Let’s have a little economic review, shall we?
Early 2006 — We were told by “economists” that all is well in the housing market, and we were just headed for a soft landing. Definitely zero risk to the economy.
January 27, 2006
“All the hype about the housing market falling apart is exaggerated,” Tim Rogers, Boston-based chief economist for Briefing.com, an economic research firm, said in an interview. “Mortgage rates are around 6 percent and that’s going to keep supporting housing. It’s falling off of record highs but I don’t think anything is plunging here.”
Mid-to-Late 2006 — Whoops. Turns out the housing market is in fact slowing down faster than the economists expected. But not to worry, they say, there’s still no risk to the economy.
July 27, 2006
“The economy is still performing reasonably well,” said Michael Moran, chief economist at Daiwa Securities America inc. in New York. “The housing market is definitely slowing, but the drop is not precipitous enough to do serious damage.”
September 25, 2006
The Fed’s Fisher said aside from the housing market, which is experiencing a “serious correction,” the U.S. economy “is healthy and robust.”
Late 2006 – Early 2007 — Whew! That was a rough year. The housing slowdown almost started to affect the economy, but thankfully the economists assure us that it’s not a problem going forward. Now the economy is ready to roll without being dragged down by housing.
January 8, 2007
“The worst of the drag on the economy from construction is behind us,” says Chris Varvares, president of St. Louis-based Macroeconomic Advisers Llc. As a result, he says, growth should pick up to an annual rate of more than 3 percent in the second quarter, from 2-1/4 percent in the current quarter.
Early 2007 — Whoa, where’d this subprime mess come from? Yuck! Nobody worry though, the economists assure us that it is completely, 100% contained. Zero effect on the overall economy—for reals.
April 3, 2007
Fed Chairman Ben S. Bernanke, who still expects the economy will expand at a “moderate” pace, last week told lawmakers he expects the subprime fallout “is likely to be contained.”
Mid-2007 — Economists: “Guess what guys? The economy is still going gangbusters! Anyone that tells you a recession is on the horizon is a fool. We have the data right here that proves it.”
July 27, 2007
As recently as May, traders were certain of a rate cut by the end of 2007, only to be dissuaded by continued growth in employment and comments by Fed officials that recession isn’t likely. Some economists said traders may again be getting ahead of themselves.
“The Fed should be pretty happy with these numbers,” said David Wyss, chief economist at Standard & Poor’s in New York, referring to the second quarter figures for gross domestic product. “I don’t think the Fed does anything this year.”
September 2007 — “Holy crap! If the Fed doesn’t cut rates RIGHT NOW, we’re headed for a certain recession.” Fed cuts rates 50 points. “Whew! The Fed has come to the rescue! Now the economy is in the clear!”
September 18, 2007
The Federal Reserve lowered its benchmark interest rate by a half point to 4.75 percent, the first cut in four years, to protect the U.S. from sinking into a recession sparked by fallout from the housing-market collapse.
“Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,” the Federal Open Market Committee said in a statement after meeting today in Washington. The central bank will “act as needed to foster price stability and sustainable economic growth.”
Is it just me, or have the so-called professional economists pretty much lost all credibility at this point? They were wrong about the extent of the pain the housing market would endure. They were wrong about the containment of the subprime mess. They were wrong about the effect of housing on the overall economy. They were wrong about the risk of a recession.
But now we’re supposed to believe them when they say that the Fed can wave their magic wand and keep the economy from experiencing all this bad stuff that wasn’t supposed to be a risk in the first place? Huh?
Somebody please explain this to me. Seriously, what the heck.