Comments (7)

• William Rader

  I would certainly think Alan Greenspan (M.A., Ph.D., NYU) would make many peoples' lists. Ben Bernanke (Ph.D., MIT) would probably make others' lists. Both certainly would have benefitted from reading Henry Hazlitt, who I would place on a list of best economists.

  Published: November 12, 2008 10:18 AM

• Bill Anderson

  Alan Reynolds often is quite good on a number of things, and I was surprised to see him trying to defend the housing madness. Three years ago, we wanted to sell our house and in our market, which usually was fairly slow in normal times, activity was quite hot, as there always were multiple bids on houses.

  Whenever a market is behaving in this manner, one knows that it is overheated and that a correct is going to follow. I would think that Alan would have known that, as he generally is pretty astute.

  However, I also would say that Alan might have been issuing wrong opinions, but he was NOT responsible for pushing bad policies. The other Alan, that being Greenspan, gets my nod for the worst economist of the decade.

  The man has outpointed even the horrible Paul Krugman, which means that his is quite an accomplishment.

  Published: November 12, 2008 11:51 AM

• J Cortez

  If we're just talking about the housing bubble, I say Alan Greenspan deserves the title of grand champion, because he's a total sell out and responsible for the boom in the first place.

  "Helicopter" Ben Bernanke gets honorable mention.

  Published: November 12, 2008 12:54 PM

• Willabus

  I do not really see how Alan Reynolds was deeply wrong as John Carney concludes. The current situation has been way overblown by the media and politicians which led us to the $700 billion bailout bill. He was also correct to point out that bank lending did not freeze up and it was more a matter of pricing 'toxic' assets. His prediction was also correct that the foreclosure problem would be isolated in certain areas and would not be a 'national' crisis.

  What is important is that he was not in the group that was blowing this situation out of the water, predicting the end of the world and trying to pass sweeping regulation and more government control.

  While he was wrong on some points (nobody knows how to make a pencil) I do not think that qualifies him for 'worst economist'.
  

  Published: November 12, 2008 3:14 PM

• thesprot

  I have no idea who Alan Reynolds is, but i think there are others who deserve to be carved into mountains with a laser beam, as the worst economists, starting with the obvious Bernanke Greenspan Combo.

  As for other economists. Ken Fisher deserves the number one spot. It is an injustice, an infamia, as Vito Corleone would say, that others should beat him to the first price.

  Rarely will you find a man who is both a devoted Keynesian economist and a Efficient Market theory Investor at the same time.

  When it was pointed out to him by Marc Faber and Jim Rogers in a Bloomberg interview some time ago , that a tighter credit condition is coming, and that the economy is facing massive problems, with both housing, and debt, and that stocks will perform badly, he's rebuttal was very academic : "This is Silly stuff, this is all just silly".

  Ken fisher deserves the number one spot. Congratulations Ken, and i wish you many more such awards in the future.

  Goodnight everybody.

  Published: November 12, 2008 9:13 PM

• Jordan

  Paul Krugman has got to be the leader of the pack of Keynesians who masquerade as economists. His latest perversion from the NY Times:

  "The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little."

  And this guy teaches at Princeton and is a Noble laureate?

  Armageddon is undoubtedly near.

  Published: November 13, 2008 9:55 AM

• Alan Reynolds

  Criticizing a passage from something I wrote in 2006, John Carney says, “In his view [meaning mine], the mortgage crisis was, at worst, a local problem in some over-priced markets.”
  
  That is still my “view,” or rather my reading of the evidence. RealtyTrac foreclosure rates are around 1 in 200 in California, Arizona and Florida, but foreclosures in the median (25th) state are below 1 in a thousand and foreclosure rates in the best states are smaller than even 1 in 10,000.

  California accounts for 25% of the Case-Shiller value-weighted price index, which exaggerates that very big “local problem.” But falling house prices did not cause the 8.5% unemployment in California. High unemployment caused falling house prices. Ditto for Michigan’s sixth highest foreclosure rate. There was no “housing bubble” before the housing bust in Detroit. It went from bust to bust, because the local population is falling fast.

  Some permabears were forecasting a housing-based recession four years ago, at the start of 2005. In the context of doubting such decidedly incorrect forecasts, I did not question that there had been speculative overpricing and overbuilding in many big housing markets. On the contrary, I simply said (as I did also this June in the case of oil) that when something becomes too expensive the price has to come down. I concluded that “would be unpleasant news for home sellers, but good news for buyers.” If that is mistaken, I’d like to know why.

  My column of April of 2008, says Carney, “is worth quoting at length.” I not only agree, but like to think everything I’ve written (almost weekly) since 1971 is worth quoting at length. But some of it surely turned out to be mistaken. In this case, however, the mistakes do not appear to be mine.

  I wrote, “If banks have been reluctant to lend money to one another, then interest rates on such loans, like the six-month London Interbank Offered Rate (LIBOR), wouldn't have fallen to 2.6 percent from 5.3 percent a year earlier. And if banks were reluctant to lend to "anyone else," then bank loans wouldn't have increased by 8 percent (as Fed data say they have) since last August, when the mortgage crisis first emerged.”

  Those facts were, of course, entirely correct at the time. LIBOR did rise for a while after the Lehman default in mid-September. Yet U.S. commercial bank loans nonetheless increased from about $6.9 trillion in July to $7.2 trillion in October-November. That should please those who adopt the Bernanke-Paulson theory that the solution to excess debt is more credit. My own view is that credit demand should contract in recessions, and that both firms and households need to reduce borrowing and rebuild savings.

  I also criticized as misleading an April 9 headline saying, "IMF Puts Cost of Crisis Near $1 Trillion.” What was misleading is that the IMF estimate was not for U.S. mortgages defaults, but for worldwide future accounting losses (amounting to 4.1 percent) on all sorts of loans and securities, from junk bonds to hedge-fund speculations. For mortgages alone—worldwide— the IMF estimated losses of just $115 billion. I noted that Standard and Poors estimated that write-downs of mortgage-related securities could be as high $285 billion.

  The IMF and S&P estimates of loan losses turned out to be much too low, which is apparently why Carney calls me the world’s worst economist (meaning forecaster, I imagine). But those were not my estimates.

  We are now deep into a global recession with multiple causes, including the surge in prices of oil and metals through early 2008, not just the surge in U.S. home prices from 1995 to 2006. As I noted in the Financial Times, January 3, we have had ten postwar spikes in oil prices followed by ten recessions.

  U.S. housing has been in a slump since early 2006, along with autos. That was surely no surprise. Falling home construction subtracted more than a percentage point from GDP in 2006 and 2007, but only about half a point in the second and third quarters of 2008. Nobody denied the housing bust was a big problem. By itself, however, it wasn’t enough to tank industrial production or the overall economy.

  What caught everyone by surprise, including the IMF, the regulators and Wall Street bank analysts, was the extent to which so many financial institutions around the globe had used huge amounts of short-term IOUs to invest in inherently illiquid mortgage-backed securities. Economists and journalists could not and did not know how gigantic a problem this was because it simply was not public information. Indeed, many billions were “off the books.” I’m not sure economists or journalists should have been expected to fully understand facts that were not publicly available.

  Published: December 20, 2008 3:02 PM