The Rising Influence of Rising Affluence

[10nisman]

Bill’s most interesting point is one I have made many times: central banks are overconfident in their own ability to control the economy. He says it more eloquently, so I’m going to quote him at length.
“Mark Twain said, ‘It ain’t the things that you don’t know what gets you, it’s the things what you know for sure, what ain’t so.’ And Oliver Cromwell wrote a letter to the Scottish parliament, I think it was… And what he said was, ‘Brothers, I beg you in the bowels of Christ, think it possible that you might be wrong.’ And this problem of people holding on to false beliefs seems to me to have been around for a very long period of time. The first question, I guess, is, do we think that the Central Bankers actually have got it wrong?
“They’ve got the wrong model, the wrong framework, and I’ve said and written this a number of times. I think they have made what I call a profound ontological error. It’s almost a philosophical error that they have misunderstood the nature of the system that they’re trying to control and what all of these models are based upon—and not just the Neo-Keynesian models, but the big structural models too—they’re based upon the idea that the economy is actually very simple and it’s static, essentially. It is understandable because it’s simple and static and, therefore, it is controllable.
“The models have all got that as fundamental assumptions, but there’s a problem. And the problem is, it’s not true. Because the economy is not simple, it is complex; it is not static, it is adaptive. Everybody’s constantly reacting to all the stuff that’s going on and changing their behavior.
“And in consequence, the economy is not understandable, and it is not controllable. Maybe controllable within certain limits, but it will not take the maximization that has been going on without having some unintended consequences that, over some longer run, will come back and bite you in the bum. And that’s precisely what’s been going on.
“And I think the degree to which the Fed—and the other Central Banks too—have gotten wedded to this fundamental, philosophical misconception is really unfortunate because it has allowed them to conduct a policy, which, again, as I’ve said before, this ultra-easy monetary policy going back decades almost, has been both unneeded because deflation is not always and everywhere, a bad idea. We can talk about that a bit more. That policy has proved to be ineffective for reasons that you know well, Lacy. Easy money encourages a buildup of debt, which over time then weighs negatively against further growth.
“And lastly, I think this policy has just been very dangerous because of all of the unintended consequences. In addition to the debt overhang, you’ve got all of those financial imbalances that I just spoke about a few moments ago. And in addition, I think what you’ve got is that ultra-easy monetary policy—and this goes back to Hayek and the Austrians—does lead, in the end, to misallocations of real resources that actually slow down aggregate supply every bit as much as it slows down aggregate demand.
“So, I do think it’s unfortunate that this approach has been so widely taken because it has allowed us to go down a path that has generated the problems that we are currently facing and which, as I said earlier, I fear could lead us to a rather sticky end. Not saying it’s inevitable, but it does seem to me to be quite likely.”
These are profound words: “The economy is not understandable, and it is not controllable.” Powerful people at the Fed and other banks disagree. They think they do understand the economy and they can control it. They’re wrong on both counts, and their mistakes are causing enormous damage.
This echoes a point I have made in numerous past letters. Easy money and quantitative easing have contributed to the excessive wealth disparity in the world. It is clearly the root cause of the financialization of the economy, which leads to the distortions that Bill mentions.

How is the above excerpt insightful or useful? And why should anyone read / listen to John Mauldin? He appears to be an info commercial promoter / marketer.