Thriving Norways provides economics lesson

Originally posted by Lundos
He predicted the crash. His original title to Der Crash Kommt was Der Crash 2008.

EDIT: But his editor wouldn't have it in case it didn't come until 2009.

Your original claim was "lots of economists" predicted this. Would you admit that is a bit of an exaggeration?

Originally posted by no1marauder
That is one, so you have met my challenge. Kudos to you.

Would it be fair to say that his opinion was shared by only a tiny minority of professional economists?

I don't know how tiny it was. I know of others who shared his opinion, like Edward Leamer, for example, or William Poole (who was at the time the president of the St. Louis Fed). The problem is that politics is full of hacks that call themselves economists, but have only a superficial understanding of economics.

Edit - It certainly wasn't large (I would even say it was small), but to be aware of the dimension of the problem one would need to have looked at the balance sheets of banks and probably the details of the disaggregated credit data. Most economists would have told you that housing was overpriced, though, but (I think) it was impossible to judge the domino effect without access to such data.

Originally posted by no1marauder
Your original claim was "lots of economists" predicted this. Would you admit that is a bit of an exaggeration?

There was a big debat in Denmark about it. The thing is that economy is a very, very big field (like law), and the people who knew most about this wasn't popular in the media. The main spokesperson, the macro finance professor, called all the journalists idiots since they couldn't understand it (he had to move to Australia afterwards), so mostly it was the other sides opinion that got through to the politicians. I say about 10% of the economist knew it would happen around this time or maybe a bit later, which is lots in numbers, but not lots in percentages.

EDIT: The 10% number is what my brother (finance major) tell me. He got it from his undergraduate macro professor.

Originally posted by Palynka
one would need to have looked at the balance sheets of banks and probably the details of the disaggregated credit data

Grroooarrr, I get all frisky when you talk all nerdy.

Originally posted by Lundos
There was a big debat in Denmark about it. The thing is that economy is a very, very big field (like law), and the people who knew most about this wasn't popular in the media. The main spokesperson, the macro finance professor, called all the journalists idiots since they couldn't understand it (he had to move to Australia afterwards), so mostly it was the ot ...[text shortened]... is what my brother (finance major) tell me. He got it from his undergraduate macro professor.

Fair enough to both you and Pal.

But deregulation of the financial markets which led to the explosion of mortgage "backed" derivatives was strongly supported by mainstream economists.

Originally posted by telerion
Why are we on opposite sides of the American political fence? We agree on many things. You do not believe that this planet is less than about 4 billion years old do you?

LOL; Are we on opposite sides? 🙂

I don't stick to one side of the political fence. On the whole, I'm a moderate republican. But, I have positions that are conservative, positions that are liberal and positions that are downright libertarian (not too many, though). If you want to pigeonhole me, you can call me a Rudy Giuliani/ Mike Bloomberg circa 2002 Republican; though I don't agree with everything they say either.

===You do not believe that this planet is less than about 4 billion years old do you?===

I am a religious person, but I understand that the Universe is characteristic of a 15 billion year old Universe . Why is that? I don't know. Maybe God created the Universe to look like it was 15 billion years old. Maybe the six days of creation lasted 15 billion years (it's not like a "day" to God has to mean the same thing as a "day" to man). I also understand that evolution occurs; whether that's the manner in which human beings came into existence is a different issue. I do not pretend that my beliefs can be proven; nor should they be considered scientific.

However, I do believe that one's religion (or lack thereof) has no place in shaping public policy. I also believe that one's beliefs is a personal decision and that extremists from both sides (those that want to shove their religion down your throat and convert you to their religion AND those that want to destroy your religious beliefs and convert you to atheism or deism or whatever), are intolerant and arrogant.

Originally posted by no1marauder
But deregulation of the financial markets which led to the explosion of mortgage "backed" derivatives was strongly supported by mainstream economists.

And that was a mistake. Salomon Brothers and the like should not have been allowed to carve up mortgages into derivatives and package them as enormous securities and sell them in an unregulated environment just to make millions on the transactions. I agree with that.

That doesn't mean you have to throw the baby out with the bath water though. Economic policy that rewards successful entrepreneurs is both a good idea and necessary to sustain the kind of lifestyle we in the West enjoy.

Originally posted by no1marauder
Fair enough to both you and Pal.

But deregulation of the financial markets which led to the explosion of mortgage "backed" derivatives was strongly supported by mainstream economists.

The thing is that people think most economists agree with the FT or the Economist. From my experience, the vast majority of economists who pursue graduate studies ditch them or read them critically. Even worse for CNBC, Bloomberg or similar.

Originally posted by sh76
And that was a mistake. Salomon Brothers and the like should not have been allowed to carve up mortgages into derivatives and package them as enormous securities and sell them in an unregulated environment just to make millions on the transactions. I agree with that.

That doesn't mean you have to throw the baby out with the bath water though. Economic policy ...[text shortened]... eneurs is both a good idea and necessary to sustain the kind of lifestyle we in the West enjoy.

Just to play devil's advocate -- what if regulation produces a "species" of banker that doesn't have basic survival skills? He doesn't really know about risk because regulations always prevented him from any catastrophes. Then, when the regulation eases, he goes out and takes huge risks in mortgage-backed securities -- which he doesn't understand -- but he doesn't have the cunning to interpret that as a risk.

