Did no-one “see this coming” too?
from Steve Keen
Beyond the current volatility of the stock market, it is becoming obvious to everyone now that the crisis that began in 2007 is still with us.
When the crisis first hit, many of those whose behavior (or delusional economic models) helped cause this crisis claimed when it hit that “No-one saw this coming”–that it was an unpredictable event. Dirk Bezemer gave the lie to that with his paper of the same name, identifying the handful of academic economists and market commentators who had anticipated this crisis because they focused on the explosion in private debt that had occurred since the 1987 stock market crash.
The same group–myself included–argued that this crisis would not end until that debt was substantially reduced, and that the process of debt reduction would usher in a second Great Depression.
I’ll write more on this process soon, but given that the minds of market speculators and politicians are now refocused on yet another economic downturn, I thought it prudent to note that this downturn was also something that was obviously going to happen, given the private sector’s process of deleveraging. Below are some relevant blog posts on this topic:
September 20, 2010: Deleveraging with a twist
October 19, 2010: Deleveraging, Deceleration and the Double Dip