The last half of the old saying, "figures don't lie, but liars can figure." I'm referring to what is by far the most important story to have surfaced in the last couple of weeks, the tale of a paper written by two Harvard trained economists, Carmen Reinhart and Kenneth Rogoff.
This paper, called Growth in a time of Debt, purported to show that, when a nation's debt exceeded 90% of its annual GDP, a tipping point was reached which crushed economic growth. It has been constantly quoted and hailed far and wide by proponents of the miserable "austerity" policies which have nearly destroyed the European economy, and which continue to damage our own.
It now turns out that this paper contained a number of serious errors, the most comic of which (if it wasn't so catastrophic) was a simple Excel coding error that "accidentally" left out the data of several of the most well-off countries. Including that data, the conclusion of the paper is totally negated. Thus it may be very fairly said that a large part of the suffering forced upon the people of Greece, Spain, Ireland, Italy, and indeed here, is the result of what can at best be considered a mistake which anyone who uses Excel should be able to spot quickly.
I am not an economist. I tried to find a way to explain the whole thing quickly, but as you might anticipate, I was easily bested by Paul Krugman, who is beginning to seem like the only sane voice in the whole mainstrteam press:
"In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact.
...the truth is that Reinhart-Rogoff faced substantial criticism from the start, and the controversy grew over time. As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around, with poor economic performance leading to high debt. Indeed, that’s obviously the case for Japan, which went deep into debt only after its growth collapsed in the early 1990s.
Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results."
I occasionally recommend that your read some article- I plead with you to read all of this one, as it reveals the utter bankruptcy of the endless campaign by the rich and powerful to restructure the whole world for their sole benefit.
Krugman, of course, never gets to the question of motive. As a civilized individual he is content to let this whole incident pass as a tragic mistake. Green Eagle has no such brake on his behavior, so he will take up the question with a few comments about Carmen Reinhart.
Before continuing, however, I need to turn to another subject: that of Peter G. Peterson. I was surprised a couple of days ago to discover that my wife had never heard of him, and if she hadn't, I suspect most other people haven't either. Here's some information from an article in the Los Angeles Times:
"Who's the most influential billionaire business figure in national politics?
If you answered one of the Koch brothers (Charles or David) or George Soros, you're wearing your partisan blinders. The former are known for their devotion to conservative causes, the latter to liberal. In either case, you're wrong.
The most influential billionaire in America is Peter G. Peterson. The son of Greek immigrants, Peterson, 86, served as Commerce secretary under President Nixon, then became chairman and chief executive of Lehman Bros. Subsequently, he made his big money as co-founder of the Wall Street private equity firm Blackstone Group.
Peterson doesn't attract venom from the left like the Koch family or bile from the right like Soros. In Washington, he's treated with sedulous respect as a serious thinker about public policy willing to support earnest public discussion with cold cash. His money backs a large number of think tanks across the political spectrum...Peterson's views are subtly infiltrating the Washington debate — which is why Americans should start getting worried about him."
Peterson is the number one proponent of "austerity" proposals in the United States. And let me say that I put that word in quotation marks, because it always turns out to mean austerity for you and me, but more money for people like Peter G. Peterson.
Now, why the detour to discuss Peterson? Well, it turns out that, in 2010, a few months after publishing this paper,
"Carmen Reinhart, the University of Maryland professor who has studied eight centuries of financial crises, was named a senior fellow at the Peterson Institute for International Economics, the Washington-based nonprofit said."
But of course, nothing to be seen here. You can be positive that, with this "appointment" Reinhart's income increased vastly, but of course that could not possibly suggest that there is anything deliberate in her having produced a fallacious piece of academic "research" which so fully supported the positions of her future employer. And just to add insult to injury, we learn:
"Her husband, Vincent Reinhart, is a former monetary- affairs director at the Federal Reserve and now resident scholar at the American Enterprise Institute"
The American Enterprise Institute- possibly the biggest corporate lie factory in the United States.
So, the question remains, cheesy, high school grade error, or deliberate lie fabricated to delude the nations of the world into following a ruinous economic policy? Unfortunately, whichever is true, the results are likely to remain the same. I'll give Krugman the last word:
"So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on."