What Economists Still Don’t Get About the 2008 Crisis
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Re: What Economists Still Don’t Get About the 2008 Crisis
#2> Basically, this theory holds that when asset prices rise — home values, stocks and so on — without a break, investors start to believe that this trend represents a new normal. They pile into the asset, pumping up the price even more, and seeming to confirm the idea that the trend will never end. But when the extrapolators’ money runs out, reality sets in and a crash ensues
So what's new here?
Re: What Economists Still Don’t Get About the 2008 Crisis
#3> Basically, this theory holds that when asset prices rise — home values, stocks and so on — without a break, investors start to believe that this trend represents a new normal. They pile into the asset, pumping up the price even more, and seeming to confirm the idea that the trend will never end. But when the extrapolators’ money runs out, reality sets in and a crash ensues So what's new here?
[deleted]
Re: What Economists Still Don’t Get About the 2008 Crisis
#4Umm, Austrian Business Cycle Theory?
https://en.wikipedia.org/wiki/Austrian_business_cycle_theory
Re: What Economists Still Don’t Get About the 2008 Crisis
#5No credit to libertarians and the Austrian business cycle theory?
They are describing it on the page, but no mention that this idea has existed for decades. Meddling in the economy wins out due to politics, but it always leads to gigantic downturn.
Re: What Economists Still Don’t Get About the 2008 Crisis
#6> Basically, this theory holds that when asset prices rise — home values, stocks and so on — without a break, investors start to believe that this trend represents a new normal. They pile into the asset, pumping up the price even more, and seeming to confirm the idea that the trend will never end. But when the extrapolators’ money runs out, reality sets in and a crash ensues So what's new here?
That zero is a real number.
Re: What Economists Still Don’t Get About the 2008 Crisis
#7Not a great opinion piece with an overly-dramatic title. The forecasting failures of major world economic bodies leading up to the 2008 financial crisis were (and somewhat still are) widely examined and criticized.
> https://www.economist.com/free-exchange/2011/02/11/the-warni...
From that article a choice quote from a referenced report:
> "In the United States, for example, it did not discuss, until the crisis had already erupted, the deteriorating lending standards for mortgage financing, or adequately assess the risks and impact of a major housing price correction on financial institutions…As late as April 2006, shortly before U.S. housing prices peaked, the WEO and the GFSR explained away the rising share of non-traditional mortgages in the United States thus: “Default rates on residential mortgage loans have been low historically. Together with securitization of the mortgage market, this suggests that the impact of a slowing housing market on the financial sector is likely to be limited."
So to say that Economists still "don't get" the 2008 crisis is a somewhat heavy rose-colored embellishment of the actual state of the field.
Re: What Economists Still Don’t Get About the 2008 Crisis
#8Keynesian Economics are the economics of political convenience. If something goes wrong, we can juice the economy by engaging in extaordinary activities which generate the illusion of wealth resulting in increased spending.
These ideas were very popular until Great Britain encountered stagflation - conditions under which both economic recession and inflation coincided and traditional Keynesian levers and predictions did not function.
Zero Interest Rate conditions are not normal. Never in this history of humanity have interest rates been held this low for so long.
I strongly recommend taking a long walk through the videos on the Mises Institute, reading Daniel DiMartino Booth and listening to several Peter Schiff podcasts.
I don’t recommend buying gold, but if you want a real critique of what is happening, listen to the leading critics and not this weirdly mangled and factually questionable Bloomberg piece.
There are many better people to learn about this from.
We are living in absolutely extraordinary times which will need with a severe economic implosion.
Re: What Economists Still Don’t Get About the 2008 Crisis
#9My own theory after digging sometime into Economics is that no one seems to have a clear idea what on earth we are actually doing. We all seems to have our own theory, and they all seems to answer half of the question. And in practice none of them currently models the world we have now. And it will take a long time before any of those theory are proved to be correct this time around. May be we can finally say Keynesian is wrong. ( At the expenses of our generation )
And it makes things more complicated when people start messing around with how they measure things, and messing with formulas. Numbers like China which are inaccurate. Inflation number which are messed with by FEDs. IMF prediction model which has been wrong every time for years and it seems its only job is to please or more accurately manipulate the market mindset.
Re: What Economists Still Don’t Get About the 2008 Crisis
#10Keynesian Economics are the economics of political convenience. If something goes wrong, we can juice the economy by engaging in extaordinary activities which generate the illusion of wealth resulting in increased spending. These ideas were very popular until Great Britain encountered stagflation - conditions under which both economic recession and inflation coincided and traditional Keynesian levers and predictions…
Didn’t this happen in 1930. We had 0 rate back then for few yeras