Why Did So Many Fail To Predict The Crisis?

[Bushman]

Maybe we should replace economists with psychologists...say a Myers Briggs index that tracks the weighting of the market to bullish vs bearish personalities? Lol.

 

[Aussiejeff]

Right now, are we sufficiently factoring in peak (whatever number) unemployment? And, how long does it linger? Uncertainties for sure, but uncertainties. It's gonna hurt, but to what extent?

I think peak under-employment is more of a concern IMO.

Many media EconExperts now seem to be crowing about how employers are cutting back workers hours rather than laying them off, thus massaging the "official unemployment" figures to "more acceptable" levels.

However, a relative few lateral-thinking EconExperts are now starting to be far more concerned at the declining economic productivity and average per capita income caused by rapidly increasing under-employment (ie: less hours, less overtime = LESS SPENDING POWER). I'm with them.

It is leading to the somewhat absurd situation where media reported LOWER unemployment "than expected" (resulting from HIGHER under-employment rates instead) is actually no better for the economy than if there had been HIGHER unemployment rates alone. For example, if a low-paid single worker on $540 week is forced to take a 50% cut in pay for a year or so through 50% less hours of work (= $270 week, less tax) in order to "save their job", that is obviously no better for the economy from a cash flow and spending point of view than if they were made redundant in the first place and then got the current dole of approx $245 per week tax free?

Come to think of it, with most wage earners needing near 100% pay rates to survive, you have really got to wonder how many of the growing band of workers who have had their "jobs saved" through significant hours of work cutbacks will actually go under financially, when faced with extended big reductions in their take home pay? Aren't most families maxed out on credit?

Hmm. A bit of "smoke & mirrors" stuff here by those in power and their media cronies, metinks....

The "real economy" will out in the end.



aj

 

[shag]

who cares about unemployment unless it threatens u or rellies. it will peak at 10pc quickly, the peopole who really were scraping to gain a job will be expunged from bussinesses, then it will go back into a 'full' employment senario far too quickly for good businesses.
im hoping for good houses to get dumped on the market from overgeared finacial field hangers on getting kicked out in east sydney.
then i can get a bigger shed with tv.

 

[Sean K]

I think peak under-employment is more of a concern IMO.

Many media EconExperts now seem to be crowing about how employers are cutting back workers hours rather than laying them off, thus massaging the "official unemployment" figures to "more acceptable" levels.

However, a relative few lateral-thinking EconExperts are now starting to be far more concerned at the declining economic productivity and average per capita income caused by rapidly increasing under-employment (ie: less hours, less overtime = LESS SPENDING POWER). I'm with them.

It is leading to the somewhat absurd situation where media reported LOWER unemployment "than expected" (resulting from HIGHER under-employment rates instead) is actually no better for the economy than if there had been HIGHER unemployment rates alone. For example, if a low-paid single worker on $540 week is forced to take a 50% cut in pay for a year or so through 50% less hours of work (= $270 week, less tax) in order to "save their job", that is obviously no better for the economy from a cash flow and spending point of view than if they were made redundant in the first place and then got the current dole of approx $245 per week tax free?

Come to think of it, with most wage earners needing near 100% pay rates to survive, you have really got to wonder how many of the growing band of workers who have had their "jobs saved" through significant hours of work cutbacks will actually go under financially, when faced with extended big reductions in their take home pay? Aren't most families maxed out on credit?

Hmm. A bit of "smoke & mirrors" stuff here by those in power and their media cronies, metinks....

The "real economy" will out in the end.

aj

Lowering overall wages, instead of sacking people, could save a business. Lowering wages, instead of forcing people on to Gov unemployment benefits, saves the government money. Yes, less spending, but a better option than just sacking, perhaps. It's maybe not smoke and mirrors, but common sence. Just a pluck. I'm not an economista.

And, your example may not be a good one. How many low paid single workers are taking a 50% pay cut?

 

[noco]

Peter Costello predicted it before the 2007 election. He even told the Labor Party dead heads also.
But of course, Why would they take any notice of the best Treasurer Australia ever had.

 

[Uncle Festivus]

Why Did So Many Fail To Predict The Crisis?

Because they probably used the same theories/paradigms/ideas that are predicting a 'second half recovery' & 'green shoots'; & then wonder why they don't eventuate?

 

[shag]

Lowering overall wages, instead of sacking people, could save a business. Lowering wages, instead of forcing people on to Gov unemployment benefits, saves the government money. Yes, less spending, but a better option than just sacking, perhaps. It's maybe not smoke and mirrors, but common sence. Just a pluck. I'm not an economista.

