I remember reading articles about the subprime problem in the Economist way before the crash. I think they're pretty good on the whole at being informative and not sensationalist.
Here's one from 2006 [1] that I found relatively easily. But there's one in my head that I remember about an HSBC owned bank that was flailing and could potentially start a crisis, but I can't find it right now - I just remember reading it at the time, it was the reason I decided to wait for a downturn in the housing market. I wish I'd ignored it and bought at the time, but with the benefit of hindsight ...
Yup. I’m always amazed when people say nobody saw the recession coming, because I distinctly remember multiple news stories about the subprime mortgage brouhaha for a year or two before the bubble burst.
People hear what they want to hear, and remember what they want to remember, I suppose.
Many people saw that housing was probably overvalued and that there was a wave of unaffordable payment hikes in the pipeline on the loans secured against that housing coming. A falling housing market is hardly a once in 100 year phenomenon, and many other housing markets had operated with similar products (teaser rates etc) for many years, and continue to operate on that basis.
Many people also saw a recession coming, because recessions always come eventually - it's a normal part of the economic cycle.
Relatively few people saw that these two things would result in many of the largest financial institutions on the planet coming near to collapse.
Even fewer people got the timing right. And not many of those had the courage of their convictions to actually place bets on it.
I clearly remember NPR was talking about the subprime in Feb-Mar of 2007. That does not mean that NPR foresaw 2008 great recession. Most people saw a dip, but very very few people saw a Valley that it truly was.
Why do you wish that you had bought the house despite accurately predicting and waiting for the downturn? Didn’t you get a significantly better deal or did it just get offset anyway? Curious because it’s a similar decision now. A recession is inevitable, will it happen in the next 3-6 months or take two years is hard to predict.
This kind of "economists are always wrong because they didn't foresee a major problem" is like saying "engineers are always wrong because they don't foresee issues caused by DNS"
It's almost as if people don't understand uncertainty.
Just because economists are not EXACTLY right about everything, does not mean they are ALWAYS wrong...
Think about all the possible scenarios that could have happened in 2008, and think about how closely economists -- on average -- were to that. They're actually ASTOUNDINGLY accurate. But just because they're not completely accurate, for some reason so many people think they have 0 value.
Eh, I think the sentiment is more like that saying "Economists have predicted 10 out of the last 3 recessions".
There are always lots of reasons to be concerned, lots of leverage that could crash catastrophically (and often does). Whether that triggers an actual recession or just a correction is the nebulous part. I mean, the S&P is down ~6% over the last 5 days. Are we at the start of a recession right now? Would you be willing to actually bet money on your answer? For the people who do: Are they just lucky, or actually insightful? How would you know the difference?
People have always worried about politics interfering with recession recovery - I mean, hell, a big part of the tea party's agenda was opposition to TARP and ARRA (I'm not going to go so far as to say that's WHY the tea party exists, though). Not to be too politically cynical, but I think it's fair to say that politicians will do everything within their power to protect the wealthy and the status quo and any opposition to that will be for show.
This is a false analogy. Economists bill themselves on being able to guide policy and large-scale decision-making given the tools and research at their disposal. If said tools and research are bunk, then the appropriate action is not to press on with guidance, but to stop with the guidance and predictions altogether. We're in the mess we're in now partly because of risk management techniques that don't work.
They aren't though. Also, it's a bit rich to blame economists when all they do is advise politicians who very often throw all the advice out the window.
"Other countries may also be looking nervously at America. And about time. An American recession would scarcely be welcome—even if for the moment Asian and European economies seem to be doing nicely on their own account. However, the true cause for concern is that just as America's housing boom was part of a synchronised global binge on cheap money, its bust may be part of a global story too."
"The trouble with the housing market", Economist, March 2007
Yes, they did. Leading up to 2008,there were a chorus of predictions of a near-future general collapse driven by housing market bubble popping from economists across schools and across the political spectrum.
It's true that this was perhaps still somewhat understated because the levels of outright fraud supporting the bubble weren't recognized, but the nature of fraud is that it tends to be actively concealed.
Isn't a basic premise in finance that past results don't guarantee future returns? Why does their past predictions invalidate their current argument? Sounds like you just have a bias...
They warned about the 2015 crash in China in time. They're not omniscient, obviously. But there's rumblings and talk about misalignments way before a crash, and The Economist is well placed to pick it up and report on it.
There's no one class of economists who all share the same opinion and make the same predictions.
The idea that cheap money leads to bubbles (which can lead to recessions) was well-established, it just doesn't harmonize well with the kind of naive Keynesian feel-good economics that politicians want to apply and universities want to teach.
Few people who correctly predicted that outcome at the time got the timing exactly right, but that's to be expected.
their prognostications are useless