He calls them Presuppositions, but hey, tomAYto, tomAHto. The assumptions he is challenging are basically the entire Keynsian economic juggernaut. This is a great Krugman, Yellen, Bernanke et al smackdown.
And LOVE the phrase “trckle down monetary policy.” So accurate, and undoubtedly a phrase that the purveyors of that particular kool-aid would find especially offensive. From John Mauldin’s Thoughts from the Frontline:
The unintended consequences of government policies and manipulation of the markets are legendary. But often unseen.
Monetary policy as it is currently constructed is only marginally helping private markets and producers. Monetary policy as it is currently practiced is an outright war on savers, which sees them as collateral damage in the Keynesian pursuit of increased consumer demand.
It is trickle-down monetary policy. It has inflated the prices of stocks and other income-producing securities and assets, enriching those who already have assets, but it has done practically nothing for Main Street. It has enabled politicians to avoid making the correct decisions to create sustainable growth and a prosperous future for our children, let alone an environment in which the Boomer generation can retire comfortably.
It is a pernicious doctrine that refuses to recognize its own multiple failures because it starts with the presupposition that its theory cannot fail. It starts with the presuppositions that final consumer demand is the end-all and be-all, that increased indebtedness and leverage enabled by lower rates are good things, and that a small room full of wise individuals can successfully direct the movement of an entire economy of 300 million-plus people.
The current economic thought leaders are not unlike the bishops of the Catholic Church of 16th-century Europe. Their world was constructed according to a theory that they held to be patently true. You did not rise to a position of authority unless you accepted the truth of that theory. Therefore Galileo was wrong. They refused to look at the clear evidence that contradicted their theory, because to do so would have undermined their power.
Current monetary and fiscal policy is leading the developed world down a dark alley where we are all going to get mugged. Imbalances are clearly building up in almost every corner of the market, encouraged by a low-interest-rate regime that is explicitly trying to increase the risk-taking in the system. Our Keynesian masters know their policies and theories are correct – we must only give them time to more perfectly practice them. That the results they’re getting are not what they want cannot be their fault, because the theory is correct. Therefore the problem has to lie with the real world, full of imperfect people like you and me.
What our leaders need is a little more humility and a little less theory.
Somehow I missed it when Mauldin coined this phrase back in 2012, but it’s awesome.