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Monthly Archives: December 2012

The President of the EU Commission José Barroso states:

“I regard Holland already for years as a guiding country, as the political thermometer of Europe. You saw that in the tolerance of softdrugs, the gay marriage, the debate on euthanasia, but also in the rise of the new right-wing extremism of Pim Fortuyn. Holland with its deep-rooted democratic tradition has shaken off political correctness earlier than other countries. Therefor I am alert on what is happening in Holland, that often forecasts the trend in the rest of Europe.” (Interview with de Volkskrant September 22, V10)

(1) Fortuyn wasn’t quite right-wing. We already had Jean-Marie Le Pen in France, Jörg Haider in Austria and Umberto Bossi in Italy. What happened is that 9/11 caused a mood swing all over the world, and Fortuyn with his own agenda took advantage of the surf. When outsiders misread what is happening in Holland does not make it a good thermometer. (Even apart from that correlation isn’t cause.)

(2) The tolerance for softdrugs is much of a disaster. Personal possession of a small quantity is tolerated but coffee shops cannot legally buy from suppliers. This causes an underground criminal and violent economy. It is an inane approach that blocks the real solution of bringing drugs into the law all over the world. Blast Holland instead of sending your youngsters to Amsterdam to have their high.

(3) One kind of political correctness merely replaces another kind. It may be doubted whether it is possible to shake off political correctness per se. The criterion lies rather in the respect shown for differing opinions.

(4) It must be hoped that the censorship of science that now lasts in Holland for 23 years does not cause a trend in Europe. That nice journalist of de Volkskrant who had the interview with Barroso doesn’t report about the censorship of science by the directorate of the Dutch Central Planning Bureau either. Perhaps Barroso has indeed taken Holland as a guide here, and Europe now gets the same treatment from Brussels ? What secrets are lurking there that we do not hear about ? Well, no need for paranoia, but it is a useful observation that the EU doesn’t have an Economic Supreme Court of itself (that might co-ordinate the national ESCs) – and check out the scientific conditions in the appendix of DRGTPE.

(5) Boycotting a EU country that censors science would be a good trend though. Start with Holland.

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The Swedish tv program World of Science had a broadcast on Economic Science and the Debt Crisis’ (YouTube, English subtitles ‘Vetenskapens Värld’ 19-11-2012). It shows us the desolate half-built houses and home evictions in Spain and wonders why economists went astray before 2007, and why in 2012 and four years after the Lehman collapse in 2008 this crisis still isn’t resolved. A main worry is whether economists still might go astray right today. The Swedish video ominously ends with the risk of a collapse of the housing market in Sweden.

In 2008/9 officials claimed No one saw this coming (paraphrased). The highest officials excused themselves in this manner, like Alan Greenspan (well-known) and Nout Wellink (not well-known but president of the Dutch Central Bank and chairperson of the Bank of International Settlements in Basel, i.e. the central bank of central banks).

Queen Elizabeth famously asked ‘if these things are so large, how come everyone missed it ?’ (paraphrased). To answer this same question, the Swedish video has interviews with Nobel Prize winners Joseph Stiglitz (Columbia University) and Robert Lucas (University of Chicago), officials Michael Kumhof (IMF), Jörg Asmussen (ECB) and Stefan Ingves (Swedish Central Bank), and scientists professor Steve Keen (University of Western Syndey) and dr Dirk Bezemer (University of Groningen).

The video is very instructive, by itself but also since it shows that Dirk Bezemer disinforms Sweden. The flow of information of economic science to the general public still isn’t optimal.

The video focusses on the phenomenon that economic models at the official institutes tended to exclude the financial sector. Even at the central banks. These models assumed that money was only greasing the wheels and not a factor of itself. The Great Depression in the 1930s occurred because money can be a factor in itself, notably when people have debts that they cannot pay back. But most economists apparently thought that this was long in the past. At the Central Planning Bureau in Holland around 1990 some models included a monetary / financial sector, following the criticism of Milton Friedman, but in practice that sector seemed superfluous. The financial sector in 1981-2007 was booming but it did not play a role in the main models. See also my earlier text here on the Keynesian years.

