I follow the economic catastrophe at a variety of places. One blog I love is Calculated Risk.
Today, they link to an article by Roubini:
Calculated Risk: Roubini: “Reflections on the latest sucker’s rally”
People love Roubini because he pretty much called this economic situation spot on:
Nouriel Roubini – Wikipedia, the free encyclopedia
Fortune magazine wrote of him, “In 2005, Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he’s a sage.”[1] In September, 2006, he announced to a skeptical International Monetary Fund (IMF) that an economic crisis was brewing. “In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession,” according to the New York Times.[2] According to the Times, he accurately foresaw “homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt.” The NY Times even labeled him “Dr. Doom.” In hindsight, IMF economist Prakash Loungani has called him “a prophet,”[2] and the vice chairman of AIG said “Roubini was intellectually courageous, and he called the shots correctly.”
In the article I linked to above he is basically saying that we are in a “dead cat bounce”. Basically things are going to continue to get worse because we haven’t solved the heart of this issue.
I have been touting the fact that I think we are at the bottom. And while I agree with Roubini that the heart of this still has significant problems, I still feel confident that we are roughly at the bottom and will be heading up from here.
This is why I think this:
Confidence is truly at the heart of all this.
Things are contracting primarily because people are scared.
Economics becomes incredibly difficult to measure and predict because emotion plays a major factor in determining the ups and downs.
Because of that, I feel that egghead economists often times do not have a tool to accurately measure today’s confidence, much less predict it into the future.
Simply put: I believe people are tired of being scared and not buying.
I think people are ready for this to be over and so… it will be over.
I know that isn’t quantitative. But the driver of this mess is primarily psychological.
I’ve been predicting that March would be the end of this for quite some time.
It’s just because Spring is a good time to start anew.
You’ll see. I’m right. Roubini is wrong (this time).
