Tag Archives: incentive to serve

Understanding Monetary Policy

Because economists as a rule believe in the imaginary incentive to serve, they work on the basis that Federal Reserve Open Market Committee members are selflessly doing all they can to do what is right for the economy.  Because the Federal Reserve is defined as being unbiased and independent, they act on the basis it is.

These notions are fantasy. Monetary policy always comes down to just a few incentives. The members cannot ignore the political agenda of the people who have appointed them. The political agenda always comes down to enhancing the economic lives of all who support and keep politicians in power. This accounts for their total devotion to elevating asset prices and forcing profit margin higher over the past several decades.

The most important factor though is how each individual member of the committee appears others who are observing them. Appearing to doing the right thing is of utmost importance. Saving face as a motivation is absolutely imperative. There is nothing the Federal Open Market Committee members will not do to escape blame.

There will be many statistics cited. Philosophies will be explained. Mountains of mush will be thrown out for everyone to read an listen to. None of that makes any difference. Nothing will matter other than what actions make them look the best.

They are working against the clock. Why do certain economic numbers look good? Because asset prices have been elevated and that translates into consumer demand at the highest income levels. The poor and middle class have been devastated financially during the long term asset enhancement initiative.  They have nothing to spend.

When the stock market finally crashes, the driving force behind the recovery will evaporate and work in reverse. Not only will wealth be destroyed in terms of assets. No other consumer demand will emerge fast enough to keep the bottom from falling out of the overall economy.

Every ounce of energy possessed by the combined staff of the Federal Reserve will be focused on finding a way to blame the coming economic disaster on something other than what they have been doing.

 

 

 

The Imaginary Incentive to Serve

Mother Teresa lived a life of service. Perhaps once in 100 years a genuine selfless person emerges. Don’t expect to find one in politics or as a political appointee.

Self interest is the natural incentive that makes survival possible. Politics works on the belief that there is also an incentive to serve. The natural incentive to serve exists only in the imagination. Voters go to the poles believing that those running for office have every intention of  serving them selflessly. This one misunderstanding is the root of all that goes wrong where government is concerned.

If you ever want to debunk an economic theory, notice whether or not the outcome depends upon a human being acting selflessly. In Keynes theory, he assumes a straw man. The straw man is his version of a selfless entity. Selfless humans do not exist and any theory that assumes the existence of one or more of them is not going to work.

Even mother Teresa acted out of self interest. Chances are her aspect of acting selflessly was acquired. Helping others truly gave her satisfaction. Mother Teresa would have never run for office. It is doubtful she would have any interest in governing other people.