The Richmond Fed’s Kartik Athreya has decreed that only the knob-twisting, interest-rate tweaking Banking Priestly Class should be allowed to talk about economics.

Ambrose Evans-Pritchard puts him in his place:

Like a mad aunt, the Fed is slowly losing its marbles.

Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.

Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”

Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa. […]

Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.

Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.

They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”.

The first part of this piece, here, discussed Hanna Rosin's recent piece for The Atlantic, titled "The End of Men."

Part II: Shop Class as Soulcraft, "Idiot Work" and Other Observations

We are pre-occupied with demographic variables, on the one hand, and sorting into cognitive classes, on the other. Both collapse the human qualities into a narrow set of categories, the better to be represented on a checklist or a set of test scores. This simplification serves various institutional purposes. Fitting ourselves to them, we come to understand ourselves in the light of the available metrics, and forget that institutional purposes are not our own.

-- Matthew B. Crawford, Shop Class as Soulcraft

As a young man, Matthew B. Crawford developed an interest in repairing automobiles and motorcycles. The son of a physicist, he found that there was a difference between his father’s abstract, theoretical understanding of things and the tacit, real-world knowledge of the experienced gearheads he bumped elbows with at the shop. He worked his way though parts of college as an electrician, and found the work to be both satisfying and mentally engaging.

After picking up a Master’s Degree in Philosophy, he took his place as a “knowledge worker,” writing abstracts-by-formula for a company that indexed scholarly articles. His more esteemed job paid less, and was somehow less mentally engaging. The work lacked integrity, because in his words, it “could not be animated by the goods that were intrinsic to it.” His company produced products (abstracts), but the company was owned by a media conglomerate, and those products were merely a set of numbers in that company’s portfolio of holdings. The quality of the abstract itself didn’t matter; it didn’t really even matter if he understood what he was writing about, and the quantity of abstracts demanded guaranteed that even a smart guy like Crawford could never really be invested in what he was doing. It was busy work, and it encouraged a kind of lackadaisical attitude among his co-workers. One fellow confessed to him that he was doing heroin on the job.

Crawford eventually went back to school and earned a Ph.D. in the history of political thought. He took a high paying job at a Washington, D.C. think tank, and was tasked with coming up with scholarly-sounding arguments that “put a scientific cover on positions arrived at otherwise.” Any honest person with a substantial vocabulary and an aptitude for fancy writing will tell you that it is easier to come up with dazzling bullshit than it is to actually think. (See also: “the art world”)

After five months at the think tank, Crawford quit and opened up his own motorcycle repair shop. An education in the “liberal” arts didn’t lead to anything as freeing as being a man who is directly accountable for the quality of his own work, solving the kinds of problems that can’t simply be talked away. A motorcycle either runs properly or it doesn’t. You end up with the satisfaction of actually having fixed something and the feeling that you earned your fee, or you to take responsibility for your inability to fix it and make it right with the customer.

The satisfactions of manifesting oneself concretely in the world through manual competence have been known to make a man quiet and easy. They seem to relieve him of the felt need to offer chattering interpretations of himself to vindicate his worth. He can simply point: the building stands, the car now runs, the lights are on. Boasting is what a boy does, because he has no real effect in the world. But the tradesman must reckon with the infallible judgment of reality, where one’s failures or shortcomings cannot be interpreted away. His well-founded pride is far from the gratuitous “self-esteem” that educators would impart to students, as though by magic.

In Shop Class as Soulcraft, Crawford shows how work, beginning with manufacturing work but extending to today’s “knowledge work,” has been degraded by a separation between thinking and doing. He offers the example of a nineteenth century wheelwright, whose craft demanded that he know how to select trees and when to fell them, and whose skillfulness and ingenuity was tested by the unique characteristics of each piece of wood. The work was holistic; as he did the work, he had to think about the end product. There was a sense of individual agency in the work, and each wheel he completed was proof of the quality of his labor -- something he could be proud of. However, when the individual craftsman was replaced by factory assembly line, the work could no longer be holistic. The work of one man was separated into processes to be performed by many men, interchangeably. A series of steps that were once challenging and engaging became repetitive drudgery, the performance of a process. The expert, personal, tacit knowledge of the craftsman was replaced, often inadequately, by the documentation of his “process,” and the understanding of the whole was concentrated into the hands of a few who in most cases didn’t actually do the work and understood it only in the abstract. The systemizing of work into process has become the norm, and it applies to white collar work as well.

George Soros has announced that Germany’s fiscal austerity measures might lead to “xenophobia,” reports Ambrose Evans-Pritchard,

"German policy is becoming a danger that could destroy the European Project. A collapse of the euro cannot be excluded," he told the German weekly Die Zeit.

