‘Prophets of doom’ claim crisis warnings went unheeded

“I wrote a report late last year titled ‘The Four Horsemen.’ It was a regretful choice of words, because I kept on fielding questions as to whether or not I was, in fact, calling for the end of the world,” Rosenberg said in a research note.

“I got to a point where my answer was ‘Just wait; it’s going to get worse than that.’”

Robert Brusca at FAO Economics said many “prophets of doom” had the correct forecast but the wrong cause. Instead of a collapse due to hedge funds, he said it was excessive risk taking by regulated banks that created the crisis.

“The problems have come from allegedly regulated entities and their affiliated funds, not from independent hedge funds,” Brusca said.

“My favorite villain is Alan Greenspan, who was hailed as one of the best central bankers but who I think will be one of the worst. He was the regulator who didn’t believe in regulating.”

Brusca said the current situation has no precedent, making forecasts difficult.

“We are too far into this (downturn) to call it short and shallow,” he said. “It’s hard to know where we are going.”

Despite the doom and gloom, a large number of economists say the crisis will pass after some pain.

Cary Leahey, senior economist at Decision Economics, acknowledged that the current situation is “the biggest event in global capital markets since 1929” but does not see a new Great Depression.

Leahey said the U.S. jobless rate could rise as high as seven to eight percent, a far cry from the 25 percent level of the 1930s.

“The reason we had a Great Depression after 1929 was that policymakers were slow and then did the wrong thing,” Leahey said.

Today, he added, “They’ve been doing the right thing, lowering interest rates, increasing liquidity and cutting taxes.”

As for the doomsday forecasters, Leahey said that “some of them have been saying for 25 years the U.S. is on the precipice,” and that at some point they will appear correct when a downturn occurs.

But he said that those who followed the advice of the naysayers would have missed “the biggest bull market in history.”

1|2

SharePrintEmail

Write a Comment

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos Respond to this email