Back in the bad old days, the premier physicians of the age accepted and practiced the idea that the cure for illness was to bleed very ill patients, effectively weakening them. Countless patients who might have recovered if simply left "untreated" died as a result of the misguided "science of healing" of the era.

Only with the advent of a true understanding of the nature of infection, the immune system and disease did the "folk" pseudo-science of bleeding pass from accepted medical practice.

We are mired in a similar era of pseudo-science being accepted as actual science, i.e. as reflecting the underlying causal mechanisms of life and the universe, and that pseudo-science is called economics.

As I have noted here many times, we are experiencing not just a standard-issue financial crisis but the failure of the entire pseudo-science edifice of modern conventional economics.

The basis of pseudo-science is to mask unfounded, misguided and potentially disastrously dangerous ideas drawn from superstition and folk beliefs with the external trappings of real science. Thus economics presents itself as a "science" by invoking the symbolic magic of equations and quantification of data gathered from the real world.

In esence, the "understanding" of junk-science is symbolic: the body is plagued with "humors" which can be drawn out via bleeding the patient, etc. The actual workings of the body, far beyond the conceptual reach of the folk/junk symbolic "science," are conceptualized symbolically via analogies: disease is "hot" or "cold," the body functions like a clock, etc.

In the exact same fashion, conventional economics "understands" the workings of the economy symbolically, and its "cures" play out in its artificial construct, the symbolic economy.

The symbolic economy is based on the cargo cult of "animal spirits", the magical "humors" which ignite the economic activity quantified by the pseudo-science. The witch-doctors at the Federal Reserve (the eminent, highly educated "expert" bleeders) have been busy painting radio dials on rocks for the past four years, hoping that their increasingly desperate pleas will magically reach the gods of "animal spirits."

The true nature of conventional economic's symbolic economy is best illuminated by the cargo cult's increasing dependence on managing perceptions as the "tool" to influence financial behavior. In other words, the "physicians" rely on fundamentally symbolic actions to influence the symbolic economy.

One of the folk beliefs of the cargo cult priesthood is that ruthless pursuit of self-interest to the point of worshipping self-serving pathology is the foundation of a "healthy economy." The end-state of such a quasi-religious faith is of course the purchase of the machinery of governance to the point that government at all levels is reduced to a battle between self-serving concentrations of wealth.

The cargo cult priesthood's primary goal is to preserve the symbolic wealth created by the symbolic economy. One way to understand symbolic wealth is that it is phantom wealth created in symbolic form.

Simply put, no economy can consume more than it generates in real surplus. Rather than face up to this constraint, the Fed creates phantom financial wealth which ends up in the hands of politically influential concentrations of wealth--in essence, a self-referential cycle of creating phantom wealth to serve the interests of current holders of phantom wealth.

Everyone with phantom wealth is of course committed to maintaining the fiction that the symbolic wealth they "own" holds sway over real wealth, i.e. minerals, water, skilled labor, productive land, etc.

There is another layer to the symbolic economy: carefully manicured totems of a vanished free market and independent government are maintained by the Status Quo that benefits from the artifice. The useful fiction that the economy is still a "free market" is heavily promoted by the Status Quo Media, and rags-to-riches stories are trumpeted ceaselessly as "proof" of the free market.

All this marketing gins up symbolisms that mask the actual mechanisms of the economy. This systemic official lip-service is also paid in China, where various useful fictions are fashioned into a symbolic economy: that the one-party rule of a command economy nurtures a true but limited form of free-market capitalism in which it is glorious to get rich.

This masks the reality of a systemic crony-capitalism married to a sclerotic command economy.

In other words, like the U.S.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.


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