"Unless Germany changes policy, its withdrawal from the currency union would be helpful for the rest of Europe. At the moment Germany is pushing its neighbours into deflation: this threatens a long phase of stagnation, leading to nationalism, social unrest, and zenophobia. It endangers democracy," he said.

Mr Soros saw the political effects of wage cuts first-hand during the Great Depression, and narrowly survived the Holocaust as a Jewish boy in Nazi-controlled Budapest. He has since dedicated much of his wealth to philanthropic works promoting freedom and pluralism across the globe, mostly through Open Society institutes.

When I was at school, I learned that it was the Weimar hyperinflation -- and not all those terrible Weimar balanced budgets -- that destroyed the savings of the German middle class and set the stage for the Rise of Evil. But who I am to question Soros’s novel theory? He was there after all…

As with all sociopaths, one must look beyond what Soros says (“gold is the ultimate bubble”), and focus on what he does (buy gold.)

My speculation is that Soros senses that the Eurozone might dissolve and wants to make a killing off selling the Euro short, much as he did with the pound sterling in 1992. Contrary to what Soros and Paul Krugman are telling the world, the only way that an El Dorado currency like the Euro could ever survive would be if the European governments practiced serious fiscal restraint and never prompted a “run on the Euro” by bailing out weaker countries or ginning up phony growth through “quantitative easing” (read "money printing," Weimar-style) and massive, unpayable debt loads. (Soros knows this; someone like Krugman probably believes his own Keynesian nonsense.)

One hopes the Germans won’t cower in the face of all this "Nazi" talk and take Soros’s advice/bait.

Geithner, Summers, Bernanke, and Co. should be careful what they wish for.

Global markets fear US Treasuries sell-off as China ends currency freeze

By Ambrose Evans-Pritchard
The Telegraph, 20 Jun 2010

Global markets are braced for a possible sell-off in US Treasury bonds after China said over the weekend that it will allow the yuan exchange rate to adjust against the dollar, ending a two-year currency freeze that has led to trade clashes with Washington and Brussels.

China's Central Bank said the economic recovery had opened the way for a return to "flexibility" but ruled out an immediate one-off rise in the yuan. The currency will be allowed to fluctuate within a widened band of 0.5pc each day against a basket of currencies.

The yuan is now expected to rise slowly against the dollar, although it may fall if the euro weakens further. "There is at present no basis for major fluctuation or change in the exchange rate," said the bank.

The policy shift is a goodwill gesture towards the US and Europe before next week's G20 meeting in Canada as a rising yuan helps Western industries compete against Chinese imports. US Treasury Secretary Tim Geithner welcomed the step but said "the test will be how far and how fast they let the currency appreciate."

For a long time now, Washington has been labeling China a wicked “currency manipulator,” and forecasters have followed with regular predictions that this will be the year that Beijing finally ends its peg and allows the yuan to float upwards. It's apparently now happening, and Washington is excited about the prospect of getting its turn at having a relatively weak currency and expects that such a move will rescue American manufacturers and exporters.

As the theory goes, if a country’s currency is just weak enough, then its products will be relatively cheap, and the country will gain a comparative advantage. (Rarely mentioned is the implication that prudent savers will be destroyed.)

From The Economic Collapse Blog.

There are quite a few U.S. cities that are complete and utter economic disaster zones in 2010 (Detroit for example), but there is something about the demise of Las Vegas that is absolutely stunning.  In recent decades, Las Vegas has become a symbol for the over-the-top affluence and decadence of America.  But now it is a microcosm of the economic nightmare that has gripped the entire nation.  When the subprime mortgage crisis stuck, no major U.S. city was more devastated than Las Vegas.  When the recession went from bad to worse, Americans decided that they really didn't need to gamble so much and casino revenues plummeted.  Suddenly unemployment started to increase dramatically in Vegas and even today it continues to soar.  Like so many other cities that are highly dependent on tourism and entertainment, Las Vegas has gone from boom to bust.  Local officials are hoping that the worst will soon be over, but the truth is that the worst is yet to come.  As the U.S. economy continues to unravel, average Americans will be spending what little money they do have to put a roof over their heads and to feed their families.   The truth is that the glory days of Las Vegas are over and they are not coming back.

Already, the number of unemployed in Las Vegas is reaching unprecedented levels.  Unemployment rates for the state of Nevada and for the city of Las Vegas both set new records during the month of April.  In Las Vegas the unemployment rate in April was 14.2%.  For the entire state the unemployment rate was 13.7%.