Paul Rosenberg highlights Dean Baker’s 2002 piece about the housing bubble:
This paper shows that there is no obvious explanation for a sudden increase in the relative demand for housing which could explain the price rise. There is also no obvious explanation for the increase in home purchase prices relative to rental prices. In the absence of any other credible theory, the only plausible explanation for the sudden surge in home prices is the existence of a housing bubble. This means that a major factor driving housing sales is the expectation that housing prices will be higher in the future.
Matt Yglesias explains why there is no professional benefit to being prescient in the economic world:
And in the reputational economy of analysts the consequences are even worse. If you go along with the herd and then predict a problem a month before it arises, then you strike everyone as prescient. But if you start warning about something and then it doesn’t happen, and then you keep nagging people, and then you keep complaining about how nobody’s listening to you, you start getting dismissed as a crank. And when you’re proven right, you’re still that crank nobody wants to listen to. You don’t get hailed as a hero. But Ben Bernanke who made very mainstream mistakes and then pivoted adroitly once the bill came due does.
Of course, it’s the same with everything. The people who opposed the Iraq war are are still those cranks that nobody wants to listen to, while George Packer and Fareed Zakaria are hailed as brilliant foreign policy minds. Zakaria and Bernkanke are bright and competent, which is why they’re good examples here: it’s not just that our discourse holds up idiots as experts, it’s also that, within the world of intelligent commentators, those who are wrong are rewarded while those who are right are ignored.
Again, I don’t see how any of this ends well for the United States.
Comrade Jake
Probably doesn’t end well for us, but I still think we should continue to mock those who were so spectacularly wrong. Like when someone resurrected those old Powerline posts where the usual suspects were bashing Krugman for basically saying there were storms brewing ahead a few years ago. That was full of win.
tgeb
What we really need is for 100ft tall cyborg-zombie Hitler to appear in Germany so Mecha Reagan can lead us into battle and riches.
T. O'Hara
You mean like these guys? CBO: Obama stimulus harmful over long haul:
Scruffy McSnufflepuss
At least when we’re a broken, pathetic remnant of an empire, the terrorists will probably stop wanting to attack us.
We can win the GWOT… by losing!
Crusty Dem
This is a problem in any market, publicized or not. I’ve experienced it in the stock market, there have been times when I’ve known a stock has bubbled and was woefully overpriced, but that knowledge is not valuable. To make money shorting the stock, you need to know when everyone else will realize it’s overvalued. Otherwise you lose as the bubble continues to grow…
Scruffy McSnufflepuss
@T. O’Hara:
He should have let the tax cuts save us. They were already working wonders, but then the Keynesian lunatics hijacked America again.
Scruffy McSnufflepuss
Also, Bush’s stimulus was working. Also.
DougJ
At least when we’re a broken, pathetic remnant of an empire, the terrorists will probably stop wanting to attack us.
In 2050, if David Brooks is still writing for the New York Times — and you know he will be — he will use this argument to prove that the neocons were right.
glasnost
Again, I don’t see how any of this ends well for the United States.
To pick nits while basically agreeing 100% with the rest of it, arguably there’s no real predictive significance, only because the same perverse incentives are at work everywhere else in the world at the same time. As badly as we run things, we’re either mindlessly imitated or actually outperformed. Japan’s dept-to-GDP ratio is well over 100%, Italy imitates a velvet dictatorship, Britain is a surveillance paradise, various European banks were just as dumb as we were and equally collapse-y, China spends the GDP of Nigeria on blocking websites and crushing minorities, etc.
Cheer up, there’s always a chance the rest of the world will screw up even bigger than us.
bayville
Exhibit A with “one of the greats” in stock picking.
Morbo
Dean Baker has a beard, and he’s shrill.
T. O'Hara
Or spend another couple trillion on payola? Krugman had some good points, like this one:
Fixed it for him.
tc125231
It’s quite probable that things will continue to get worse until they overtly –and sustainably –begin to fall apart. At that point, a turning may appear.
But until then, no. The crowd running things is just having too much fun gumming up the machine.
After all, they get to slurp at the Money River! Sure, it appears to be getting shallower. But who cares? They get to slurp!
Scruffy McSnufflepuss
@DougJ:
“In 2050, if David Brooks is still writing for the New York Times—and you know he will be—he will use this argument to prove that the neocons were right.”
