Thomas Herndon – The man who has changed the world.
The story of ‘The Emperor’s New Clothes’ comes to mind about news that the doctrine which has basically turned millions into serfs and peasants, hurt many by deliberately creating mass poverty, and, probably led to deaths of many, has been destroyed by a 28-year-old economics graduate student who had the temerity to have actually look at the figures and do the maths.
Carmen Reinhart and Kenneth Rogoff, two celebrated Harvard intellectuals and ‘parents’ of the theory which claimed that having debt which was in excess of 90% of gross national product (GDP) was bad and led to the economic calamity and ultimately economic decline and death! This sort of debt was to be avoided at all cost.
The theory was championed by nearly all centre left, centre and right wing governments, parties, commentators and other busy bodies around the world. In the UK, the present Conservative-Liberal Democratic coalition took the theory up and designed the UK economic policy around the theory and rammed it down the throat of the nation sacking loads of workers and cutting public spending to the bone and loving it because it showed that they were ‘responsible and determined’. They was going to live within their means was the phrase thrown around.
The only problem with the argument was that it had no basis of truth and when you looked at the general argument presented no one would ever have a mortgage because your household would be living beyond your means by 400 – 800%+ of your household income!
Carmen Reinhart and Kenneth Rogoff had either by design or error had not included numbers which would have shown that their report which became a smash hit in the book This Time is Different was basically wrong! They did not include data from countries such as Canada, New Zealand, and Australia who had large debt but had seen great growth in wealth. By not having these countries as part of the data produced the dream that neo-liberal academics such as Niall Ferguson, author of The Ascent of Money: A Financial History of the World that protecting the poor and helping to create real opportunities was wrong. He actually wrote about the book:
“This is quite simply the best empirical investigation of financial crises ever published. Covering hundreds of years and bringing together a dizzying array of data, Reinhart and Rogoff have made a truly heroic contribution to financial history. This single marvelous volume is worth a thousand mathematical models.”
So based on what he said, he actually did a rigorous examination of the data and with his unbiased scientific intellect came to the conclusion that not including data which would alter your result is top notch academic research. Well done that man!
Thomas Herndon in his paper Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff simply put all the data into the computer and came up with a different conclusion. Why didn’t these celebrated academics do the same? Was it lazy thinking or was it easier to plunge the World into another crisis 1 year after Lehman’s Day (September 15, 2008), to implement your agenda of returning the working class to their proper place of serfdom and peasantry which 60 years of social democratic orthodoxy had tried to end?
In the poker world Carmen Reinhart and Kenneth Rogoff and their theory would be classed as a busted flush. Niall Ferguson would be relegated to the losers table and Thomas Herndon would be given a large sum of cash for doing the world a favour by exposing these idiots for what they are…reprobates and degenerates on the make. In the old days they would have been chased out of town but in these days they will be given plaudits and a seat on some think tank to do more damage to people they do not even know or care about.