Dean Baker is that rare exception: an economist who is reality-based, who is willing to call it like he sees it, and who is happy to take his peers to task for their delusions, distortions and claims of expertise.
The co-director of the Center for Economic and Policy Research is also an eloquent critic of ill-informed reporting on economic matters, which makes his Beat the Press blog an entertaining and illuminating read.
In "Bad Debt: $100 Billion, $400 Billion, Who's Counting?" Dr. Baker reveals the latest word on the cost of the housing collapse, while also detailing a forecast of his own that stands in sharp contrast to what many of the so-called experts are saying.
These are not good days for the dominant "who could have known?" school of economics. First, they missed the housing bubble. Since it has started to unravel, they have continually understated the size of the fallout. Only now are most economists beginning to acknowledge that the economy is virtually certain to be thrown into a recession from the collapse.
Fortunately, the media do not hold economists responsible for their failures. The NYT gives us yet another example of non-accountability. At the very end of an article warning that the impact of the housing collapse is likely to be substantial, the NYT reports "The German finance minister, Peer Steinbrück, said members agreed that write-offs at banks related to subprime mortgages could reach $400 billion, about four times estimates just a couple of months ago."
Being off by 300 percent might be considered a serious problem in other lines of work, but apparently not for economists. For the record, I expect total losses for the financial sector to approach $1 trillion.
Michael Panzer writes "For the record, I expect total losses for the financial sector to approach $1 trillion."
However, this cannot be true. That money exists. Those who bet correctly won and were paid that $1 trillion.
For some to have lost $1 trillion means that others walked away with the same $1 trillion.
That $1 trillion did not disappear.
Who has that $1 trillion is what you should worry about.
Posted by: Pier Johnson | February 13, 2008 at 03:48 AM