If stem cell research ever does lead to immortality, people like Broder will be the only ones who get to use it. But it’s not rationing, the government won’t be the one doing it.
Scott H
Everyone who tried to draw attention to George W Bush’s track record in the run up to the 2000 general election are familiar with this.
beltane
Woe to the nation that is guided by hacks. Maybe we will be like the declining Roman Emprie where all the smart, thoughtful people retreated to monasteries and withdrew from the world almost completely. The temptation to do this is strong sometimes.
Crusty Dem
@glasnost:
Cheer up, there’s always a chance the rest of the world will screw up even bigger than us.
Thanks glasnost, I think I’ve now hit rock bottom. #Fmyspecies
Scruffy McSnufflepuss
@T. O’Hara:
I think it’s fair to say that Obama’s Presidency was a failure the minute he was elected. Future historians will undoubtedly view it as such. Their only controversy will be whether his Presidency actually went off the rails when he clinched the nomination, or whether he still had a few months to turn it around before the election.
Scruffy McSnufflepuss
@beltane:
I don’t want to go Galt. Too many Glibertarians doing that already.
SGEW
@Scruffy McSnufflepuss: We wish.
The Next-to-last samurai
The deeper question is, WHY are people who are clearly too stupid to pour piss out of a boot hailed as experts? If I’m feeling masochistic, I can turn on a talking-head show and spot an idiot in thirty seconds. Even if he’s talking about a subject such as economics that I know little or nothing about, I can still tell he’s not making sense. (Conversely, on the rare occasion someone who isn’t an idiot is the guest, such as Paul Krugman, I can also tell he’s making sense.) I figure if I can tell that someone is an idiot, so can the show’s host and so can the guest booker. And yet, the same idiots turn up repeatedly.
A related topic: I posed this question but nobody noticed, due to a troll invasion, so I will try again, and this time I will pose it in Balloon Juice fashion, rather than a tactful fashion. If you were as pig-ignorant as the average American, do you think you’d be happier, unhappier, or about as happy as you are now?
tc125231
@Scruffy McSnufflepuss: You are, of course, kidding? Or have you forgotten to take your meds?
Scruffy McSnufflepuss
@tc125231:
Sorry. I figured snark was the best troll-food at hand.
demimondian
Phooey, Doug.
You’re a mathematician. Go back and look at how the original analysis of non-linear dynamical systems was greeted — mostly with derision, and with good reason. Yes, Ed Lorentz turned out to be right, but *he was right for uncompelling reasons*. The same is true in every field — if you’re going to make a powerful claim, then you need powerful evidence. Someone who’s prematurely anti-Fascist may honestly be prescient — or they may be in the pay of the NKVD. Someone who foresees the housing bubble may be a prophet, or then may be Roubini, who’s a fraud.
Morbo
@T. O’Hara: Let’s actually compare some actual numbers from the CBO then, not just the Mooney Times’s take on it, shall we? Yes, let’s.
“CBO estimates that the Senate legislation would raise output by between 1.4 percent and 4.1 percent by the fourth quarter of 2009; by between 1.2 percent and 3.6 percent by the fourth quarter of 2010; and by between 0.4 percent and 1.2 percent by the fourth quarter of 2011.”
“CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.”
Now take the integral with respect to time… gee, I think the area under the curve for one of those is bigger than the area for the other.
jwb
@T. O’Hara: The results are already in for Failbush. Not so much for Obama. How long has Obama been in office again?
Come back in three years and we can have this discussion.
SGEW
@Morbo:
“The Washington Times: The Newspaper Sarah Palin Would Read, If She Read Newspapers”
DougJ
@Demi
Baker’s argument is compelling tho. It is the exact same one my former mathematician Wall Street friend started telling me in 2003.
pcbedamned
@glasnost:
And yet, amazingly enough, ‘socialist Canada’ fared pretty well. For some insane reason, Mr. Harper still felt it necessary to give an 85 billion $ bailout (hey, to us Canux, that is a lot of coin), but overall, the main problem here is the idiots who fall for the scare tactics put forth by the MSM. I still think that if the MSM would tell everyone, ‘Hey look, the sky is rising – not falling’, all of the sheeple would go back to life as normal and shop like it was 9/12. (Seriously, no disrespect intended – I just think that was one of the stupidest things I had ever heard).
