You Got to Be Kidding Me!

Did You See It Coming?

Posted in Economics by Stacy McMahon on January 3, 2009

Via Instapundit, Bruce Bartlet notes that “financial leaders” failed to foresee the housing bubble.

Thing is, they did foresee it – they just didn’t do anything about it.

At the height of the subprime mortgage boom, Citigroup’s CEO, Charles Prince described his position in an interview with the Financial Times – “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

That guy saw the bubble – correctly – as a game of musical chairs. What he didn’t see, maybe, is that in this game, all the chairs are still there every round …until the round where they’re all gone.

For my part, I saw the bubble coming …until I stopped seeing it. I’d always known that you can identify a bubble when people with no special knowledge of the market (whatever market it happens to be) believe themselves to be experts because they (and everyone else) are making ridiculous profits. What I learned in this bubble is that the end is in sight when I begin to question that basic wisdom and start thinking maybe it really is “a new world”.

Lesson of 2008: There are no new worlds.


One Response

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  1. Christina | AmiExpat said, on January 5, 2009 at 6:23 am

    I saw it coming. I also think there could be another credit crunch coming when people start defaulting on their huge credit card debts. Let’s hope it doesn’t happen, but I wouldn’t be surprised if it did, and that would really be a big mess.

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