The search for better politics

This is the exact opposite of the historical record! Private bank lending inflated the money supply, while the government, by running 1% of GDP surpluses every year, had deflated the money supply. It was a private debt crisis, not a government one.

Neoclassical economists are defending equilibrium theory on Twitter. They're telling students to ignore critics who question this framework. The timing is revealing. It's been 20 years since the Global Financial Crisis. Students entering university this year weren't born when it happened. The economists who failed to predict 2008 want the next generation to forget. But here's the historical irony they won't mention. Irving Fisher created equilibrium economics in 1907. He became the most prominent economist in America. His framework assumed markets move toward stable equilibrium through rational price adjustments. On October 15, 1929, Fisher publicly declared stocks had reached a "permanently high plateau." His equilibrium theory told him the market was fundamentally sound. Six days later, Black Tuesday happened. The market eventually fell 90 percent. Fisher didn't just lose his academic reputation. He lost everything financially. Between $100-200 million in today's money. His sister-in-law had to forgive his debts on her deathbed. Columbia University provided him housing because he'd lost his home. This catastrophic failure forced Fisher to reassess his entire framework. In 1933, he published The Debt Deflation Theory of Great Depressions. In it, he explicitly rejected equilibrium thinking. He wrote that assuming economic equilibrium is "as absurd as assuming that the Atlantic Ocean can never be without a wave." Fisher realized that capitalism is inherently dynamic. Debt levels fluctuate. Production and consumption oscillate. Investment moves in waves. Trying to analyze this system through an equilibrium lens meant missing the forces that actually drive economic change. Yet modern neoclassical economists still build their models on the equilibrium framework Fisher abandoned. This isn't just academic history. This matters for practical economic analysis. Equilibrium thinking led economists to miss the Great Depression. After World War II, they reconstructed neoclassical economics with equilibrium at its core. And it led them to miss the Global Financial Crisis. I began warning about the 2008 crisis in December 2005. Not because I had superior intelligence, but because I used a non-equilibrium framework that tracked private debt dynamics. The warning signs were clear once you stopped assuming equilibrium. The same pattern continues. Neoclassical economists remain committed to equilibrium despite its repeated failures. They cannot imagine an alternative framework. For anyone serious about understanding economic dynamics rather than forcing reality into convenient mathematical abstractions, this history is essential. Watch my full breakdown of Fisher's intellectual journey and why equilibrium thinking fundamentally misunderstands capitalism's dynamic nature in the comments #Economics #Finance #EconomicTheory #MachineLearning #FinancialCrisis #Capitalism