Mind you, I did my Mom and Grandma last June/July to get their money out of their stocks. And I also told my husband to quit spending money like it was coming out his ass because I knew all this was about to come down. Nobody ever listens to me. Mom and GG lost a bundle, and idiot husband went out and bought himself a new Avalanche.
Yep, sometimes I hate my species too…
(Life would be so much better if they would only start to listen to me, as I am usually right :-)
Warren Terra
Best example is a contemporary Paul Krugman column predicting that Fed policy would create a housing bubble to get out of the ~2002 recession – now used by the wingers to blame Krugman for the bubble.
Chad N Freude
@Scruffy McSnufflepuss: I think it’s fair to say that it’s premature to assert how future historians will undoubtedly view an event. The idea that a presidency has failed before the president has been elected is kind of interesting and should be subjected to scientific scrutiny. By Heisenberg maybe.
ominira
@Chad N Freude: Broken snark meter.
Xenos
The basic rule of bubbles, in my experience, is that they last much longer than they should. This means there is plenty of time to get out of the market, but it also means that once you have taken your gains out you could be cooling your heels for a couple years watching everybody else make great returns. The temptation to hop back in and time the market can be overwhelming.
Avoiding the massive downward adjustments is the most critical thing. YMMV.
Chad N Freude
@ominira: Guilty. And I am renowned for my chiding of others for the same Fail.
Steve
I’m not sure I agree. Nouriel Roubini was predicting doom for many years and he was regarded as a crank. When the shit hit the fan, everyone seemed to love him all of the sudden.
DougJ
Nouriel Roubini was predicting doom for many years and he was regarded as a crank. When the shit hit the fan, everyone seemed to love him all of the sudden.
This actually almost reinforces the point in a way. Because of the people claiming there was a bubble — and there were many — Roubini was probably the biggest crank.
Xenos
And has anyone seen Roubini on the news over the last few months? By now he has gone back to crank status, I suspect.
JackieBinAZ
Get with the times.
JasonF
In the forties and fifties, the U.S. rightwing went after communists (and suspected communists) who had fought against Franco in Spain. They derisively called these people “premature antifascists.” Sure, events had proven that the people who opposed fascism in the thirties were completely correct, but so what?
The point isn’t about who gets proven right by history. The point is about making sure the powers that be aren’t challenged. Which is why it’s far more rewarding to be the guy who sees elite opinion starting to turn and says “Hey guys, we’re moving this way!” than to be the guy who says “Hey guys, you really need to move this way!” before the elite is ready to do so.
liberal
@DougJ:
That’s exactly the point—Baker’s reasoning and facts are compelling.
I’ve been following Baker since the late 1990s. Partly if not entirely because of him, I liquidated most of my stock mutual fund holdings before the tech crash, and kept out of the housing market until last summer (when my wife wouldn’t take “no” for an answer).
In the case of both bubbles, Baker presented data on the fundamentals.
Yes, it’s true that it’s difficult/impossible to get out at the top of a bubble, but IMHO if the data are right, it’s best not to get in in the first place.
Of course, it would be very interesting to look up people who argued with Dean; ISTR there was some woman up at Harvard who took the opposite side on the housing bubble. LOL!
liberal
@Xenos:
Yeah.
Midnight Marauder
@Scruffy McSnufflepuss:
Sorry. I figured snark was the best troll-food at hand.
The best troll-food is a healthy helping of rolling your eyes and then just scrolling down.
glasnost
Here’s the thing about not feeding trolls. What about the random people who click through, read this comment section, and see the lies and bullshit just lying their on our page, without any counterarguments? Especially when the rest of the comment section is filled with inside jokes and cryptic Atrios-like slang and references, the trolls, with their straightforward – stupid and dishonest, but often directly connected to John’s post and in plain language – remarks may be the only thing some outsider picks up on.
If you don’t fight the trolls, you’re letting them advertise for free. The best way to deal with them (the true) trolls is to criticise them relentlessly and shoot the hell out of their arguments. Not to simple curse them off or insult them. A combination of both of those things, is the easiest way to break their morale, but just the first one is the best way to win over the audience – full of people who you don’t even know are there.
