Millions ignored diagram of doom hiding in plain sight
Economist Nouriel Roubini predicted (with great accuracy and in great detail) the current economic crisis. What was his secret? He took seriously a chart in a book read by millions:
Roubini said that he studied a chart in economist Robert J. Shiller’s book “Irrational Exuberance.” It showed that U.S. housing prices, adjusted for inflation, had remained essentially flat for a century, until the mid-1990s, when they began to shoot up. What’s more, Roubini saw that the most recent housing correction in the late 1980s had a severe effect on the financial system — leading ultimately to the collapse of the savings and loan industry.
So Roubini knew two things: Housing prices wouldn’t keep going up forever, and when they went down, they would take a big piece of the financial system with them.
Posted by James on Wednesday, February 18, 2009