Monday, June 28, 2010

One year on, Krugman concedes

"Due to the sizeable bear market rally that began in March 2009, many, if not most, economic observers are presently convinced that the global economic difficulties of last autumn are largely behind us now, courtesy of the aggressive, expansionary actions of the monetary and political authorities. They are wrong. It is not over. It has only begun. I believe that what we have witnessed to date is merely the first act in what will eventually be recognized as another Great Depression."
- Vox Day, The Return of the Great Depression, June 29, 2009

"We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense."
- Paul Krugman, The Third Depression, June 28, 2010

It looks like my predictions are running a little ahead of schedule again. RGD readers will recall that I didn't have the mainstream economists starting to whisper about the possibility of a Great Depression 2.0 until the end of 2010. This is supposed to be the time for talking Double-Dip and W-shaped Recovery. But then, Krugman has always been rather more dyspeptic than the rest of his colleagues. I await with interest for all of those who said that my forecast was incorrect because I dared to contradict a FAMOUS ACADEMIC and NOBEL-PRIZE WINNER to explain this mysterious failure of credentialism.

Krugman is wrong about the historical use of the term depression, of course, (depression was synonymous with recession until after the Great Depression ended), just as he is wrong about the reason the global economy is sliding further into contraction. Fame and credentials are no substitute for the knowledge of history combined with a reliable theoretical model. Longtime readers who are investors may recall that my 2002 recommendation to buy gold and avoid real estate has worked out just a little better than Krugman's 2002 recommendation to buy real estate and avoid gold.



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Blogger Sandymount September 01, 2015 11:35 AM  

Is there a due date on the forecasts for depression etc ? Here we are 5 years later and growth is anaemic but I notice from my Austrian friends (whose economics is more convincing than their track record at forecasting) shapeshift so that none of their forecasts are ever wrong. Variations on gold/commodites up, dollar/bonds/equities collapse turn into growth is slower than expected and 'if the Fed hadnt intervened...'but the facts are plain. We have not had a great depression, and the price forecasts have if anything been inverse to what played out. After 5 years it is hard to say we need more patience (as per Peter Schiff or Hussman). I used to be an investment banker and for all our faults one thing was useful, you were humbled by the market and good management wouldnt let you hold a losing position for too long based on a convincing narrative. Why dont pundits get called out.. one would have thought one thing the Googlisation of everything would have done is to make it easier to find error and name it?

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