The entire world must get mad. Every middle class and poor American must get mad. Politicians around the world have affected policies based on a fraud. The policies affected based on this fraud has cost millions their jobs, their wealth, and some even their lives. Yet, if one follows the way this story is covered, it’s a blip on the radar. What gives?
This story starts with two supposedly renowned economists, Carmen Reinhart and Kenneth Rogoff releasing of the paper “Growth In The Time Of Debt”. This paper was in line with American and the world’s Right Wing Conservative ideology that focused almost exclusively on debt reduction. The basic conclusion of the paper was that debt above 90% of GDP would cause negative growth. The paper was one of the most cited papers in finance and economic journals and the media. Paul Ryan cited it in his Path To Prosperity middle-class killing budget. It was used to effect destabilizing austerity policies in Europe and now in the United States.
What is upsetting is that the New York Times gave a non-peer reviewed piece of work a very long article in their paper titled “They Did Their Homework (800 Years of It)” in 2010, a title that implied a completeness and gravitas that simply was not there.
The New York Times should have known that Rogoff was nothing but a Right Wing hack. There was ample evidence. Under his tenure at the IMF partially during the Argentinian financial debacle exacerbated by IMF austerity policies, their growth projections failed. They failed just as pitifully for Venezuela. Argentina underperformed using austerity policies, Venezuela over performed using Keynesian policies. Further, the open letter he sent to Nobel Prize winning economist Joseph Stiglitz after Stiglitz justifiably criticized the evil actions of the IMF, made it clear Rogoff was a Right Wing ideologue and not a real economist.
For a very long time, Mr. Rogoff and Ms. Reinhart declined to provide the data to have their work peer reviewed. It took 28-year-old University of Massachusetts, Amherst grad student Thomas Herndon to debunk their nonsense in his paper "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff" co-authored with Michael Ash, and Robert Pollin.
Herndon found three blatant and obvious problems with the Rogoff/Reinhart paper that seasoned peer reviewed economists would never have had. They arbitrarily selected subsets of periods to validate the outcome. They weighted different data relative to each other subjectively. And they had a “rookie” Excel coding error that mysteriously excluded Australia, Austria, Belgium, Canada, and Denmark from their calculations which cumulatively voided their outcome. You can read in detail here.
Reinhart and Rogoff made an attempt to rebut Mr. Herndon with two rebuttals (here and here) where in effect they acknowledge the error; claim that even with the error their conclusion is correct, but took exception with the apparent view that their error was ill-intended. Herndon responded with the definitive response proving that the “renowned economists” were simply wrong while not attributing it to a willful error. This author after reviewing Rogoff’s history is willing to state that more likely than not this was a willful error to promote an ideology, an ideology that is wreaking havoc worldwide. The paper came at just the right time; a time when everyone knew more Keynesian stimuli was required around the world.
When renowned Wall Street Analysts (pariah) writes an article titled “The Economic Argument Is Over — Paul Krugman Has Won” it means that in fact the abject nonsense the Right Wing Conservatives have been promoting which have destroyed many an economy has been completely debunked. Nixon realized this back in the 70s. It took a regression back into willful ignorance beginning with Reagan’s policies to destroy many an economy and the middle class.
This is a very big story. It must have traction. Lives are being destroyed by policies based on Reinhart and Rogoff’s work.One can only hope it is not too late to undo the economic evil of the last 30+ years and the malicious justification by two economic hacks.