Economists Out to Lunch

C'mon... The answer is because of history!!!! Most econimists are students. They tend to be "in the box" thinkers, whom lack creative vision. ...and they're all taught from the same schools, about the same historic events.

Creative economic engineers are what's needed to better map out and hypothesize future outcomes. Our complexty has grown far too much to use dogmatic models and theories. Those history lessons are good to know, to stop criminal or inefficient behavior... but they have liottle place in our economic evolution.

This is coming to you froma person who predicted this better then most!!! Yes. Me. As a writer for Nouriel Roubini's RGEmonitor I can proudly say that I saw this coming, and it's well documented (and time stamped to boot)

All the best,
Rich Hartmann (aka Miss America)

Economists and other leaders don't seem to realize that to the average or below average income family a $50/week increase in gasoline costs is enough to cripple a budget. When it takes an extra $200/month just to put gas in the car to drive to work so you can make enough money to continue to eat, the mortgage falls behind along with any other discretionary spending, and obviously the economy comes tumbling afterward. When people lose homes while oil companies make BILLIONS there needs to be some investigation.

Don't forget, a lot of "regular" people made money during the real estate boom! I did, on a couple of transactions, quite a bit of money, actually. Also, I pulled my mom's portfolio out in SEP 07 and mine in FEB 08 - was ridiculed online when I posted that info. Well, I saved all that money, I did not take the 40 -50% hit many of the people that were jeering at me probably took.

Lesson - think for yourself.

Who is to Blame? Who is to Blame? If this was George you guys would be talking about what a dumb *** he is! Why no blaming BH Nobama, the smartest president in the world. What a bunch of gutless hipocrits!

As much as greed and corruption had a lot to do with ithe economic disaster; there is still the lurking possibility that we were blind sided and sucker punched by the need to maintain a balance between supply and demand sides of economics. As the demand side of economics decreased in available funds the supply side cranked up prices to cover their side of the equation. Higher prices further decreased the demand side of economics' available funds. As wages fell, jobs were shipped out and debt expanded; the lighter than air economic balloon turned to lead, people lost their faith in the economic system and banks began to fail. Conservatives who thought that economics did not need controls got greedy and sent their golden parachutes to off shore banks further undermining the economy. In the mean time, people were being inundated with spend mania advertising as the economy nose dived, their jobs went off shore, their wages fell, and their debt soared like the eagles.
Now we are in deep kimshe.
Instead of seeding necessary funds to the demand side of economics where the problem lies; our government is lining the pockets of the traitors who started the mess. We know the problem and what the solution is but the powers to be do not have the intestinal fortitude to do what is the right solution for the problem. The first thing that has to go is lobbyists so as to remove the obvious corruption of our government and then the demand side of economics must have an infusion of sufficient funds to support a quality society. Lack of money is also a root of great evil.

Secrecy (legal or illegal) is a reason economists missed their call. In ROLLING STONE April 2, 2009 ???The Big Takeover???, Matt Taibbi reports QUOTE BEGINS: ???People are pissed off about this financial crisis, and about this bailout, but they???re not pissed off enough??? AIG Financial Product???s returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary???s 400 employees were paid a total of $3.5 billion??? Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascent to Treasury secretary??? If AIG went down, there was a good chance Goldman would not be able to collect??? That???s the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers??? credit card??? In essence, Paulson used the bailout to??? socialize ???toxic??? risks but keep both the profits and management of the bailed-out firms in private hands. Moreover, this whole process would be done in secret??? By early 2009, a whole series of new government operations had been invented to inject cash into the economy, most all of them completely secretive??? While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP,??? these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments??? No one knows whose getting that money or how much of it is disappearing through these new holes in the hull of America???s credit rating??? What authority Congress has to monitor the Fed??? an obscure statute that nobody had ever heard of before: the Accounting and Auditing Act of 1950. The relevant section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include ???deliberations, decisions and actions on monetary policy matters.?????? When Rep. Alan Grayson of Florida asked Federal Reserve vice chairman Donald Kohn where all the money went ??? only $1.2 trillion had vanished by then ??? Kohn gave Grayson a classic eye roll, saying he would be ???very hesitant??? to name names because it might discourage banks from taking the money... Geithner, Obama???s Treasury secretary, is one of the architects of the Paulson bailouts; as Chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company??? He has continually talked about partnering with private investors to create a so-called ???bad bank??? that would systemically relieve private lenders of bad assets??? QUOTE ENDS

Disinformation is one reason. Like Johnny, Senor Wence???s puppet, Geithner and Obama know what to say. But they do the opposite. In BARRON???s April 13, 2009 ???Lessons of the Savings and Loan Crisis??? William Black, who was a deputy director at the former Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s reports QUOTE BEGINS: ???This whole bank scandal??? the scale of the fraud is immense??? We have failed bankers giving advice to failed regulators??? Tim Geithner, the current Secretary of the Treasury, and Larry Summers, chairman of the National Economic Council, were important architects of the problems??? It is worse than a lie. Geithner has appropriated the language of his critics and of the forthright to support dishonesty??? The current law mandates prompt corrective action, which means speedy resolution of insolvencies. He is flouting the law, in naked violation, in order to pursue favoritism that the law was designed to prevent. He has introduced the concept of capital insurance, essentially turning the U.S. taxpayer into the sucker who is going to pay for everything??? mispricing toxic assets??? With most of America???s biggest banks insolvent, you have, in essence, a multitrillion dollar cover-up by publicly traded entities, which amounts to felony securities fraud on a massive scale??? We need to gear up to pursue criminal cases??? Two years after the market collapsed, the Federal Bureau of Investigation has one-fourth of the resources that the agency used during the savings-and-loan crisis. And the current crisis is 10 times as large. There need to be major task forces set up??? Prompt corrective action is what is needed, and mandated in the law. And that is precisely what isn???t happening.??? QUOTE ENDS

ECONOMISTS DID PREDICT THIS CRISIS.

