Economists and medics

Dear reader,

while the authors reads with interest many pieces by fine economists, he often feels reminded of the medical profession where there are also professors, MD's  and other experts in their field, but where their relationship to their patients is worth a closer look.

The medical profession can be divided into three categories:

1.) 'normal' medical staff , trying to cure acute diseases the patient suffers from, by using all their knowledge.

2.) Pathologists which try to find out the causes why the patient has died. (Perhaps after an unsuccessful treatment by colleagues category 1) ;-)

3.) Doctors in the field of disease prevention such as those working at CDC (USA), Louis Pasteur Institute (F), and Robert Koch Institute (D) and perhaps also such medical experts in sports and public health , searching for better performance of their clients, injury prevention and better health on individual level and of the population as a whole.

If we look upon the eurozone, the structure can be compared to a patient who is seriously ill. So treatment by doctors from 1st category has started , while in early December 2011 those from 2nd category were already standing by to start their diagnosis what led to the exitus. So both categories involved are looking back in their analysis trying to find what happened, while cat. 1 trying to take countermeasures to keep the patient alive. So genius Dottore* Draghi and his team from European ER applied a mixture of steroids & antibiotics to fight the sepsis, and the patient so far survived, (some whisper they even added some morphine) but side effects of that treatment were never put to clinical tests before. So they ER team has to stand by to monitor their patient closely and apply antidotes when side effects appear or treatment wasn't sufficient to complete the healing. 



Category 3 is in the authors view the vital one, which is somehow neglected mostly by economists focusing to much on fiscal and banking issues, such as banking system or the role of central banking. All about finances but very little concentrating on the fact, that those money flows must be created by a real economy producing goods,selling them, making profit or buying goods and selling them with a profit margin, or selling their services to customers. Money doesn't grow on trees, as we all know and what both the USA and Europe must recognize is the fact that a big parts of 'real money creators' thus manufacturing has been transferred to Asia and is currently helping those economies in their rapid development out of poverty. While governments such as the Chinese are hoarding their trade surpluses instead of spending them like most (not all: e.g. Norway) European governments on big social programs.

While many economists warn for a single handed approach to the eurozone, only based on strict austerity for all at once, they call (as the author here did all the time) for growth, but then face the problem on how to do so, without somewhat 'old fashioned' solutions like government spending. Of course I might be wrong, but can it be that economists had to little contact with 'growth producers' in the real economy just doing their daily business and employing millions of people? Those businesses in the real economy which are more regulated by politicians and been looked upon more as 'cash cows' than less productive sectors of the financial sector.

Of course it is necessary to have a viable system of money flow in the back, but without wealth being produced, this wouldn't prevent an economic downward spiral. We also cannot rely on producing goods which are only bought by those, who are getting the money for the purchase by the tax payers of those countries where the producers have to pay their taxes. I once made the suggestion that instead of shipping industrial goods produced in Germany or France to Greece, the two producing states can guarantee the payment for production and those goods can be dumped easily into the North sea or Atlantic Ocean. Absurdity ? What are the root causes for current imbalances showing up on the Target2 balance sheets (besides frozen up 'normal banking') ?

As Klaas Knot, the president of DNB, the Dutch central bank, reminded us a few weeks ago in his speech, the expression EMU doesn't stand for 'European Monetary Union' but for 'Economic and Monetary Union'. We see the last two years summit after summit either by heads of governments, or by their finance ministers at their EcoFin meetings or both events combined. Has the author here missed it, or was there really not one meeting of economic ministers like Besson (F), Rösler or Brüderle (D), Verhagen (NL), Tremonti (I) and others? As the author here considers the state entities as 'big enterprises', where problems of declining turnover and profits, are trying to get tackled by instructions of the CEO to the accounting department to root out money flow problems, instead of reminding marketing and sales, R&D and production dept. to produce and sell more products the market needs.

Can it be, that the 'real economy' isn't just like a 'black hole' just for journalists, but at least also for the political establishment ? (There will be a comment later on a piece by Dr Martin Roos on German journalists who have rather naive views on businesses.) 

 
*=  not to be understood in an Italian way, since the Author consider both "Super Marios" as the right persons at the right place at the right time.