The Times is good today in looking at how some prognosticators are racing to outdo each other predicting how far the market will fall. It’s kind of amazing to see experts quoted in a major paper saying the Dow could fall to 2,000. It’s stunning, actually, and that’s not even mentioning the guy who predicts a 90 percent tumble.
The Times is quick to say that trying to predict stock-market movements is largely a fool’s errand and is amusing in busting the chops of those guys who wrote “Dow 36,000” a few months before the tech bubble burst.
Still, while the reputation of its authors may have taken a hit, “Dow 36,000” has not seemed to hurt their careers. Mr. Hassett, who did not respond to a reporter’s inquiry, works at the American Enterprise Institute, a conservative research group in Washington, and serves as the senior economic adviser to the presidential campaign of Senator John McCain.
According to his spokesman, Mr. Glassman prefers not to comment on the financial markets now that he has started in his new position: under secretary of state for public diplomacy in the Bush administration.
I think that’s called failing upward.
Speaking of prognosticators, Nouriel Roubini, who will be remembered as the Prophet of the Panic of ’08, says it’s only going to get worse, with governments likely to have to shut markets down for a spell. He’s not called Dr. Doom for nothing.
“We’ve reached a situation of sheer panic,” Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. “There will be massive dumping of assets” and “hundreds of hedge funds are going to go bust,” he said.
N. Gregory Mankiw in the Times yesterday asked whether we’ve learned enough over the last 80 years to prevent another Great Depression. The ex-Bush economic adviser is not too optimistic either.
What’s next? Perhaps the most troubling study of the 1930s economy was written in 1988 by the economists Kathryn Dominguez, Ray Fair and Matthew Shapiro; it was called “Forecasting the Depression: Harvard Versus Yale”…
The three researchers show that the leading economists at the time, at competing forecasting services run by Harvard and Yale, were caught completely by surprise by the severity and length of the Great Depression. What’s worse, despite many advances in the tools of economic analysis, modern economists armed with the data from the time would not have forecast much better. In other words, even if another Depression were around the corner, you shouldn’t expect much advance warning from the economics profession.
Let me be clear: Like Mr. Blanchard at the I.M.F., I am not predicting another Great Depression. We have indeed learned a lot over the last 80 years. But you should take that economic forecast, like all others, with more than a single grain of salt.
Arthur “the Curve” Laffer gets column inches from his favorite patron, the WSJ editorial page, and calls Bush (and Congress, to be equanimous, of course) Herbert Hoover! Of course, he’s got a book to sell, but what’s really laughable is to see him beef about budget deficits.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
That’s right— it’s Mr. Voodoo Economics himself, griping about deficits that his theories had perhaps the biggest role in creating. Nice.
The NYT’s Gretchen Morgenson let loose on the BS being shoveled out by the perps in the crisis, including Alan Greenspan, SEC Chairman Christopher Cox, and the ratings agencies.
The press is talking more and more about the potential bankruptcy of the Big Three. Today it’s the Journal and yesterday it was the Times. I’ve beefed about after-the-fact-ism in the press, so a tip of the hat to it for an uncharacteristic boldness in spelling out the likely scenarios before they happen.