You were just reading the wrong economists.

The folks I read predicted exactly what unfolded in 1) housing, 2) banking, 3) stocks, 4) derivatives starting as far back as 2004 and 2005. And they are still predicting accurately it seems, what is coming.

All mainstream economists are part of the failed Keynesian School of economics.

Get out of the box Newsweek. Do some real investigative work: make journalism proud again.

Look into the Mises School of Economics and read Contrarian Economists.

They'll seem crazy and wacky to you at first; but you know ahead of time what is coming.

I'm not an economist, have no money to invest, live day to day. Yet observation sufficed, when combined with a modicum of old fashioned common sense, to figure out that the junk bond debacle; the dot com circus; and grotesquely overpriced real estate was the hyperactive precursor to a full-blown national bipolar diagnosis . Ask most ordinary people. They'll tell you they saw it coming. It was too good to be true.

Easy! We don't want to know the truth: 'That every 'extreme' creates its opposite!' In the case of the financial collapse, it went to its extreme, and then had to burst. Enantiodromia! Endless cycles in Duality!

I hold you, and your ilk, just as responsible. When we mere plebians tried to voice our concerns, you kept talking about how cheap we could buy toasters today, as compared to as in our childhood. It doesn't take an expert economist to understand that people are not making the salaries needed to afford million dollar homes. My father was able to raise two kids and buy a three bedroom home employed as a washing machine repair man. That disparity is what you should be looking at...... and taking responsibility for not reporting on it the way you should have!

Perhaps all these genius economists are kids too young to remember the 80's.
The fact is Bush's black Friday was fashioned after Reagans black Monday and S&L bailout and was as predictable as rain the day Bush took office. In fact it is not unlike the causes of the Great Depression.
What was not as predictable was the housing bubble, but an intuitive person should have taken note when Bush gave a speech in 2002 encouraging Home ownership and "making it easy" for everyone to own a home, that and the fact he had a mini housing crisis while governor of Texas...Practice run perhaps?.
The other thing that was not as predictable was the sheer magnitude; that it would affect the economy of the entire industrialized world.
Still one has to wonder just why some of the folks in Washington did nothing. Those who have been around for a while. Some have been in politics since Nixon and should have had some insight. But that leaves nothing but speculation albeit lots of it.
Like maybe they had some insight into when to sell...if you sold at the top of the market you did very very well.

I think you'll see that economics is actually quite good at 'predicting' AFTER the fact what has just happened. To be fair, these complex systems like the economy are perhaps not possible for a science to predict due to the nature of complexity. They are not nice simple linear systems and very often respond quite chaotically to the complex factors that drive them. The problem is that economists try to convince everyone that they know what they are talking about and most of the time they don't.

This is a bit of a trick question. If enough people had the foresight to see the market implosion, they could have done something about it. There WERE people within the financial sector (Jamie Dimon at J.P.Morgan, and many hedge fund managers, for example) who saw the dangers certain sectors of the market and divested. It's noteworthy that those who pulled their investments early were seen as being foolish. "Irrational Exuberance" had become the new paradigm. What could possibly happen? The housing market crash? That hasn't happened since the Great Depression!

Like Generals who develop strategies to win the previous war, the models of behavior developed by financial institutions were based on old markets. That, plus the opacity of many of the recently developed financial instruments, made it difficult to prognosticate accurately.

People who look at the crash and say "how could it have been averted?" are missing the point. The crash is not the end of what happened. Government intervention happened after. A more appropriate set of questions should be
"Can an economic entity become too big to fail?"
"Can economic entities become too interndependent to fail?"

There is cognitive dissonance between believing in free markets and believing in bailouts. If you believe in government bailouts, you have to believe in the government's right to intrude in free markets.

If you believe in free markets, are you willing to let an entire system crumble so you can be the hero in an Ayn Rand novel? If not, how do we go about designing a market where entities become neither to big nor too interdependent to fail?

If we work backward from whether or not the government should be required to bail out the financial sector, coming up with rules and understanding what we have to do will be easier.

Economists are not scientists because the study of ecomonies is not a science. It is only a lookback in time. A true science allows you to test your hypothesis. Ecomomists can not do this. End of story. In fact, there should not be a Nobel given for the study of ecomony as it is not a science.

I think the signs of doom were always there, and very ominous! The only problem was that we failed to see what was there to see. In the enthusiasm to "create wealth" we continued to live in a dream. Some did see it and were vocal about it, but the question is who wants to end a super party? The media had its role, obviously fed us what we needed to keep the party going! Is there another bubble waiting to burst? The oil .....