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CASSANDRA UPDATE….Yesterday I asked for names of people who had given early warning of the global financial meltdown. Not just people who foresaw the housing bubble, mind you, but people who figured out some of the other problems that made a bursting housing bubble into a worldwide catastrophe and were banging the drums about them. Unfortunately, nearly all the answers came in one of three buckets: (a) Nouriel Roubini, (b) people warning about the housing bubble, or (c) people writing in 2006 or 2007.

However, there were a few plausible suggestions for analysts whose warnings went beyond the housing bubble and who did it earlier than 2006, including Peter Schiff, Tanta at Calculated Risk, Mish at Global Economic Analysis, Doug Noland at PrudentBear, and Brad Setser. Martin Wolf provides a few more possibilities here. I don’t know enough about their early work to say for sure that these folks were all early and accurate critics of more than just the housing bubble, but they seem to be likely suspects.

On the other hand, commenter Commenterlein offers a counterpoint:

Most of the people listed above recognized that there was some form of housing bubble (at least in some markets), but most of them (imho ex-ante correctly) focused on the U.S.’ external balance (i.e., current account deficit) as the main problem. Hence the crisis most economists predicted was a rapid depreciation of the dollar, associated with a massive and pain-full shift of employment from the non-tradeable sectors (i.e., housing) to the tradeable ones.

Bottom line: I have not yet found anyone who predicted that a house price decline would lead to a complete loss of confidence in the financial sector and a massive credit crunch taking down institutions all over the world with essentially no (direct) exposure to the US housing market. And as much as I love Roubini, perpetually predicting the end of the world for ever changing reasons just isn’t that useful.

The current account deficit was, of course, a routine topic of concern among economists, but as Commenterlein points out, a dollar depreciation crisis isn’t the crisis we actually got. In fact, just the opposite: we’re practically in a T-bill bubble right now. That may yet change, causing us even more problems, but so far lack of demand for U.S. debt from the Chinese or anyone else just hasn’t been a factor in the world’s financial problems.

Tell you what, though: let me ask a much simpler question, since asking “who got it right?” is obviously a little tricky. Back in April 2004 the SEC voted to loosen the capital rules for the five biggest Wall Street investment banks. In retrospect, this was a very bad idea indeed, and it was a bad idea for precisely the reasons that have caused our financial problems to become so dire: it allowed leverage to skyrocket unsustainably and lending standards to deteriorate.

So here’s my question: Did anyone object to this at the time? The New York Times identified one person who objected, an Indiana consultant named Leonard Bole, and one SEC commissioner who at least asked questions, Harvey Goldschmid, but that’s it. Anyone else? This may have been an obscure ruling to people like you and me, but I’ll bet it wasn’t all that obscure to people who follow Wall Street closely, and I figure anyone who truly knew what was coming would have sounded a warning about it in 2004 or 2005. Did anyone?

UPDATE: In comments, Ole nominates fellow Dane Jakob Brøchner Madsen, who, according to a Google translation of epn.dk, “has been proclaimed the country’s most pessimistic economist.” However, even Madsen admits, “I knew well that the system was rotten. But not that it was so rotten.”

WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

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