You know, if any of you folks actually give a damn, your small part in crushing the stupid targeted by the blog owners is to fight these people. (Even though it’s pointless usually, or at least apparently pointless, I think the people who do flame trolls on here are overly profane and insulting without enough factual meat. But ignoring is also not the solution.
These comment threads aren’t just for high-fives and jokes. John Cole may be here somewhat just to vent his feelings and make friends, but I bet he also likes to think that he’s changing some people’s views on some things, somewhere. How we deal with trolls is part of that.
Wolfdaughter
Glasnost:
I agree. We cannot just ignore the trolls; we must present facts which contradict their silly arguments. But while it can be great fun to insult them, that doesn’t accomplish the needed task of correcting the misinformation.
I’m 63 and I worked for almost 40 years in the library biz (now retired). In countless meetings I saw what Doug alludes to in microcosm. I am a strong intuitive in Myers-Briggs terminology, and as such I can see the end result of a given idea, without always being able to articulate the logical steps to get there, unless I back up and think it through very carefully. Many times I opposed some idea only to have it implemented, with the poor results I predicted. Other times I suggested a change, only to be shot down, with said change begin later suggested by someone else, who then got the credit.
I was one of the people who correctly opposed the Iraq war from the outset and whom history has proven abundantly to be correct. But, again in Myers-Briggs terms, the majority of the population are Sensates, who must have all the steps spelled out to them and who must be given time to process those steps. And many of them seem unable to do this. And they certainly don’t trust those of us who go against the conventional wisdom, or that being presented by people in power.
It’s just the price we pay for being human. Ideas just aren’t processed before their time. Even so, we do make progress, but stumblingly, with many pratfalls before the right things finally start to get done. Sigh.
Wile E. Quixote
I’d like to see the Democrats go all out and start comparing the health insurance companies to the mob. Point out that we spend more than any other country does on earth for healthcare, and have substandard outcomes, point out that insurance companies don’t do a goddamned thing to make people better, they’re not working with patients, they’re not researching new treatments, they do nothing except charge people large quantities of money for insurance and then do everything they can do deny them care. Seriously, wouldn’t you love to see an ad where someone said “In the last 30 years has improved by X percent, this is because of lots of hard work by doctors, nurses and researchers, hard work by everyone except for insurance companies, who contributed absolutely nothing to this and tried to kill it off by refusing to pay for it.”.
HyperIon
@Xenos: Avoiding the massive downward adjustments is the most critical thing.
yeah. things continue to go up yet….this cannot continue.
preservation of principle is my greatest concern. when retirement is within sight, the idea of another 4000 point adjustment is very scary. so i’m not much in the market right now. the other shoe has to drop at some point.
HyperIon
@glasnost: wow. we certainly take ourselves VERY seriously. bullshit.
Wile E. Quixote
Sorry, wrong thread with that last post. Let me jump on topic for this thread. Look T. O’Hara, the president is black. I know that you hate this, I know that you fear him because he’s not only black but also because he’s taller than you are, better looking than you are and probably has a bigger cock, cut or uncut, than you and your birther buddies. But not only is the president black T. O’Hara he beat the Republican party and showed that for all of their tough talk that the Republicans were a bunch of sniveling little punks.
The Republicans lost ,T. O’Hara. The Republicans lost because they’re cowards who wrap themselves in the flag and start wars while refusing to serve their country. The Republicans lost because they fetishized the free market while doing everything they could to use the government to insulate themselves from being accountable in a free market. The Republicans lost because they champion family values and then visit high-end prostitutes, or cheat on their wives or suck dick in airport men’s rooms. The Republicans lost because they claimed to be fiscally responsible while running up huge deficits and playing the kind of games with budget numbers that would get your ass sent to jail if you were on Wall Street.
The Republican party is an institution powered by bigotry, fear, lies and hypocrisy. The leadership of the Republican party has revealed itself to be stupid, hypocritical, cowardly, sexually deviant and massively incompetent. The followers in the Republican party are every bit as bad as the leadership is, and when it comes to stupidity they’re even worse. Republicans had a good run, but eventually the voters looked at them and saw that the pretty words that came out of the mouths of Republicans had nothing to do with their actions in real life, that the Republicans were full of shit.
