AXEC: New Foundations of Economics: Central Bank

Showing posts with label Central Bank. Show all posts

July 8, 2026

Occasional X: How it works (CDLXXXVIII)

“Because the US government relied on neoliberal economists, who (in service of Wall Street) insisted that all of that cheap money should flow to the most profitable sectors, following the dogma of the 'free market'.” (Norton)

This is true from the practical standpoint. From the…
— AXEC (@EgmontHandtke) July 8, 2026

May 10, 2026

Occasional X: Clueless economists / Money (CXXXVIII)

“Economist Jesús Huerta de Soto argues that central banks face the same knowledge problem that Ludwig von Mises and Friedrich Hayek identified in socialism.” (Foundation for Economic Education)

Central Banks face no knowledge problem, except for random natural events. As a…
— AXEC (@EgmontHandtke) May 10, 2026

April 21, 2026

Occasional X: Clueless economists / Money (CXXXII)

“How money was born without government’s help.” (Handre van Heerden)

Whether van Heerden's historical account about money and the Menger/Schmoller debate is true or false does not matter. What is needed for economic theory is the logical account of how money fits into the… pic.twitter.com/NryWYzMhUa
— AXEC (@EgmontHandtke) April 21, 2026

April 9, 2026

Occasional X: Clueless economists / Money (CXXVII)

“Private banks create money when they issue a loan. This money is the same as state issued currency, …” (?whispers?)

?whispers? is wrong again. Problems arise, for example, if a private bank customer wants notes for his balance. Notes are Central Bank money, and the private…
— AXEC (@EgmontHandtke) April 9, 2026

March 31, 2026

Occasional X: Clueless economists / Money (CXXIII)

“Inflation is made in Washington because only Washington can create money.” (Milton Friedman)

False. The private banking system, too, can create money. Most people cannot tell the difference between bank money and Central Bank money. For details, see

Basics of monetary theory:…
— AXEC (@EgmontHandtke) March 31, 2026

March 20, 2026

Occasional X: How it works ― the central bank as profit pump (VI)

“Central banks used to buy government bonds and maybe some gold. The SNB prints Swiss francs, converts them to dollars, and buys growth stocks in Silicon Valley.” (Handre)

Handre has no idea how Capitalism works. This is self-disqualifying.

The Central Bank's main task is to…
— AXEC (@EgmontHandtke) March 20, 2026

March 14, 2026

Occasional X: How it works (CDLXIII)

“If the money printer grows 8-10% annually and the S&P 500 returns ~9%, it's just treading water. True wealth comes from outpacing the printer. That's the Bitcoin journey.” (Former finance professor, quoted by Fiat Archive)

True wealth comes from resources, science, and…
— AXEC (@EgmontHandtke) March 14, 2026

March 11, 2026

Occasional X: Clueless economists / Money (CXII)

“Yes, yes. I'm dying to receive a zero-value transaction money in exchange for goods I work to produce.” (Professor One Digit)

You get your wage on your account, and you pay for your groceries from your account. Basically, payment is a service, and you pay a service fee. Fiat…
— AXEC (@EgmontHandtke) March 11, 2026

March 7, 2026

Occasional X: How it works ― the central bank as profit pump (V)

“THEY even destroy the Bundesbank: For 2025, the bank recorded a 27.8 € bn loss, by far the highest ever. And I ask again: Who got all the money?” (Thorsten Polleit)

Thorsten Polleit has no idea how Capitalism works. This is self-disqualifying.

The Central Bank's main task is…
— AXEC (@EgmontHandtke) March 7, 2026

February 14, 2026

Occasional X: How it works ― the central bank as profit pump (IV)

“Even if the federalreserve remains operationally independent, the profit-and-loss-sharing arrangements between it and the USTreasury – its beneficial owner – is dangerously asymmetric, …” (Willem Buiter and Anne Sibert, quoted by Project Syndicate)

Some words are like a…
— AXEC (@EgmontHandtke) February 14, 2026

February 7, 2026

Occasional X: How it works (CDXLVII)

#Economics #AllYouNeedToKnow

“A former World Bank president has sounded the alarm, revealing that the Federal Reserve has lost over a trillion dollars—and counting—turning it into nothing more than a massive hedge fund for the rich and powerful.” (redpillbot)

Even former World…
— AXEC (@EgmontHandtke) February 7, 2026

January 27, 2026

Occasional X: How it works (CDXLIV)

