The Biggest Fraud in Economics

Forget ‘peak oil.’ Or so they say. It has fracked its way to energy self-sufficiency.

Porter Stansberry:

… there are roughly 20 major shale oil plays in the US. The largest five of these new reservoirs have more than 20 billion barrels of recoverable oil… meaning that each of these new fields is not only the largest in US history (by a wide margin), but that each of them, individually, would more than double the proven reserves of domestic oil…

That is why America is on track to be the world’s leading producer of oil within the next five or six years… and why the most knowledgeable oil analysts are predicting a new all-time high of American oil production by 2017. In fact, we’ve already become a net energy exporter for the first time since 1949.

The Wall Street Journal tells us that the US will not import a single barrel of oil from the Middle East by 2035.

Hey, wait a minute. Wasn’t that supposed to be why we’re spending trillions on wars in Middle East…to keep vital supplies of black goo headed our way?

Of course, the numbers never really made any sense. Neither did the logic of it. It would have been a whole lot cheaper just to buy the oil on the open market. Trillions cheaper.

But money isn’t everything. The US needs to guarantee access to oil…or its whole economy might be brought to its knees.

Which is probably a good place to introduce a new idea:

The biggest fraud in economics is economics itself.

What’s the point of having an economy? It is so that people will get the stuff they need and want. The more efficient the economy, the more stuff people get with the least effort and expense of resources.

It makes no sense to waste trillions of dollars’ worth of resources just to “protect the economy.” The whole point of an economy is to create more stuff…not to waste it. You might just as well try to protect your health by committing suicide.

Most economists are fools or knaves. The knaves want to get prestigious jobs and Nobel prizes by offering crackpot advice. The fools think it will work.

A few months ago, they were concerned with peaks. There was a peak in oil production. There was a peak in food production. There was a peak in available water coming. Then, a peak in peaks must have been hit.

Now there is a peak in valleys. All of a sudden, the peaks are far away. Commodity prices are falling, not rising. Deflation is economists’ worry, not inflation. Deflation is an impediment to growth; everyone believes it.

The European debate is largely a dispute over which fraudulent solution will cause ‘growth.’ The austerity crowd believes it has to clamp down on government spending. This will give investors’ confidence in government bonds. The feds will be able to borrow again. The economy will grow. All will be well.

The economic stimulus crowd targets growth directly. It wants the feds to spend…creating jobs, incomes, spending and so forth.

Paul Krugman is in The Financial Times:

“At a time when the private sector is engaged in a collective effort to spend less, public policy should act as a stabilizing force, attempting to sustain spending.”

Krugman says the real problem is a lack of demand. People just don’t want to spend their money. This is something that needs to be fixed!

Why? Why not let people decide for themselves when they want to spend and when they want to save? Why let the government do for them what they do not want done? Krugman doesn’t bother to think about it.

He is worried only about growth. He is afraid that the economy will collapse completely before austerity measures lead to growth. The austerity group worries that government-led ‘growth’ will blow up the economy before it has a chance to turn into real, private sector growth.

Neither side doubts that growth is the key. Almost everybody agrees: we have to pursue growth. “The Hero,” Ben Bernanke, does it by printing money. Congress and the administration do it by running trillion-dollar deficits.

Nobody doubts that ‘growth’ is the key to progress, happiness, and maybe even Heaven. But there’s the foundation of the great flim-flam right there.

Why do economists think ‘growth’ is such hot stuff? Because they can measure it…

Economists can measure GDP. They can tell when it goes up…or when it goes down. Generally, more is better…because it means the economy is creating more stuff. So, economists tailor their policy recommendations…their theories…and their editorial page blah- blahs to the goal of stimulating growth.

But is growth a good thing? Is it the same as progress and prosperity? Is more stuff what the world really needs?

Just 5 years ago, TIME magazine thought the US needed more stuff…in the form of houses. Seventy years ago, the US needed more stuff…in the form of tanks and fighter planes.

Forty years ago, US economists – notably Samuelson – were convinced that the Soviet economy would soon be larger than the US economy. Why? It could produce more stuff. They had charts to show how stuff production in the Soviet Union was increasing…and how it would surpass the US in just a few years.

And what happened? It didn’t matter. The stuff was worthless.


Bill Bonner
for Markets and Money

From the Archives…

The US Deficit of Deceit
2012-06-22 – Greg Canavan

How Nice to Have Friends At the Fed
2012-06-21 – Bill Bonner

Deep in the Stock Market Trenches
2012-06-20 – Murray Dawes

In Praise of the Eureka Rebellion
2012-06-19 – Dan Denning

What Could Possibly Go Wrong With Infrastructure Investment Bonds?
2012-06-18 – Dan Denning

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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6 Comments on "The Biggest Fraud in Economics"

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I have long wondered why “growth” is the goal of economists and politicians. The books of Thomas Homer-Dixon have explained that growth is required so long as the population is growing. Ideally, the economy should grow at the same rate as the population so that GDP per capita remains stable. What you want to avoid is a decline in GDP per capita.


Exactly! The whole concept of “Growth” needs to be questioned. A very important article, but isn’t the person in the street more concerned with how their football club is going?


The reason the US gets it’s oil from everywhere but the US is because they can just print dollars or wire a country some ones and zeroes and they will GIVE US their oil.That game will not last too much longer.


Another concept that could bear some exploring is whether or not the concept of “peak government” has any validity. I’m thinking that it does and that the stumbling economies of the world are in such trouble now because non-productive government is consuming the nations that gave them birth.


My contention is that the power of corporatists (the government within our governments) will grow in power (as it has been for a very long time) while the visible forms of government which most people relate to will necessarily shrink. I guess the latter is some relief. Unfortunately the future of our governments from this standpoint looks a little more authoritarian and a little less democratic though I question very much the potency of any democracy we have had. How much democracy and how much illusion of democracy?


The biggest Fraud is believing that we as humans can indulge in experiencing perpetual growth.
There is no such thing as Exponential Growth. The Most IMPORTANT Video You’ll Ever See – Prof. Alfred Bartlett (playlist)

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