I've often highlighted the flawed assumptions, illogical assertions, and hallucinogenic forecasts uttered by professional economists and other paid "experts," especially in regard to the dramatic developments of recent years.
To be fair, though, there are some professionals who have basically called the tune on the bursting housing and credit bubbles and the subsequent fallout. One such individual is Nouriel Roubini, a professor of economics at New York University's Stern School of Business and Chairman of RGE Monitor. I highlighted Dr. Roubini's insights in a post I wrote last November, "The Truth Will Set You Free."
Another notable forecaster -- who avoids the rose-colored glasses, fog-inducing chemicals and other reality-distorting paraphernalia favored by the Wall Street crowd -- is Dean Baker, an economist and co-director of the Center for Economic and Policy Research. His latest thoughts are featured in a post at the Wall Street Journal's Economics Blog, "Recession Just a Matter of Semantics?"
Many analysts gathered at the American Economic Association’s two-day annual meeting spoke of a recession as almost a given but differed over how severe it will be.
“The recession is likely to be a serious one,” said Dean Baker, co-director of the Center for Economic and Policy Research. He estimated losses in prime mortgages will be two to three times the $160-$200 billion hit seen in the subprime sector. This, he said, will lead to large losses at banks and difficulty for Fannie Mae and Freddie Mac.
University of Chicago professor of finance and former chief economist at the International Monetary Fund, Raghuram Rajan, said questions in the media over whether the U.S. economy will fall into recession are really only about semantics. “We are going to have very low growth in the first two quarters of the year. Whether it is negative or zero, it is going to feel like the same thing,” Rajan said.
Many analysts argued that the government may be powerless to prevent a downturn. “My sense is that even though the government wants to be seen as reactive, there is not that much they can do at this point,” Rajan said. “Monetary policy has lags of a year. It can’t revive lending that isn’t taking place because banks have capital constraints.”
Princeton economist and New York Times columnist Paul Krugman was skeptical that Congress would put aside partisan politics over tax policy in order to pass such measures. “One side will not accept tax cuts for rich people, and the other side won’t take fiscal action without tax cuts for the rich,” he said.
Mike,
I gotta admit that you, Michael Pento, Doug Kass, Joe Battipaglia and Gary Shilling have absolutely nailed it. I started watching you guys on Kudlow 6 months ago when I started getting interested in the markets and I did not know who to believe at first.
At this point, I hope your book sells millions of copies.
Posted by: Thomas Shawn | January 06, 2008 at 07:14 AM
Mike,
I gotta admit that you, Michael Pento, Doug Kass, Joe Battipaglia and Gary Shilling have absolutely nailed it. I started watching you guys on Kudlow 6 months ago when I started getting interested in the markets and I did not know who to believe at first.
At this point, I hope your book sells millions of copies.
Posted by: Thomas Shawn | January 06, 2008 at 07:14 AM
No sign of recession for the ultra rich
http://www.palmbeachpost.com/business/content/business/epaper/2008/01/06/m1a_WEALTHY_0106.html
Posted by: Ace hanlon | January 06, 2008 at 08:17 AM
Raghuram Rajan's comments "whether it is negative or zero will feel the same is an odd comment. If we have the economy
retracting at 5% or 0 it will feel the same?...What about 10%?
Posted by: the_economist | January 06, 2008 at 11:15 AM
Great article, especially the props to Roubini. He has taken a lot of heat from the moronic TV bubbleheads over the last months because of his outlook.
Posted by: Ignatius J. Reilly | January 06, 2008 at 02:08 PM