#Economics #AllYouNeedToKnow

“Warren Buffett on the fact that governments, including the US, have an inherent tendency to debase their currencies over time through fiscal policies, making them worth less and posing a major risk to holding assets in them, as he fears the dollar… pic.twitter.com/b3GZwGnqYW
— AXEC (@EgmontHandtke) January 27, 2026

January 14, 2026

Occasional X: Clueless economists / Money (LXXXIII)

#Economics #AllYouNeedToKnow

“Wow. Statement signed by the heads of the ECB, BoE, Riksbank, the Danish Nationalbank, SNB, RBA, Boc, BoK, BCdB, BIS” (Joe Weisenthal)

Some words are like a medieval excommunication curse from the Pope. One of them is Central Bank independence.…
— AXEC (@EgmontHandtke) January 14, 2026

January 12, 2026

Occasional X: How it works (CDXXIX)

#Economics #AllYouNeedToKnow

“I served under 4 administrations (Republican and Democratic) and always performed my duties with a focus not on policy, but on minimizing inflation and maximizing jobs.” (Jerome Powell quoted by Lord Bebo)

The Central Bank's main task is to…
— AXEC (@EgmontHandtke) January 12, 2026

Also at James Young.

December 11, 2025

Occasional X: How it works (CDXXII)

#Economics #AllYouNeedToKnow

“Yeah… that’s trillions in U.S. debt that expires in 2026. … And all of it has to be refinanced at much higher interest rates than the near-zero environment it was originally issued in.” (NoLimit)

The free-market economy runs on profit.…
— AXEC (@EgmontHandtke) December 11, 2025

December 9, 2025

Occasional X: How it works (CDXXI)

#Economics #AllYouNeedToKnow

“America just crossed a threshold from which empires do not return.” (Shanaka Anslem Perera)

No panic, this is old stuff. Wake up and read the 2020 post.

From the debt economy to the gift economy: how America is brainwashed to love budget deficits…
— AXEC (@EgmontHandtke) December 9, 2025

November 30, 2025

Occasional X: Clueless economists / Money (LXIV)

#Economics #AllYouNeedToKnow

“In 1989, the top one percent held 22.8 percent of American wealth. By the second quarter of 2025, that figure reached 31.0 percent. The bottom fifty percent now holds 2.5 percent. The Federal Reserve printed nine trillion dollars between 2008 and…
— AXEC (@EgmontHandtke) November 30, 2025

November 29, 2025

Occasional X: How it works (CDXVI)

#Economics #AllYouNeedToKnow

“Fed is still over $240 billion away from sending Treasury a single dime: …” (E.J. Antoni)

Who, do you think, has the $240 billion now?

The U.S. economy runs on profit. Macroeconomic profit is given by the axiomatically correct Profit Law /…
— AXEC (@EgmontHandtke) November 29, 2025

September 17, 2025

Occasional X: Clueless economists / Money (XLXI)

#Economics #AllYouNeedToKnow

“Taxing SUVs may be a good idea to discourage their use in narrow city roads.... BUT that doesn't 'raise' money for a govt that has unlimited pounds available.” (MMT for Progressives)

The idea that a govt that has unlimited money available is plain… pic.twitter.com/kFokk4LkOO
— AXEC (@EgmontHandtke) September 17, 2025

September 15, 2025

Occasional X: Clueless economists / Money (XLIX)

#Economics #AllYouNeedToKnow

“Where does it end? The Fed in 2009 started doing QE (blue) and since then has bought huge amounts of Treasuries that are never sold. That keeps yields artificially low and enables increasingly reckless fiscal policy. We're on an explosive path,…
— AXEC (@EgmontHandtke) September 15, 2025

Subscribe to: Posts (Atom)

Knowledge only — no opinion

Science does not explain everything, but non-science explains nothing.

Neither orthodox nor heterodox economics satisfies the scientific criteria of material and formal consistency.

Economists cannot explain how the economy works. The Profit Theory is false since Adam Smith. There is much opinion and little knowledge.

Opinion is the realm of political economics, knowledge is the realm of theoretical economics.

Political economics is scientifically worthless.

Theoretical economics is built upon clearly stated premises, i.e., upon a set of axioms.

Orthodoxy got the axiomatic foundations wrong and Heterodoxy has none at all.

Economics is a failed science. Economists are incompetent scientists.

Profit

Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor MMTers, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor EconoPhysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit. Hence, they all fail to capture the essence of the market economy.

Because of this, economists have nothing to offer in the way of a scientifically founded economic policy guidance.

The hybrid science

As a first approximation, one can agree on the general characteristic that the economy is a complex system.

However, with the term system one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system the market economy should be characterized more precisely as a complex hybrid human/system entity.