In the video, Robert Lucas is in a state of denial. Joe Stiglitz doesn’t have much of an answer though everyone at George Soros’s Institute of New Economic Thinking (INET) listens attentively to what he has to say, perhaps trying to find out whether there is something New in it. The officials explain that they are doing their best and that we have to muddle through. Keen and Bezemer explain the mechanism of debt. If you borrow and invest, the economy will grow because of that investment. If you invest wisely then you can pay back what you borrowed. If you invest unwisely you cannot pay back, but still have to. Banks are supposed to have buffers for failing clients. Things can go wrong when many clients fail at the same time. It doesn’t help when there has been fraud in the system and you don’t do anything about that, even when the proof is so obvious after the system collapses. (And it doesn’t help when the environment is not accounted for in your measure of growth.)

Bezemer did not warn about the crisis before it happened. He was an economist on agriculture and development with a 2001 thesis in that area. He however wrote a paper No one saw this coming that shows that plenty economists warned about the crisis. What was obvious for everyone who had seen the crisis coming has now been documented for a larger public.

Our high officials deliberately chose to neglect contrary evidence, not only before the onset in 2007 but still continue to do so. Much of the economic history of the last five years is about how the world deals with embarrassment in high places. For example, in the recent European Summit Bundeskanzler Angela Merkel succeeded in blocking further discussions, with the effect that the German trade surplus doesn’t get the criticism that it requires. The attitude is as if the debtors are the problem but economically the creditors are important too.

I did warn about the crisis, see DRGTPE 2005 on the financial system, though I was amazed that George W. Bush allowed Lehman to collapse. Who also warned is professor Alfred Kleinknecht of the University of Delft. He and I do not occur in Dirk’s paper because neither of us used explicit financial models. He and I just followed economic developments and used common economic sense and statements of those with the alternative models. Dirk’s criterion of quantitative finance is also rather strict since I employ economic theory and propose a new neoclassical synthesis, which allows us to understand that crises will happen when countries do not have Economic Supreme Courts. (Not only financial crises but also ecological crises for example.)

Thus, when I read Dirk’s paper in 2009, I complimented him on his fine work, but also informed him about the censorship of economic science at the Dutch Central Planning Bureau. Also, Dirk’s paper emphasises the role of accounting for economic modelling. Indeed, debt can only play a role when you properly account for it. Dirk’s paper has a bit of a flavour as if this would be a new discovery and original contribution of himself. However John Hicks 1904-1989 and Nobel Prize winner in 1972 already famously pointed to the importance of accounting. And my analysis in DRGTPE also achieves an important result by accounting. I asked Dirk whether he could check that also since a corroboration would be useful in general.

There evolved an exchange of emails. Indeed, I write ‘Dirk’ instead of ‘Bezemer’, which reflects this exchange. To my regret Dirk concluded that I would not ‘communicate effectively’. I disagree and find that he doesn’t listen well. I still have the impression that he hasn’t read DRGTPE. See here my overview of our differences of opinion, and it amazes me that he doesn’t formulate a reply.

There is also the case of professor Alfred Kleinknecht of Delft. Like me he criticises for twenty years the Dutch export surplus. The surplus of the North is the deficit of Southern Europe. Dirk can check as an academic outsider that Dutch official institutes and bureaucrats abuse economic science. But he doesn’t. Dirk isn’t interested in who saw it coming, but of course has to write a paper that will be accepted by journals.

Dirk’s paper ‘No one saw this coming’ is more useful than that of Nobel Prize winners Lucas and Stiglitz and the officials at IMF, ECB and the Central Bank of Sweden, but it still is incomplete, biased and inadequate if you want to understand the current crisis. Apparently Dirk has also a page at INET. It is not clear what is New about ‘No one saw this coming’ since it only states what was known, so there must be other New ideas. Clearly Dirk didn’t use his contacts there to inform INET and Joe Stiglitz about the new ideas in DRGTPE and the censorship of science in Holland. Dirk doesn’t tell the Swedish camera that there is censorship of science in Holland and that everyone is advised to boycott Holland till that censorship is resolved.

Dirk seemed part of the solution but turns out to be part of the problem. He seems critical but he actually isn’t. You are warned now. Though Dirk’s paper might seem critical, do not conclude that he has an open mind. On camera he is nice and helpful and knowledgeable, but apparently this is not the whole picture of the situation.