And one day...boom.

Questions: Has the banker learned anything? Is he sadder but wiser now? Does it truly make sense to slap on regulation again? Aren't we giving up what we paid dearly to learn?

Originally posted by spruce112358
Just to play devil's advocate -- what if regulation produces a "species" of banker that doesn't have basic survival skills? He doesn't really know about risk because regulations always prevented him from any catastrophes. Then, when the regulation eases, he goes out and takes huge risks in mortgage-backed securities -- which he doesn't understand -- but ...[text shortened]... ake sense to slap on regulation again? Aren't we giving up what we paid dearly to learn?

Interesting point.

Still, without the regulation, the banks that got burned by the mortgage crisis may not repeat their mistakes. But, the young up and coming traders and even their supervisors will see big dollar signs in trading these securities. They don't have the "macro" view of the economy that's necessary to prevent them from sacrificing long term stability for the quick buck (or, more accurately, the quick millions of bucks).

Originally posted by no1marauder
[b]Fair enough to both you and Pal.

But deregulation of the financial markets which led to the explosion of mortgage "backed" derivatives was strongly suppor.

Back the boat, that makes for effective politics, but not for accurate history. Limited and effective regulation is not hated by economists, but excessive regulation is a parriah. Some economists do see government interfearance as a long run net drag and causes damage and distortions. However, there is room for prevention of market failure.

One thing to remember about credit is that it also has cycles because it is influenced by so many factors. An economy that makes grea*ter use of credit is basically using debt to finance more activities. Most economic models would point to gains from limited debt levels from non-investment activities as most economists are not saving at a point that would maximize output or growth to a high state.

To make a long story short,
financial innovations may be useful tools, but they do not mean that credit cycles disappear, especially when debt instruments are used without any regulation and in excess and when the government is itself in debt and people aren't saving enough...

Don't blame the economists who as has been pointed out could tell you that there was an asset price bubble in the long run due to the low interest rates and that we had the lowest interest rates in 40 years and that Americans were not saving enough, and that the economy was leveraged, and... basicallly all this stuff that politicians hate to listen to.

It is not popular to pass effective long-run economic policies, because that is more likely to mean less consumption in the short run and more sacrificing to invest in the future.

Politicians know that it is more popular to please the masses by offering consumption and new goods/services.

Beware the politicians and the politically biased who would try to distort economic history to blame one party for economic fluctuations... they are just playing their game of politics.

Originally posted by rwingett
Finland is not a Scandinavian country. Norway, Sweden and Denmark are.

If we look at the Gini coefficient (which measures income inequality), Denmark is the best in the world, at 24.7. Sweden and Norway check in at 25 and 25.8 respectively. The UK has a 36 and the US a 40.8. This low level of income inequality for the Scandinavian countries is a result ...[text shortened]... iki/List_of_countries_by_income_equality

http://en.wikipedia.org/wiki/Human_Development_Index

Australia's not doing bad by these metrics

Her Gini coefficient is 35.2 and her Human development Index at 0.962 has her ranked 3rd in the worlld for the 2007/2008 report you quoted.

If the post I made on page 9( 15 May '09 00:49) of the thread Socialism is to the economy as ... proves to be propghetic, then all I can say is bring on the NWO!

Lets face it, the much feared new world order and its much anticipated one world government will attempt to place much of the world in space somewhere between US style capitalism and the USSR under Brezhnev.

In short somewhere between Scandanavia and Australia. And as I already live in the latter all I can say is big whoop!

Originally posted by kmax87
Australia's not doing bad by these metrics

Her Gini coefficient is 35.2 and her Human development Index at 0.962 has her ranked 3rd in the worlld for the 2007/2008 report you quoted.

If the post I made on page 9( 15 May '09 00:49) of the thread [b]Socialism is to the economy as ... proves to be propghetic, then all I can say is bring on the NWO!
...[text shortened]... via and Australia. And as I already live in the latter all I can say is big whoop![/i][/quote][/b]

35.2 is a bit high...

Originally posted by Palynka
The thing is that people think most economists agree with the FT or the Economist. From my experience, the vast majority of economists who pursue graduate studies ditch them or read them critically. Even worse for CNBC, Bloomberg or similar.

As has been mentioned, reporters (with a superficial understanding of economics) are not the main source from which to gain an understanding of economics. However, the Economist and the FT are VERY good sources of information and report on some very useful information and trends and use good sources. Even CNBC and Bloomberg provide more useful economic information than most of the maintream media, just not at the level that economists would prefer. It's a noticeable upgrade for a typical person to listen to more cnbc and bloomberg if that is a replacement for the AP and Reuters. At least some of the basic concepts and topics of the day become easier for them to get a basic sense of than from reading maintream media.

Originally posted by eljefejesus
As has been mentioned, reporters (with a superficial understanding of economics) are not the main source from which to gain an understanding of economics. However, the Economist and the FT are VERY good sources of information and report on some very useful information and trends and use good sources. Even CNBC and Bloomberg provide more useful economic ...[text shortened]... cs of the day become easier for them to get a basic sense of than from reading maintream media.

Did you pursue graduate studies in economics?