September 3, 2015

Nominal and real time transfer

Comment on Hazel Henderson on ‘What Americans need: An ‘idiot-proof’ retirement system’


It is a bit tragic that the RWER blog moves ever closer towards Zerohedge. The one and only message of this popular blog is that all is a fraud, that the markets are rigged and manipulated by the FED, that the algos make their money by creating crashes on a regular basis, and so on. You can have as much empirical proof and juicy exposure as you like every day.

All this happens, no doubt, but we should calm down for a moment and ask ourselves whether economics has not degenerated into a criminal investigation, trickster hunt, swindle warning, wolf crying, and exchange of hot tips about safe havens and tax evasion.

When the question comes to the retirement system, thug-busting is the wrong approach. What is lacking is a sound theoretical underpinning of the effects of saving/dissaving over time.

The economic problem of the retirement system is that the real and nominal side of saving/dissaving is disconnected in time. That is to say that the problem lies on the macro level and not on the casino floor.

While I agree that stories about evil Flash Boys and other players on the stock market are more entertaining I strongly suggest that economists eventually come up with sound theoretical foundations for the construction of a viable retirement system. This means, first of all, to rethink the theory of saving/dissaving and the interconnection between saving/dissaving, increasing/shrinking debt, and loss/profit (2013).

As long as standard economics is idiotic, Americans will not get an idiot-proof retirement system.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2013). Settling the Theory of Saving. SSRN Working Paper Series, 2220651: 1–23. URL