When John Maynard Keynes wrote his ‘General Theory’ he of course couldn’t require the world to read it, but he could do so for his students, and apparently World War II was a sufficient nutcracker to open up more minds. Currently I don’t teach economics and I am hoping that we can prevent World War III in say 2050 or even a local war here in Europe that doesn’t get the rest of the world involved again. Perhaps Dirk is waiting for a new crisis like that so that he can write No one saw this coming’ again. But okay, this may be unkind of me to say. But it is frustrating when you hope for an open mind and a scientific attitude, and you find evidence to the contrary again.

As a student in highschool in 1970 I wanted to study archeology because I found mankind’s past fascinating. I read thick books on the history of Russia and China as well, for which reading I am still very grateful since some such knowledge still is very helpful in understanding the world. However, at that time there were tv broadcasts about Biafra and the death of innocent people and children. Since politics is determined so much by economics – at least, this is what I learned from those books on Russia and China – I decided to study econometrics instead. Now I have developed my analysis in DRGTPE that can help prevent new Biafra’s. There is little that I can do about this anymore. It are my fellow economists who have to study my analysis, and it are the public and the political powers that have to decide whether they want to adapt the Trias Politica of their nation with an Economic Supreme Court. Fortunately I forecasted the crisis and forecast more crises to come, so there is some likelihood that circumstances will allow rationality and kindness to prevail. With unemployment and poverty essentially solved, I have more moral freedom to pursue other interests. Archeology popped up again.

Sometimes a person can surprise himself. This happened this year with me on the subject of both mathematics and religion. The ordeal started with the earlier weblog entry Crucifiction, deliberately spelled in that manner since the crucifixion might be fiction. At first I thought that the subject had taken too much time already, but then it hit me: the subject lends itself magnificently as a contribution to the education of mathematics. My new book The simple mathematics of Jesus proves the point (and corrects that earlier weblog entry Crucifiction).

(1) In the didactics of mathematics there are the levels of understanding discovered by Pierre van Hiele and Dina Geldof. Line and circle are abstract mathematical notions but pupils will first develop a less abstract understanding such as walking straight or riding a merry-go-round. In the same way the divine can be understood as an abstract notion that people first learn at lower levels of abstraction. Indeed, mathematics can be applied to all kinds of subjects, space, numbers, physics, and it can be enlightening to apply it to the story of Jesus.

(2) Our civilisation developed with religion and mathematics in tandem or in tango. Early religion was linked up with astrology. This predecessor of astronomy still required mathematical talent. The zodiac is the early calendar required for agriculture and the seasons of sowing and reaping. The sun, moon and five known planets were worshipped as gods and goddesses. The early mathematics of the Old Testament was dogmatic and part of mathematical autism transferred into religious intolerance. Levels of misunderstanding contributed to religious wars. Only with Thales and Euclid there arose the liberty of posing axioms and the notion that a proof is required, and that only your own mind can force you to accept a proof. In the New Testament (Matthew 22:36-40) Jesus indeed reduces the Ten Commandments of Moses to the mathematically sufficient two demands to hallow God and love thy neighbour as yourself. Unfortunately both religion and mathematics still suffer from the ancient culture of dogmatism and haven’t amply adjusted to the discovered freedom yet. Also, that the Bible relies upon astrology was considered a strong point up to the middle ages since that was the best that the ‘science’ of the period had to offer. Since then astronomy has taken over and religion hasn’t been able to follow suit.

(3) Mathematics doesn’t only apply to the development of the calendar and astronomy. There is also the mathematics of information theory, text analysis, the study of patterns in story telling and theatre. Writing and reading were a problem in the past – at least more than in our times – and the astrologers relied on stories to relay their findings. To be remembered and retold, a story had to be good. The astrologers may have been masters in encoding information into stories that capture the imagination. Jesus is born in the sign of Capricorn. The goat becomes the scapegoat that carries the sin of the world, and that is slaughtered later as the lamb of god to redeem us from that sin. The agricultural season in the Middle East differs from that of Northern Europe. Sowing of barley and wheat takes place in November and December, or in the astrological sign or house (= Beth) of bread (= Lehiem). We also see the ass and ox that pull the plough. The harvest begins at Easter, and Jesus then is the human sacrifice required for a good crop. Analysis of such themes suggest that Jesus was not a historical figure but came into being as a theological concept, similar to how Sherlock Holmes has become the quintessential detective. People have to decide for themselves naturally but it is enlightening to consider the evidence.

