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Jan
06

Quantum Economics

In recent years economists, financial advisors and policy mavens have been challenged with analytics that rival those of quantum mechanics.  Predicting economic behavior is as challenging as monitoring of particles at the quantum level, or so some would have us believe.  As with astrologers and other pseudo-scientists, one guess is as good as another. Nonsensical economic opposites are now joined in ways that make “wave-particle duality[1]” sound almost pragmatic.

Of late, noted PIMCO bond fund manager Bill Gross, has shifted his “new normal” predictions for the economy to a “paranormal” universe.  Cautiously avoiding a focus on the most probable of outcomes, he warns of the “fat tails” of destruction using an economic theory we might label “contraction-inflation duality.”

Bill’s prognostication is made rational, because he acknowledges the irrationality of what I call quantum economics –  an economic theory which changes polarity almost instantaneously based on observed government behavior.  These shifts in polarity have cataclysmic impacts on economic outcomes.  They dwarf the physics of everyday elements – like the economic behavior of citizens.

The difficulty with quantum economics for citizens of the land is most government behavior is not observable, so outcomes remain highly unpredictable.  Add to this, there are some related theories that state government can’t be observed specifically because it “does not move.”  For this reason, there are conservatives and liberals (two ends of a political duality) who deny there even is a functioning government.

Within the paranormal economic universe we find the housing galaxy – the source of many economic black holes.   As with the physical sciences, the variables impacting economic stability here can be listed, but the observation and causality of growth remain perplexing.  It is a quantum economics thing where the mere presence of government uncertainty (or special interests) influences the behavioral outcomes in unpredictable ways.

The astrologers who attempt to regulate and control this dimension of economic space-time live in a political super nova that encompasses the Washington DC region.  Real estate values and economic growth are poorly understood here because market pricing signals are ignored whenever possible.  Fiat money allows obstructionist behavior (often labeled truth-telling) to be confused with objectivity, which until recently was the universal approach making clear that which was uncertain.

Objectively speaking, current housing uncertainty factors include:

  1. Jobs and economic growth
  2. Shadow housing inventory
  3. Distress Housing – delinquent, underwater and otherwise sinking
  4. An absence of credit for those who would use it

For the few lenders who did not fall into a housing black hole, Washington’s gravity is as powerful as it is confusing.  Uncertainty around lender responsibility (for loan put-backs) tied to the four uncertainty factors above, coupled with almost invisible loan yields all challenge the predictability of lending profitability.

In humbler parts of the planet, citizens must marvel at the willingness of Americans to entrust their economic livelihood to the prognosticators of outcomes rather than the creators of them.  Even giants like PIMCO are captives of polarity of quantum economics.

Housing, the once entrepreneurial economic supernova that brought new jobs and economic life during financial downturns is now lost in a String Theory tangled so tightly in quantum economics one wonders how it will ever escape the gravitational pull of the spinners of government policy.

Maybe we will elect a proactive and practical government this time, but if not we had better start building a star-gate to a parallel universe where everything is the opposite of the world we live in.

More to come.

Permanent link to this article: http://www.patient-capital.net/2012/01/06/quantum-economics/

1 comment

  1. L Nimoy says:

    The 2008 meltdown left naked the federal strategy of “off balance sheet” nature of Fannie Freddie. It allowed almost unlimited subsidy and financial stimulus and required zero reserve requirement……as long as collateral values continued to rise or be stable. No wonder Newt could grab $1.5 million for being a buddha photo opp.

    In fact, once Wall Street figured out that social policy was addicted to this stimulus, quantum economics and their disciples drove a truck through it.

    The way to stop an infection is to provide an antibiotic. Perhaps we can reverse engineer and or “Quant” our way out of this? Oh right, we have to factor in electoral politics. Ooops.

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