Now that we’re mired in the worst economic crisis since the Depression, forecasters who didn’t see it coming are consoling themselves by saying, “no one saw it coming.” This is hogwash. Many people saw it coming: Gary Shilling, Nouriel Roubini, Jeremy Grantham, Dean Baker, Peter Schiff, Robert Shiller, et al. They just don’t happen to work for major investment banks.
It is true that the folks who work for major investment banks didn’t see it coming. Historians will eventually determine whether this is because the major investment banks uniformly employ boneheads, or, more likely, because, when you work for an investment bank, it is easier to conclude that now is always a good time to buy stocks.
In any event… the New York Times reports that economists who work for major investment banks now think that prosperity is just around the corner. Hard to tell whether this is good news or bad news. For what it’s worth, Nouriel Roubini thinks that prosperity is a good deal farther down the road. 2009 will be a washout, says Nouriel. And even 2010 will be crappy.
NYT: In the midst of the deepest recession in the experience of most Americans, many professional forecasters are optimistically heading into the new year declaring that the worst may soon be over.
For this rosy picture to play out, they are counting on the Obama administration and Congress to come through with a substantial stimulus package, at least $675 billion over two years.
They say that will get the economy moving again in the face of persistently weak spending by consumers and businesses, not to mention banks that are reluctant to extend credit.
If the dominoes fall the right way, the economy should bottom out and start growing again in small steps by July, according to the December survey of 50 professional forecasters by Blue Chip Economic Indicators. Investors seemed to be in a similarly optimistic mood on Friday, bidding up stocks by about 3 per cent.
But in the absence of that government stimulus, the grim economic headlines of 2008 will probably continue for some time, these forecasters acknowledge.
See Also: A Very Bullish Sign
Photo: Herbert Hoover and his gang conclude that prosperity is “just around the corner.”