Composing The simple mathematics of Jesus has been an adventure. Since 1970 I have been keeping notes in the margin and such insights coalesced now. 5000 years of history are not easy to handle. So I put the evidence in “panels” of about a page each, and the reader can evaluate the steps. The whole allows the reader to link up mathematics with history, philosophy and religion. Standard histories tell that Pythagoras and Plato went to Egypt to study, but we see only few discussions that Plato’s Academy was actually a Pythagorean School, and that centuries later the Pythagoreans and Platonic philosophers in Alexandria in Egypt had a great influence on the development of Christianity. It is enlightening for an understanding of our civilization to join up these bits. If you get to read the book: brace yourself, and enjoy !

The book also relates to the current economic crisis. Does neighbourly love have a future ? For this, my economic analysis applies again. In economics everything hangs together, and I can refer to my other earlier weblog entry on the high treason of the high priests …

In July I promised to write on “the EU ‘superstate’ and its risks of war”. In the mean time the EU has received the Nobel Peace Prize, so apparently my thoughts are not completely out of sync. The problem however is war and not peace.

War is surely a high priority subject. However, I gave priority to completing the book Common Sense: Boycott Holland. When that was done another priority inserted itself, and that was the book The simple mathematics of Jesus, now completed as well. Perhaps you might agree that God deserves priority over war, especially since wars are frequently fought over God. Perhaps you might also agree that mathematics deserves priority over war, though it happens less frequently that wars are fought over mathematics.

I don’t claim any particular knowledge about war except for economic insight (see e.g. here). I suppose I know as much as anyone of the anonymous millions of potential victims about how horrible war can be. A not too distant relative is general Wouter Cool, minister of war in 1909-1911, which ministry now is called defence, presumably more fitting to its original task.

Now, following Caesar: The EU is divided in three parts: (1) North and South are divided by the Rhine between German and Roman cultures, (2) East and West are divided by the history of the Eastern and Western Roman empires, (3) There is a remainder that collects all other divisions, such as rich and poor, young and old, men and women, well-educated and less-educated, hard-working and happy-go-lucky, and so on.

Freddy Heineken, of the beer company (to be boycotted as well), developed a map of Europe, Eurotopia, where all regions with some historical and cultural unity are allowed more independence, and then integrated in the EU rather than in current nations. It is an enticing concept that clarifies that the current national structures are somewhat artificial compared to the much longer European history. A small point of critique is that an optimal allocation might cause even smaller units.

The point is that the EU puts pressure on this continent and its isles like an elephant in a China room. Its economic policy is misguided, and brings countries and regions to collapse. The euro is the new gold, the new mammon, and the EU sacrifices its youth in blind worship. If this policy continues, it is not inconceivable that violence will increase as well. The Banlieuex are not far from the center of Paris. Slogans about dominant Northerners and lazy Southerners might easily develop a dynamics of themselves.

Economics and politics mix. There is now talk about independence of Scotland and Catalunya. Perhaps London is willing to let Scotland go, but Spain might block Scottish membership of the EU for fear that this will set a precedent for Catalunya, and the Catalans might not accept this.

When the EU went to Oslo to collect the Nobel Prize, the current EU presidency by Cyprus was excluded from the three other presidents Van Rompuy, Barroso and Schulz, and one can understand that Christofias, the president of the Cyprus, decided to stay home.

And so on.

It is now inconceivable that there will be a full blown war again on the continent. Yet we already see violence in the streets in various parts. We are at risk of much more violence. Once the peaceful frame of mind switches to the regime of violence then the inconceivable will be discussed again. The crucial point is that the EU will be discredited. Once the EU is no longer the solution but people see it as part of the problem, we are back to square 1.

Northern Europeans tend to regard the Balkan as a rebellious region. They tend to forget that the whole of Europe is a Big Balkan. The war in Yugoslavia started when the IMF began to claim redemption of its loans. In the Cold War the country got easy credit to keep the Soviets out. When the Cold War ended, the IMF thought that it was time to pay back. Milosevic turned from communism to nationalism to keep in power. The IMF and EU are triggering similar processes right now.

The conclusion is: boycott Holland, remove the censorship of economic science, and let the peoples of Europe decide in freedom but also with sound information about their best economic policies. Put a stop to the illusions that now lead to violence and perhaps even war in a more distant future. Please be aware that I present a new economic analysis that allows monetary union without the fiscal union and transfer of sovereignty that now is on the table.