I read Yves Smith’s post on why the field of economics is so poor at forecasting, and poorer still at recognizing its failings and was inspired to write the following:

Can’t we all just get along? Oh, sure variety is the spice of life and all that, but what does it really matter if you can trot out the exception (Larry Elliot, Yves Smith, Nouriel Roubini, Niall Ferguson, Ambrose Evans Pritchard, and some others) that proves the rule (Economics as a field of study is as bankrupt as the US economy), when the facts will out that the United States is in the absolute worst economic crisis EVER? Economics, particularly the branch that espouses neoclassical theories, is useless to try and understand how we got here, where we are, and where we are going.

Try history instead. It’s a hell of a lot more insightful and informative because it gives you a picture of reality (what motivates people, how they act, the forces they react to) and if you’re smart enough you can actually see patterns and begin to apply it to society at large. Unlike economics, which is useful only when you control for all variables and you postulate perfect information, perfect competition, etc, etc.

So as economists reassure us that we’re in a recession and they see it ending sometime in the second half of 2009, maybe early 2010, you should be thinking: BULLSHIT. Sure people will argue and try to point to the contra indicators that say the credit crisis is over, the stock market is stabilized, the USD is still reserve currency of favor, unemployment is in historical normal ranges, people are still buying American cars, Chase had a profit (what a good use of those TARP funds), entrepreneurship thrives in a recession, the housing market has bottomed, mortgage rates are at an all time low, gas is less than $2 a gallon, and so on, and so on.

But all of that is just plain nonsense. A statistician might say it’s all spurious. In reality, the fun (for all you sadists) is just beginning. The post-war American dream of every generation building on the successes of the previous generation is on hold. It’s done. Game over. Time’s up. Music’s stopped. Piper must be paid. Choose your favorite metaphor. But the facts remain, the United States economy is entering an unrecoverable (in the near term 5-10 years…pray tell not longer) slide into massive destabilization. You can forget about doing better than your parents did. And your children can forget about doing better than you did. People need a massive collective reset. Washington needs an even more massive reset.

You can’t print money until the cows come home and expect to sell the guarantees on that money to sovereign wealth funds without them getting mad as hell when they realize they’re holding a bag of shit. Oh but the Fed call that Quantitative Easing. I call it mortgaging our future, or worse.

You can’t sustain consumption when real wages are declining, the savings rate is negative, and the second largest credit issuer in the country is ratejacking. Shouldn’t that be a crime like carjacking? What’s the difference really?

You can’t rebuild an economy laden with $$ trillions in debt, no wage growth, no job growth, extreme concentration of wealth, rampant fraud and mistrust, and no viable long term systemic means of creating long term (100+ years) value. If you subscribe to the labor theory of value instead of marginal utility, look at the facts and quickly you’ll see we’ve created a perfect storm of anti-value creation (is there such a thing? hmm.)

It’s time somebody started listening to historians.   While most are still drinking the neo-classical economic Kool-Aid(TM), it’s time for a great economic awakening. But forget about economists leading us to the promised land. They’re hopeless.

And by the way, I’m not a pessimist…I am a realist, but sometimes the truth hurts.