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Friday, August 05, 2005
 
Everyone's an Oracle

From The Housing Bubble:

"[Demos research associate] Silva worries that if housing prices flatten out or decline, some newer homeowners who have built up little equity, could find themselves 'upside down', owing more than their houses are worth. And, if interest rates rise, homeowners with adjustable rate mortgages may not be able to keep up higher payments or sell the house for what they paid. Foreclosures could spike and the supply of homes for sale soar. That could send real estate market into a tumble."

"'That's the scenario I'm most afraid of,' said Silva, 'and it's one that few economists acknowledge.'"

(emphasis added)


Dear Economists,

Please stop telling us only what we want to hear and then wondering amongst yourselves why we make so many dumb investment decisions. One of the core principles of your worldview is that market participants have enough information upon which to base their purportedly rational decisions. A lot of that information is supposed to come from the likes of you. If you fail to provide it, then any prognostication you do that assumes rational actors becomes worthless. If you share what you know, then we make better decisions, and you make better predictions. It's win-win.

I realize that a lot of you work for private concerns that would prefer that the average schmuck is ignorant or, better yet, misinformed, about economic conditions. I could get angry with each of you personally, but I realize that somebody's going to do it, and it might as well be you pigs. No hard feelings.

As for the rest of you, only one of you is the Chairman of the Board of the Federal Reserve Bank of the United States of America, and only a handful more of you are heads of the regional banks. Among your colleagues, it is only they who have the stature to materially and consistently affect the markets with their pronouncements such that they must be purposely gentle and vague with them, lest they upset the delicate balance of the economy.

Compared to them, the rest of you are nobodies (exceptions listed to the left) who seriously need to get over yourselves. Individually, your piddling little publications don't move interest rates a tenth of a basis point or generate $10 worth of consumer spending. Together, however, your silence has allowed millions of people making $50,000 per year believe it makes sense to buy $400,000 houses with interest-only loans in a no-wage-growth environment in which rates are set to skyrocket.

If your kids were in the that situation and wanted to buy that house, you'd spare no effort to talk them out of it. What about the millions of your countrymen who are headed down the greased rail toward bankruptcy? Do you have something against them? Do you hate America?

Please, just do your jobs.

Thank You,
David