Raghuram Rajan, a University of Chicago professor, former head of India’s central bank and one of the handful of economists who predicted the financial crisis, tries to argue central bankers have been set up as the fall guys for our coming economic problems.

Sorry, but these problems are the result of central bank policy since the financial crisis began in 2007.  So yes, central bankers and by extension PhD macro economists should be held responsible and blamed when these preventable problems occur.

Professor Rajan provides a great summary of the current public view of central bankers and PhD macro economists:

This has left them triply damned in the eyes of politicians: they failed to prevent the financial crisis and paid no price; they are failing now to meet their mandate; and they seem to know no more than the rest of us about the economy.

Let us take the reasons why central bankers and PhD macro economists are damned one at a time.

First, they failed to prevent the financial crisis.  Actually, they performed worse than this.  In the run-up to the financial crisis, they marginalized PhD macro economists like Professor Rajan or the BIS’s William White who argued we were setting ourselves up for a crisis.  By doing so, they made the financial crisis much worse.

Please note, at least these individuals were politely listened to while being marginalized.  Individuals like myself were not even extended the courtesy of being listened to before the 2007 financial crisis morphed into the 2008 banking crash.

Why were these individuals marginalized and people like myself ignored?  My discovery was PhD macro economists know nothing about the how’s and why’s behind the design of the global financial system.  Their models of the economy ignored the financial system so it was easy for them to marginalize or dismiss any discussion of the financial system.

PhD macro economists in 2008 and still today exhibit willful ignorance about the financial system on an incredible scale.

However, because they chose willful ignorance, it created the opportunity for someone like myself to come along and integrate the design of the financial system into economics.  I did this through the Information Matrix.

The Information Matrix is so intuitively obvious, that you can explain to a 6-year old why a financial crisis happens, how our financial system is designed to prevent financial crises and what should be done in response should a financial crisis ever occur.

The Information Matrix literally transforms Economics even more than the economic profession’s discovery of information asymmetry.  For example, not only does it incorporate information asymmetry, it fully integrates behavioral economics with classic economics.

Please note Professor Rajan’s observation central bankers and PhD macro economists paid no price for their failure in the run-up to the financial crisis.  In the case of central bankers, they actually lobbied for and received enhanced responsibility despite their obvious failure.

As for PhD macro economists, it isn’t clear they paid no price.  After all, the Information Matrix rewrote their entire field of study.  Any paper written without reference to the Matrix and which quadrant they are assuming transactions takes place in can be easily dismissed as pure PhD macro economist BS.

Second, they are failing now to meet their mandate.  There is zero reason to think central bankers or PhD macro economists know how to achieve this mandate.  If you don’t understand the Information Matrix, you don’t know what is the necessary policy response to a financial crisis to end it.  Nor do you know why the policy responses by the central banks have actually made the situation worse (hint:  they took a crisis contained to the financial system and pushed it on to the real economy).

Third, they seem to know no more than the rest of us about the economy.  Actually, we have over a decade of proof that shows central bankers and Phd macro economists know less than the rest of us about the economy.  Remember, they still haven’t discovered the how’s and why’s of the design of the financial system.