Monday, December 10, 2012

Was Ron Paul Right? (Rhetorical question)

Do be sure to check out my latest interview with the very popular and very awesome Davis Aurini over at my national column in which we discuss the fiscal cliff and the future of America. Here's a brief excerpt:

Danny de Gracia: You recently put out a new video on your YouTube channel which was fairly technical in scope discussing how to govern in a depression. I take it that you haven't bought into the official line that we're "in a recovery" now?

D.M.J. Aurini, my favorite YouTube personality.
D.M.J. Aurini: Absolutely not. Ron Paul and Gary Johnson nailed it: All you need to do is to look at the numbers, or listen to your gut.

With the numbers we’re looking at a shell game. The Consumer Price Index, for instance: it’s supposed to be a measure of how much an average bundle of consumer goods costs for the average person – essentially a yardstick for inflation, showing you how far your dollar will go. In recent years they’ve changed which goods they use to determine its value – they’ve swapped out goods for a cheaper equivalent good, in the effort to prove that inflation isn’t a problem right now.

But what do we see when we’re at the grocery store? Common sense and the alleged numbers don’t add up. The same thing goes for the unemployment figures; they don’t match up to people’s day-to-day experience. The government claims we only have moderate unemployment, meanwhile we have people so desperate for work that they’ll hand over their Facebook passwords and consent to drug testing.

This isn’t a recovery. It’s quantitative easing. Free money for the banks. At best we’re only kicking the can down the road. This spend-through-the-nose behavior is going to catch up with us.

DDG: Why didn't the "expert" economists see this coming, prior to the 2008 banking crisis?

Aurini: Have you ever met a gambling addict who has a system they swear by?

Gambling’s never been particularly attractive to me for the simple fact that I understand how probability works. Let’s take slot machines: If you play a slot machine once in your life you have a – let’s say – 1/20,000 chance of winning $10,000. Those are stupidly bad odds, of course, but it only gets worse from there. Most people don’t just play once; they’ll pull the arm hundreds of times in their life. And the longer you play, the more normalized to the curve you become and the worse your odds become. Even if you do win that $10,000 eventually, it’s only after having spent $9,000 on tokens.

And yet gambling addicts swear they have a system.

Sometimes the system is a misunderstanding of mathematics, other times it’s a personification of luck, but regardless of what it is there are two mental errors which support their system: One, they assign meaning to an apparent pattern, which is truly a result of random chance; and two, they are more likely to remember evidence which supports their theory than evidence which discredits it. A few chance wins early on, and they’ll continue to butt their head up against the wall for years.

This is precisely how most ‘expert’ economists think. The only difference is that four years at the School of Voodoo Economics allows them to make their ideas sound more sophisticated than they actually are. In the end what most of them are doing is nothing but high level rationalization.

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