When people hear the word “model” they instinctively think of a tall, graceful, female marching down the runway as the music blares, the flashbulbs pop, and the audience gazes in awe.
If you’re a Keynesian, however, the word “model” brings to mind something completely different.
The day after the Federal Reserve’s announcement of Operation Twist and the financial market’s response to “significant downside risk,” the Keynesians are out in full force. First, appearing on Bloomberg were two former Fed officials who applauded the Fed’s actions by saying it probably wouldn’t help, but if it could add a few hundred thousand jobs, then why not.
When pressed as to how it would add those jobs, they responded by saying “many economist were consulted, and their models said it would happen.”
Next, we heard from analysts and pundits from Wall Street on CNBC, saying the action by the Fed created an overreaction and worldwide selling across the board in every asset class except treasuries.
They also said this would obviously create a wonderful stock buying opportunity fairly soon. Once again, when pressed as to why, the analysts and pundits reverted back to their standard response.
Stating they observed their models over time “this is how we should respond.”
Finally, the man I’ve been waiting to hear from, Treasury Secretary Tim Geithner, chimed in by applauding the Fed’s actions and then condemning China for their currency, scolding the Europeans for not taking on more debt, and belittling Congress for its proverbial breakdown.
As to why these things should be done his way, little Timmy put his hands out in his inevitable style, looked down, then looked up, and said over his elevated nose “the models said so.”
Economic success is very simple to measure; it means more jobs and housing stability. The success of the Keynesian models has continued to come up way short. It doesn’t take an economist, a CFP, or even a young child who has few dollars to understand that absolutely none of the modeling has worked.
Please, let’s all come to one conclusion.
When you hear the term “model,” forget Keynes and think Tyra Banks.
Geithner has the hair for it, but he’s no model.