrabortty provided an excellent summary for where the UK is at as a result of their choice and defense of the Japanese Model:

Over the past decade, the British public has been assured that the banks are rock-solid, that austerity will end soon and that there will be jam tomorrow. None of these things has come true. When the experts fail and expertise is broken, then any joker with a good yarn to spin is legit. The good folk of the Treasury, the OBR and the Bank of England would doubtless be horrified at any comparison with such clowns as Johnson and Fox. Their thinking is backed up by models, their pronouncements come in official publications. But they are guilty of a similar un-realism and they have proven just as impervious to criticism. This age of impossibilism is partly their creation. [emphasis added]

Of course, the macroeconomic policymakers want to escape the blame for their role in setting the stage so any “Joker with a good yarn to spin is legit” and creating the “Age of Impossibilism”.

However, history will not be so kind as to let them escape the blame their actions merit.  It is their failure as experts that has lead to fantasy politics and voter choices like Brexit and Trump.

(On the other hand, I guess they can take some solace in all the money they made as a result of choosing the Japanese Model and bailing out the bankers).