>"Economists have essentially no idea what is going on"
Complete and utter nonsense. "You" don't know what's going on, and assume others don't. The public is unbelievably ignorant of this subject. These men are brighter than you think.
>"EMH is by far the clearest example of this"
EMH is a 50 year-old theory. Like practically any other subject, economics that is taught in school at low-levels is based on old science. There is real, modern research happening on real-world things, just go poke around the Fed's site to see what they're doing.
EMH is actually a hypothesis (not a theory) that arises from non-arbitrage models. It's not meant to describe the real world, although it's thought-provoking to look at how "efficient" real markets are, so people like to characterize and "test" the EMH in its various forms. How markets fail to be "efficient" is often quite instructive for practical purposes.
For pedagogical purposes, I think it's a really good simplified and ideal illustrative model, until you learn the more axiomatic derivations of no-arbitrage (the arrow-debreau stuff). From your other posts, I gathered that you're not beyond undergrad studies in economics - you'll likely learn about the more complex models when you reach a more advanced and rigorous stage, if you pursue the theoretical path.
If I were you, I wouldn't be too concerned about others arguing about the EMH - without the proper foundations, you won't understand them beyond a superficial level.
Not to mention that it's popular for the less educated to bitch about the EMH, probably because it's an English acronym with commonly used words. I've almost never heard laymen talk about how unrealistic the nash equilibrium is (:
>"I've only done graduate level courses in economics and finance. If they know what they are doing why do we still have financial crises?"
Then you're ahead of me education-wise; we lend money until the default rate gets above a threshold, which causes a "crisis" of deleveraging. Then we lever up again. All of this happens around a long-term, upward growth trend. It's the business cycle. It's hard to time, but most people understand how it works.
How can you prevent crises when their foundations can come from anywhere, including natural disasters? It's impossible. But the powers-that-be do their best to soften the blow. And they have been very successful in this last recession. I know it's hard to convince people that it could have been worse, but it could have been worse.
Already they're working on the next problem: how do we not become Japan? Unlike some of the hard-sciences, economists get one kick at the can. If they miss, they have a new problem to solve.
Why not counter cycle the lending activity instead of exacerbating the business cycle?
Oh wait we're economists - free markets are sacrosanct and they are efficient - if there is an arbitrage opportunity to short surely the rational investors will price it correctly. Not.
>"Why not counter cycle the lending activity instead of exacerbating the business cycle?"
That's easier said than done. Most of it is politics. But they do.
The Fed began tightening monetary policy back in 2004, when rates went from just below 2% to 5.5%. They did so to start to "cool" the economy, and it essentially popped the housing bubble.
Did you include the "sic" as a joke? If so well played my friend, if not the streak continues. Including "sic" is grammatically incorrect because you are not transcribing an error or misspelling something on purpose.
I believe you to be mistaken. I did not include it as a joke, and using "sic" in this context is literally correct. The reference is to "Muphry's" law (carefully note the spelling), and almost everyone would assume that I had mis-spelled that, intending instead "Murphy's" law. Using "sic" indicates that it is written as I intended.
Quoting Wikipedia:
The Latin adverb sic ("thus"; in full:
sic erat scriptum, "thus was it written")
...
The usual purpose is to inform the reader
that any errors or apparent errors in the
transcribed material do not arise from
transcription errors, ...
But others, who do not read as closely as you apparently do, need the extra information provided by the "(sic)". More than once when quoting Muphry's Law I've been "corrected".
Complete and utter nonsense. "You" don't know what's going on, and assume others don't. The public is unbelievably ignorant of this subject. These men are brighter than you think.
>"EMH is by far the clearest example of this"
EMH is a 50 year-old theory. Like practically any other subject, economics that is taught in school at low-levels is based on old science. There is real, modern research happening on real-world things, just go poke around the Fed's site to see what they're doing.