Limited Clairvoyance

The electrical flow approach to fiscal too banking rule relies a lot on the stance that our now-wise regulators, armed amongst novel powers too the tens of thousands of pages of Dodd-Frank regulations, genuinely volition come across problem only about the corner side past times side fourth dimension too create something virtually it. If exclusively they had to a greater extent than ability dorsum then....And of course of pedagogy fifty-fifty conventional macro policy chat revolves only about wise heads of the Fed, IMF, ECB, too thus on spotting "global imbalances," pricking "bubbles," "coordinating policies" too otherwise guiding the ships of state.

In this context, a lovely picayune slice at "The American" AEI's online magazine, caught my eye, Alex Pollock's "The housing Bubble too the Limits of Human Knowledge"

An excerpt:

Consider the lessons of the next 10 quotations:

1. About whether Fannie too Freddie’s debt was backed past times the government: “There is no guarantee. There’s no explicit guarantee. There’s no implicit guarantee. There’s no wink-and-nod guarantee. Invest too you’re on your own.” — Barney Frank, senior Democratic congressman, notable Fannie supporter, later on chairman of the House Financial Services Committee

It would live on hard to imagine a disputation to a greater extent than wrong.


2. “We create non believe at that spot is whatever regime guarantee, too nosotros become out of our trend to tell at that spot is non a regime guarantee.” — John Snow, Republican too secretarial assistant of the Treasury

Saying it did non arrive so, unfortunately.

3. “The facts are that Fannie too Freddie are inward audio situations.” — Christopher Dodd, senior Democratic senator, prominent Fannie supporter, chairman of the Senate Banking Committee

Pronounced ii months earlier Fannie too Freddie collapsed.

4. “We convey no plans to insert coin into either of those ii institutions [Fannie too Freddie].” — Henry Paulson, Republican too secretarial assistant of the Treasury

Stated 1 calendar month earlier the Treasury started inserting coin into Fannie too Freddie.

Ordinary Americans are beingness taxed thus that unusual too domestic bondholders larn dorsum every penny they lent Fannie too Freddie.

5. “Home prices could recede. Influenza A virus subtype H5N1 abrupt decline, the consequences of a bursting bubble, however, seems most unlikely.” — Alan Greenspan, chairman of the Federal Reserve Board

The mutual wisdom of the bubble years. At the fourth dimension of this disputation inward 2003, the Fed was inward the procedure of dramatically reducing short-term involvement rates too stimulating house-price increases.

6. “Global economical risks [have] declined.” — International Monetary Fund

Observed iv months earlier the international fiscal panic started inward August 2007.

7. “More than 99 per centum of all insured institutions met or exceeded the requirements of the highest regulatory majuscule standards.” — Federal Deposit Insurance Corporation

This disputation was made inward the minute quarter of 2006, at the elevation of the housing bubble. More than 400 such institutions later on failed too others were bailed out inward the ensuing bust. The FDIC failed its ain required majuscule ratio, reporting negative cyberspace worth.

8. “The jeopardy to the regime from a potential default on GSE [Fannie too Freddie] debt is effectively zero.” — Joseph Stiglitz, Nobel Prize–winning economist, Peter Orszag, a futurity White House budget director, too Jonathan Orszag

Conclusion after considering “millions of potential futurity scenarios” — but plainly non the scenario which too thus genuinely happened.

9. "'Not exclusively didn’t nosotros come across it coming,' but in 1 trial the crisis started, cardinal bankers 'had trouble' agreement what was happening." — Remarks past times Donald Kohn, vice chairman of the Federal Reserve Board

Influenza A virus subtype H5N1 candid disputation of the truth.

10. Finally: “Libenter homines id quod volunt credunt.” That is: “People easily believe that which they desire to believe.” — Julius Caesar

Nothing has changed inward this honor since Caesar’s day, too his dictum applies to regime officials, cardinal bankers, economists, too experts — only equally it does to y'all too me.