For those under 25!

[John Short]

http://uk.finance.yahoo.com/news/Economists-undergo-George-tele-206890267.html?x=0

[harnett]

So why don't economists predict the trouble brewing?  One good place to start is to watch the Oscar winning Documentary "Inside Job" which presents plenty of evidence that economists (and others) are part of the carousel linking Wall Street, US government (Treasury etc.) and academia.  Too many of them are less than independant academics unfortunately.  There is evidence that an unelected group of very wealthy individuals with a common interest are given unfettered access and influence to both politicians and the academic elite.  If an academic writes a report for a financial institution then is that academic likely to criticise that institution?

But there again there are plenty of other economists who are genuinely independent. Why didn't they predict the crisis?

[STONE]

Easy to predict crises - this is how you do it.

To Editor FT,

Dear Sir (sic),
There will be another economic financial crisis,

Yours faithfully,
Learned academic economist, publicly funded university somewhere in the world

[STONE]

Or you can keep it local and wear some boards with

"an economic/financial crisis is nigh"

This has got to be better at has some reference to time...

But newsbiscuit is better than me
 

[petagny]

Agreed: it's impossible to predict when confidence will collapse and bubbles will burst. But the intensity of cries that 'this time is different' seems often to be a good warning sign. Gordon Brown's 'end to boom and bust' now seems pretty prophetic (in retrospect!) And, of course, next time I'll see it coming and put my pension in gold (now another bubble?)!

I fear that the conditions for more frequent and more intense bubbles have been created though. What exactly has been done since the Crash to tackle the 'too big to fail' problem of the large financial institutions. A bit if tinkering around the edges?

[John Short]

Perhaps the members of the Board should put their minds together to come up with a forecasting index, which could be made up of number and importance of policy distortions, number and importance of market distortions weighted by the regulatory response and a cronyism measure, as an example.  Weights and composition would be important, but I am sure this could be improved upon easily by the members.  It could be called the WHU-PS Index or whupsi™ for short.  (Those over 25 may know what WHU and PS stand for and the relevance here!)

[harnett]

Sounds like a "must" for the future, John.  But back to the prediction issue.....

Surely we all knew that the ease of accessing mortgages compared to 30 years ago did not bode well.  We all felt uncomfortable by it but nobody actually stood up and said it would provoke a crisis.

What really makes me smile though, is that now there is talk of going back to days of 100% mortgages in the Uk to enable first time buyers some extra possibilities!

[STONE]

I recall Stiglitz's review of where it all went wrong - can't remember where it was though

Ponzi knew there would be a day of reckoning...

 A bit like Mykingdomforanos - tomorrow the sky will fall on my head - but tomorrow never comes

[petagny]

Stiglitz's book the 'Roaring Nineties' explains how all the pieces for the crisis were put in place (and led to the Dot-Com bubble). Partly a 'mea culpa' since he was an advisor to Clinton. I've seen quotes from him predicting a 'long and deep recession' in early 2008.

[STONE]

Petagny, yes thanks, but I'm thinking about the piece where he reports how accountability (finally) works when he reports how Greenspan was forced into some humiliating admissions by a Congressional committee - too late to look now ...