In an earlier post I cited an article written by James Quinnn from Dartmouth. Here is another of his articles summarizing what went wrong and what to expect from the economy. I highly recommend it to everyone concerned with manufacturing.
America's Economic Collapse – Unintended Consequences in Action
Neutron Jerk says
So we’re supposed to believe an Ivy Leaguer from Dartmouth???
Michael F. Martin says
One thing every lean advocate can appreciate: rates of growth have to be sustainable. A legitimate role for systemic risk regulators is simply looking carefully at high-growth areas in finance to ensure that not every bank is in the same boat:
http://brokensymmetry.typepad.com/broken_symmetry/2009/06/how-to-reduce-systemic-risk-look-at-the-rates-of-growth-and-crosscorrelations.html
Tony says
Did Mr. Quinn see this coming and predict it? I place much more credibility on those who did. The only economist I can think of who did is Chris Thornberg of Beacon Economics.
However, the housing bubble was obvious to anyone with common sense who was thinking about buying a house in CA, FL, NV, AZ, etc in 2004-2008, including bloggers such as Ben of thehousingbubbleblog.com. And the Newsweek indicator worked perfectly — they had a cover article on how great housing was right at the peak, summer 2005.
This is another example of how ordinary Joes with common sense can get it right, but journalists, economists, and Ivy Leaguers all miss the elephant in the room.
Bill Waddell says
Tony,
I certainly agree that “ordinary Joes with common sense” are much more reliable than the intellectual elites.
I disagree, however, with the implication that the cause of the economic setback is easy to see in hindsight. Mr. Obama – and most of our leadership in both parties, for that matter – think that the economy will recover when we can get the banks back in the lending business.
They don’t seem to understand that the banks are lending – but only to people creditworthy enough. Lending money to people with insufficient incomes or lousy credit scores is what got us into trouble in the first place. Going back to those practices only deepens the problem.
And the problem was not just the “housing bubble”, although many people seem to think so. There was comparable insanity in just about every aspect of consumer credit … car loans for 100%+ of inflated Blue Book values to people who could not afford them, a trillion bucks in increased credit card debt, again, largely to the undeserving.
Hindsight seems to be just as cloudy as foresight for many folks. The economy is described by many as ‘psychologically driven’ – as soon as people quit saving an outrageous 6% of their income and get back to living beyond their means, all will be well. The advocates of that thinking – including Mr Obama and his economic advisors – neither saw it coming, nor recognize it after it happened.