Most Economists only know Keynesian Mumbo Jumbo Economics

In my quest to find the root cause of the retirement nest egg destruction I have entered the realm of economics. It was a journey that introduced me to the two prevailing schools of economic thought.

They are the Keynesian Economics and the Austrian Economics models. Keynesian economics is named after Keynes himself who had a great influence on Roosevelt and the British Government in the 30’s.

Austrian Economics was the prevailing economic system until around the 1920’s when  Keynes started to convince governments they need to control the money supply and that it was okay to run up deficits and spend themselves out or recessions, depression and the like.

The reason we are in this economic mess right now is due to the return of Keynesian economics with a vengeance. Bernanke and Greenspan (originally an Ayn Rand Objectivist) both are Keynesian Economists.

In fact the frightening thing is that most of the economists appear to be Keynesian’s. I came to this conclusion after reading some articles on the Internet about the leading Economics Universities only teaching Keynesian Economics to their students.

What ever happened to the ideal that Universities are a place of learning. What appears to have happened in the last 50 years is they have become a place of indoctrination. Many of the leading US Universities are full of left leaning professors who are prepared to block the entry of professors with alternative views.

George Mason U. adopts a free-market philosophy to an unusual degree. This article was written in 2001 but is no less relevant today.

"In fact, the only doctoral program in the country with a dedicated
   Austrian program is at George Mason University in Fairfax."

“Credit-induced booms inevitably turn to busts, they say. Because people cannot forever spend more than they earn, such a situation will always lead eventually to a period of contraction in which debts must be worked off and savings rebuilt.”

Hmm! Where have I seen that recently – Ah ha Climategate that was it. (Some)Scientists who don’t deserve that title manipulating data to push their climate change agenda and distorting the facts for us to decide for ourselves.

It seems ethics is not taught to these great thinkers in our society.

I was reading an article in the weekend Financial Review about the CEO of Blackrock Investment Management in Australia. He is leaving Blackrock after they were taken over by Barclay’s.

When asked what he was going to do with his time he said he is going to spend the coming months devoting himself to a study of the Austrian school of economics.

He was also an economist in Treasury in Canberra but admits to having never heard of the Austrian school of economics even though it was the prevailing economic system up until the 1920’s.

It would have taken considerable effort for Universities to actually cut out all reference to Austrian Economics from their curriculums. But it appears they successfully did this.

Now Mr O’Shannassy believes this “obscure branch of economics” as the article writer calls it, has come closer than convention (read Keynesian) brand of economics to explain the recent  meltdown.

It’s good to know that someone who has been in charge of a large investment company is now thinking outside the Keynesian box. It also helps me confirm that maybe I am on the right track.

What we need is many more economists like Mr O’Shannassy to switch to the Austrian school and to apply that along with their knowledge, experience and investment skills to create a whole new investment model based on the need to protect investors from this flawed economic model that destroys your wealth and redistributes it.

“The task facing Austrians is to take our theories and get them out there,” says Steven Horowitz, associate professor of economics at St. Lawrence University in New York and a former GMU student. “I can name a dozen schools that have tenured Austrian economists there. We’re putting our roots down in academia.”

It would be too much to hope for just now that an army of Austrian Economic Thinkers can take back the Universities, the Treasuries, the Central Banks and the Wealth Managers and put in place a secure, robust economic system devoid of political short term manipulation and that we can trust to invest for the long term.

Maybe Mr O’Shannassy will be the first of many.

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