The scientific method is straightforwardly applicable to the sys-component but not to the hum-component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons the analysis has to start with the objective system-component.

In gestalt-psychological terms the economic system is the foreground, individual behavior the background. Common sense wrongly insists that the hum-component must always be in the foreground. This fallacy compares to geo-centrism. The economic system has its own logic which is different from the behavioral logic of humans. The systemic logic is what Adam Smith called the Invisible Hand.

There are systemic laws but no behavioral laws. Systemic laws have the same methodological status as physical laws.

Neither Orthodoxy nor Heterodoxy can tell what the systemic laws of the actual monetary economy are.

Whether the outcome of the human/system-interaction is good or bad is a politcal question that lies outside of theoretical economics. Theoretical economics explains how the actual economy works - no less, no more.

Narrative vs.Theory

Psychological, sociological or behavioral assumptionism cannot yield anything other than a gossip model of the world. Second-guessing the agents is not economic analysis.

Science deals exclusively with propositions that can in principle be decided by objective means. The rest is opinion, faith, phantasy, motive speculation, allegation, hallucination, myth, paranoia, ink-blot association, psychology, philosophy, in one word: storytelling.

Storytelling is the original mode of communication in the social realm — except science.

Political economics is storytelling and, by default, the natural habitat of confused confusers. Walrasianism, Keynesianism, Marxianism, Austrianism are social narratives and not scientifically valid representations of reality.

"The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions." (Fisher)

In marked contrast, theoretical economics lives up to the standards of material and formal consistency. A scientific theory is the best mental representation of reality that is humanly possible.

Theory starts with a set of objective and consistent axioms.

Paradigm Shift

"The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy." (Feynman)

"As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction." (Nell)

"The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory." (Blaug)

"Is it not a fact, which stares at us from the histories of all sciences, that it is much more difficult for the human mind to forge the most elementary conceptual schemes than it is to elaborate the most complicated superstructure when those elements are well in hand?" (Schumpeter)

"The task of producing knowledge against the grain requires imagination." (Mirowski)

"A new idea is extremely difficult to think of. It takes a fantastic imagination." (Feynman)

"The scientific imagination dreams of explanations and laws." (Peirce)

"It is brilliance of imagination which makes the glory of science." (Evans)

"... we know little more now about ‘how the economy works,’ ... than we knew in 1790, after Adam Smith completed the last revision of The Wealth of Nations." (Clower)

Selftest and to watch for

You apply one of these items

• supply-demand-equilibrium,

• general equilibrium,

• marginal utility,

• well-behaved production functions,

• total income = value of output,

• total income = wages + profits,

• I=S,

• wage rate down - employment up,

• behavioral axioms?

Then you are out of science because of unnoticed material or formal inconsistency.

Every economist who uses the concept of equilibrium is scientifically incompetent because she/he failed to notice that equilibrium is an economic nonentity.

Practically this means: as soon as the word equilibrium appears in an economic text it can be thrown into the waste basket. The same holds for all other nonentities.

The vast majority of economists deals mainly with nonentities. This is why Walrasianism, Keynesianism, Marxianism, Austrianism is scientifically worthless.

Since Adam Smith, economic policy guidance has no sound scientific foundations.

To be replaced (1)

The core premises of Orthodoxy are uncertain and false and this fully explains the failure of the research program.

“As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

The inescapable Paradigm Shift consists of the move from this obsolete hard core to the superior set of structural axioms.

To be replaced (2)

The fundamental equations of macroeconomics have been formulated by Keynes in two lines.

"Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."

This elementary syllogism is demonstrably false. The demonstration consists in the proof that Keynes could not solve the Profit Puzzle. Neither did Post-Neo-New-Keynesians.

In the most general terms, the economics Paradigm Shift consists in switching from the behavior-centric bottom-up approach to the structure-centric top-down approach. This is comparable to the Copernican turn from geo-centrism to helio-centrism.

Consensus

Economics is a science without scientists. Because they are ignorant of the elementary difference between profit and income, the present generation of economists has not made and cannot make a significant contribution to the discussion about how the actual economy works.

Every orthodox or heterodox economist can convince himself/herself that their profit theory is defective.

Every non-economist can — by applying elementary logic — convince himself that conventional profit theories are false. See 'How the intelligent non-economist can refute every economist hands down'.

Because the profit theory is false the whole of conventional economic theory has to be rejected.

"What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse." (McCauley)

No scientist will ever accept Walrasianism, Keynesianism, Marxianism, or Austrianism. These approaches are logically and/or empirically refuted. This is the actual methodological state-of-art. Walrasians, Keynesians, Marxians, or Austrians are still at the proto-scientific stage. These approaches cannot be improved, only abandoned.