Of course this has made a lot of Republicans like you bitter T. O’Hara, you’re bitter and pissed-off and cranky, and you know what, you should be. Because here’s the deal, George W. Bush and the Republican politicians that you supported fucked this country up so badly that not only were voters willing to vote for a Democrat but they were also willing to vote for a black Democrat with a funny name. The American people didn’t just reject the Republican party in the last election, or Republican politicians, they rejected Republicans in general because it was obvious to anyone who wasn’t a member of the cult that the Republicans had gone batshit insane. The American people rejected you.
Think about it T. O’Hara, perhaps, just perhaps if you and the rest of the untermenschen and rabble who spent the last eight years on your knees eagerly and greedily eating shit from the asses of Republican politicians and commentators had backed off a bit and, instead of eating all of this Republican shit, had held your Republican politicians accountable, had repudiated Larry Craig and David Vitter for being deviants and adulterers and held them to the same standard that you held Bill Clinton to, had called Bush and Cheney to account on their massive deficits, had repudiated Jonah Goldberg for backing a war in Iraq but then refusing to serve his country, or if perhaps you had served yourself. But you didn’t, and the American people saw that not only were Republican politicians full of shit, but that Republicans who refused to hold these politicians accountable for not living up to the beliefs and standards they espoused were full of shit as well.
There’s also the fact that the Republicans are incredibly childish and incapable of accepting any responsibility for their actions. We had eight years of out of control spending under George W. Bush, not only did Bush massively expand the government with Homeland Security, the War in Iraq, No Child Left Behind and Medicare Part D but he also pushed through a massive tax cut. George W. Bush was like Lyndon Johnson without the competence. But did you ever hear any Republicans call him on this? Well a few did; Ron Paul, Victor Gold, a few others. But not many, the rest of you just blamed Bill Clinton, or the Democrats, or the ACLU, or immigrants, anything other than accept your responsibility for this state of affairs.
What does the Republican party have to offer to anyone who isn’t consumed with hatred for gays, immigrants, blacks or hispanics. What does the Republican party have to offer for anyone who didn’t inherit a massive fortune? What does the Republican party have to offer for people who are religious but who aren’t hate-filled, fundamentaloid, evangelical morons and who use Jesus like junkies use smack? What does the Republican party have to offer for anyone who believes in the rule of law, the United States Constitution and Bill of Rights? what does the Republican party have to offer for anyone who believes in limited and competent government? Sweet fuck-all as far as I can see. The only thing the Republicans offer, as evidenced by your bitchy little posts and the bitchy little posts of other Republican trolls, is unprincipled whining, bitching and complaining about Obama, unprincipled because they never held George W. Bush to the standards to which they hold Barack Obama, Jeebus, flag pins, tax cuts and lots and lots of hatred, stupidity and bad craziness.
demimondian
@JasonF: I used the term with full knowledge of its history — I had friends who were *persecuted* as premature anti-fascists. Some of the were thoughtful folk who knew what Hitler, Mussolini, and Franco stood for. Most, though, were people who were anti-Fascist until the Hitler-Ribbenkopf pact, then changed sides — and then changed side again. Ignoring their history seem disingenuous to me.
Scruffy McSnufflepuss
@Chad N Freude:
I just wish we knew who the next Democratic President was going to be, so that we could start gearing up to mark the precise point at which his or her Presidency fails. If the next Democratic President is in 2017, it’s probably safe to start marking their failure-date as being the same as Obama’s; if a Republican Presidency intervenes, the last year or two of that person’s term are the approximate starting-point of Democratic failure. But not knowing more precise details, it’s impossible to mark the date exactly.
A shame, that.
sglover
The people who opposed the Iraq war are are still those cranks that nobody wants to listen to
Just in case it hasn’t been mentioned, little Mattie Y thought our glorious Mesopotamian adventure was a fabulous idea himself. Oddly, he likes to bury that in his CV…. Aside from the obvious stupidity of the idea, it’s not like little Mattie ever came within a county of the folks who’d have their lives blasted by the project. Has Yglesias’ career suffered?
Your right-wingers are certainly batshit crazy and psychopathic, but with chin-stroking “opinion leaders” like Yglesias, is it any wonder that “progressives” get outmaneuvered and blindsided at every turn?