And, your example may not be a good one. How many low paid single workers are taking a 50% pay cut?

its so bloody hard to get good employees and retain them imo, so i see this short period as somewhat positive, throw out a bit of chaff, and hopefully the competition will push others to try harder plus upscale quals plus attitude.
its counterproductive to dump good employees(for good quality bussinjesses) unless u r desperate and should b bust anyway. rehire, redundancy, reskill etc.
an extra bit of dole payments maybe a small price to pay for future growth. and prosperity.

 

[Sean K]

Why Did So Many Fail To Predict The Crisis?

Because they probably used the same theories/paradigms/ideas that are predicting a 'second half recovery' & 'green shoots'; & then wonder why they don't eventuate?

Tell us when you see the 'green shoots' UF!

Unfortunately, if you're 'imminent and severe correction' thread is any guide, we'll be 7 months too late.

So, please tell me further in advance.

Cheers,

 

[moXJO]

Seems confidence is high.

CONSUMER confidence surged in July to its highest level in one and a half years, as Australians continued to be optimistic about the outlook for the domestic economy.
The Westpac-Melbourne Institute index of consumer sentiment rose 9.3 per cent in the month to 109.4 points, seasonally adjusted, from 100.1 points in June.

The July reading showed optimists "decisively'' out-numbered pessimist for the first time since December 2007.

It also came the index in June marked its second largest monthly rise since 1974, when the survey began.

But there's nothing like another market crash to put a stop to that

 

[nunthewiser]

what crisis ?

all sunshine and lollipops aint it ?

 

[Uncle Festivus]

Tell us when you see the 'green shoots' UF!

Unfortunately, if you're 'imminent and severe correction' thread is any guide, we'll be 7 months too late.

So, please tell me further in advance.

Cheers,

What, 7 months warning wasn't enough then! No pleasing some people...

If you buy me some rose coloured glasses, a case of beer and a directorship of Goldman Sachs (or a seat on the Fed, same diff?), I can see plenty of green shoots . It's just that they will all be my green shoots while I algo trade the rest of the US economy into the ground. Now only if that pesky Russian didn't steal my trading software!!

 

[moXJO]

Now only if that pesky Russian didn't steal my trading software!!

Hey UF you got that german torrent

 

[MRC & Co]

If the majority did not fail to predict the crisis.........would there have been a crisis?

Maybe of no relevance, but a quote I love:

This raises an interesting possibility. Perhaps some of the developments I predicted were pre-empted by the very fact that they were anticipated by the market and the market provoked a reaction that prevented them from happening. When I finally recognized that markets can pre-empt the catastrophes they predict, I concluded that we live in an age of self-defeating prophecies. It is an old joke that the stock market has predicted seven of the last two recessions. We can now understand why. Financial crashes tend to occur only when they are unexpected. - George Soros

 

[MRC & Co]

Which part is incorrect, that the banks are not providing the liquidity to private and corporate borrowers, that borrowers are not borrowing, or that by either side not acting out their role there won't be inflation? Or all of the above?

Completely agree ASX.

Otherwise known as the velocity of money.

 

[tech/a]

Why Did So Many Fail To Predict The Crisis?

Failed predictions can be Career Killers.
Simple really.

 

[nunthewiser]

Why Did So Many Fail To Predict The Crisis?

Failed predictions can be Career Killers.
Simple really.

yep

a lot safer and easier to predict something in the various circles after its happened

 

[wayneL]

Why Did So Many Fail To Predict The Crisis?

Failed predictions can be Career Killers.
Simple really.

Jesus! I can think of at least.... actually I can't even count the number of economists who should be out of a job then... and just about every politician.

 

[Julia]

Here is an excellent article from the Pragmatic Capitalist. http://pragcap.com/why-did-so-many-investors-fail-to-predict-the-credit-crisis

A few of us here banged on about it ad nauseam and suffered ridicule etc, but it was only a matter of time. It also gives Keynesianism a bloody good spray. Our governments pseudo Keynesian response to this mess will cost us very dearly in the future.

So why did so many miss the signs?

Perhaps many didn't miss the signs at all, but it simply wasn't in their interests to warn people. i.e. financial advisers raking in all those trailing commissions from managed funds which were/are the mainstay of the massive Super industry.

Hence all that advice to the punters (who had no idea about where their funds were or what was likely to happen to them) to just hold tight, it would all be A-OK, baby.

 

[trainspotter]

And here is why:

Gordon Gekko: The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullsh!t. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you.

"Greed is good" Did he really say this?

 

[Mr J]

yep

a lot safer and easier to predict something in the various circles after its happened

My answer, as usual, is because they're salesmen. Most people can't predict, they just react and put on a nice act. There's also the habit of the herd pushing independent thinkers away and laughing, even if they're warning them of impending doom. The herd just can't see beyond the **** (butt) in front of them.