Economists are a public nuisance because they have an opinion on everything but knowledge of nothing.

About me

“Bottom line is that your profit law is just a definition you made up nobody else agrees with, nobody. You are all alone with your precious tautology.” Barkley Rosser

“In any event, your entire theory is based on you doing macro accounting in wacky fashion that nobody agrees with.” Brian Romanchuk

"Your stuff is at least original: it's quite cool after a couple of decades at this to see a fresh Economics. But real promises are not advanced: they were around for millennia until the Greeks obscured them with Metaphysics." Chris Cook

"No mate, they're you-blockers. You have all the personality traits of a crank, and the rest of them have tired of you. You could be 100% right, and you'd still die as your only follower." Steve Keen

"What you are doing fills is all with joy, your constructive critique is most welcome!"

Achim Truger,

German Council of Economic Experts,

in a failed attempt to be ironic

"200+ years of thought and yet you are the only one who gets it—or even understands your argument. Thank god we have you, pseudonymous Twitter user. Otherwise no one would know."

William Luther

Assistant Professor of Economics

in a failed attempt to be funny

"Egmonts profit law is the perfect equation that demonstrates this in action. Put the equation into a spreadsheet and then add government spending and watch how it flows into profits. Enter in some debt (-Sm) and watch too how that flows into profits. It can't go anywhere else."

Dean

About the rest of economics

Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, materially/ formally inconsistent. Economics is a failed science.

“There are three classes of people: those who see. Those who see when they are shown. Those who do not see.” Leonardo da Vinci

In economics, the overwhelming majority belongs to Class III. This explains why economics is after 200+ years still at the proto-scientific level.

The obvious task for every economist is to advance from cargo cult science and political agenda-pushing to science. This is absolutely beyond the means of Class III people.

For 200+ years now, economists are not scientists but agenda pushers, useful idiots, clowns in the political Circus Maximus.

Nopopop

This blog does not add to any popular/un- popular opinion.

This blog does not hand out advice about how to avoid taxes, to get rich on the stock market, to be successful in business, to increase the wealth of nations, to run an economy, to maximize welfare, to prevent national/global bankruptcy, to improve the institutional setup of society, to get out of national/global depression, nor about how to save humankind or any subgroup thereof.

This blog is about the true theory of the actual monetary economy.

"In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion." (Stigum)

Focus

Science is of primary interest and importance. Scientists are of secondary interest.

With regard to science, most people lose focus easily because of a natural preference for anecdotes and gossip over facts or subjectivity over objectivity.

Hence, Schumpeter once considered it necessary to remind his habitually disoriented fellow economists: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”

Science is about true/false and nothing else.

Disclaimer

Missing Blog-Reference links: AXEC does not guarantee that their comments can at any time be recovered from where they have been posted intitially because the availability depends on the publication policy of the blog owner which is implicitly accepted on entering a debate. See also: 'Economists: Incompetent? Stupid? Corrupt?'

Texts: Parts of arbitrary length of any of the author's texts is and will be used again by the author in papers, books, websites, blogs, and other media without explicit reference. The right to make corrections or minor textual improvements on reutilization is reserved. Therefore, it is always a good idea to double-check for the latest version.

Caution: Do not expect a corroboration of your political view. Neither a refutation. Political economics has been scientifically worthless since Adam Smith. Politics has to be separated from economics because it is categorically different from science. The best science can do and has always done is to prove beyond reasonable doubt that you have been objectively wrong or ignorant until now. Science goes beyond the naive common sense of today and becomes the sophisticated common sense of tomorrow.

See also Terms of Use and Legal at www.AXEC.org

Outlook

To recall, while political economics is storytelling, theoretical economics adheres to scientific standards.

The first task of theoretical economics is to get the axiomatic foundations right. This is what J. S. Mill called the opus magnum. Neither Orthodoxy nor Heterodoxy came up with a reasonable solution to this day. This explains the secular stagnation of economics.

There is no serious alternative to structural axiomatic economics. This is not a matter of opinion but of proof. The sole criteria are material and formal consistency.

All of economics has to be reconstructed from the ground up.

Major economic policy implication

The price mechanism does not work as standard economics hypothesizes. The axiom-based Employment Law states that overall employment increases if the average wage rate increases relative to average price and productivity. This gives one the lever to improve the employment situation all over the world and to fend off deflation without rising debt and without artificial capacity growth. To increase the average price relative to the average wage rate and productivity increases unemployment.

Right policy depends on true theory.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.