On Economics

I'm an economist; it's what I do and what I love. I know you might be surprised, since I never talk about it here on my personal blog, but now it's time to have that discussion. Specifically, I want to say something about the Housing Bubble.


(Insert groans; I know that everyone is sick of this topic.)

I listen to people talk about our current recession quite often. They talk about how and why we got here, where we're at, and where we're going. I get a lot of questions about it, too.

Here's a phrase I often hear from other professionals, at conferences, and read in the paper: No one saw this crisis coming. No one could have predicted it.

Is that a total load of crap, or what?

Whenever someone says that, I can't help but think s/he is an idiot. Seriously. No one could have seen this coming?! That's completely inaccurate, and here's two reasons:

(1) People did predict the problem. Smart people. They gave presentations and wrote memos and sometimes kicked and screamed, BUT they were poo-poohed or shushed or ignored.

(2) I predicted it.

Okay, I'm over-inflating myself. I didn't know just how bad the problem was or how severe the effecrs would be, but even I could see it coming. I heard my peers in college classes talking about their crazy mortgage loans (adjustable rates? paying only the interest? what?!); and I knew that if a college kid without a job could get a mortgage loan, there was a problem with the system.

Nathan and I also have a tradition of going on the Tour of Homes every summer. We first went in 2005. In 2006, as we walked away from a particularly swanky, supposedly middle-class, brand-new subdivision, we said to each other, "The pace and price of housing construction is not sustainable. Our society can't keep doing this. We're in a housing bubble, and it's going to burst."

I had crunched some numbers, and I knew it was true. But Nate? He's not very good with numbers. He hadn't "crunched" anything. He simply looked around, saw what was happening, and he knew.

So when I hear some Tool telling me that "no one saw this coming; no one could have seen this coming," I always secretly whisper,

Bull---t.


* The image in this post is taken from the website http://www.steadfastfinances.com/
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