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    Default "who saw it coming": ej gets a mention at ft.com/alphaville

    #5 on the list

    Who saw it coming and the primacy of accounting

    Posted by Tracy Alloway on Jul 13 14:49. Massive hat tip to Chris Cook for pointing out this fascinating paper.
    In it, Dirk J Bezemer of Gronington University attempts to show that certain contrarian economic models — and economists — anticipated the credit crisis and the ensuing recession. In contrast, mainstream economic models, and by extension most economists, did not.
    We’ll save you the suspense and present you with Bezemer’s list of analysts ‘who saw it coming’ right away. Click to enlarge.

    The entire paper itself, however, and its potential implications for the supremacy of certain economic models makes for interesting reading.
    Here’s Bezemer on the purpose of the paper:
    [The analysts presented in the table above] belie the notion that ‘no one saw this coming’, or that those who did were either professional doomsayers or lucky guessers. But there is a more important, constructive contribution. An analysis of these cases allows for the identification of any common underlying analytical framework, which apparently helps detect threats of instability. Surveying these assessments and forecasts, there appears to be a set of interrelated elements central and common to the contrarians’ thinking. This comprises a concern with financial assets as distinct from real-sector assets, with the credit flows that finance both forms of wealth, with the debt growth accompanying growth in financial wealth, and with the accounting relation between the financial and real economy.

    These are what Dirk Bezemer calls accounting or flow of funds views of the economy. They have certain Austrian School characteristics, like a distinction between financial wealth and real assets, as well as the separate representation of stocks and flows, and modelling the financial sector separately from the real economy. Those are in contrast to traditional neoclassical economic models which tend to focus on equilibriums, according to Bezemer.
    A graphical representation of the two systems is below, which demonstrates the idea pretty well. While stuff like finance and real estate feature prominently in the accounting/flow of funds schematic — they are entirely absent from the traditional model:





    etc


    http://ftalphaville.ft.com/blog/2009...of-accounting/
    Last edited by BDAdmin; 07-15-09 at 04:37 PM.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Interesting to see that all too familiar diagram on there (vs. the university taught model), thanks for posting.

    Man, the comments section is littered with some scary shit. And then you think, "and then they vote"....

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    They didn't mention Marc Faber, George Soros and Jim Rogers - all of whom warned about this well in advance. Soros has a video interview about the housing market back in 2006 which unequivocally pointed to the housing bust.

    Rogers put his money where his mouth is and shorted Fannie Mae and Freddie Mac back in March 06. And Faber pointed out the bubbles way back in late 05.
    Last edited by hayekvindicated; 07-14-09 at 02:26 AM.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by hayekvindicated View Post
    They didn't mention Marc Faber, George Soros and Jim Rogers - all of whom warned about this well in advance. Soros has a video interview about the housing market back in 2006 which unequivocally pointed to the housing bust.

    Rogers put his money where his mouth is and shorted Fannie Mae and Freddie Mac back in March 06. And Faber pointed out the bubbles way back in late 05.
    i bet they didn't get mentioned because soros, faber & rogers are traders? not economists? besides an interview or two they have no analysis to the authors of the paper to review... ej's is all online and google searchable... for anyone who's interested to know the facts from the bs.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by hayekvindicated View Post
    They didn't mention Marc Faber, George Soros and Jim Rogers - all of whom warned about this well in advance. Soros has a video interview about the housing market back in 2006 which unequivocally pointed to the housing bust.

    Rogers put his money where his mouth is and shorted Fannie Mae and Freddie Mac back in March 06. And Faber pointed out the bubbles way back in late 05.
    "Lucky shots" is far from "insightful predictions".

    "Only analysts were included who provide some account on how they arrived at their conclusions. Second, the analysts included went beyond predicting a real estate crisis, also making the link to real-sector recessionary implications, including an analytical account of those links. Third, the actual prediction must have been made by the analyst and available in the public domain, rather than being asserted by others. Finally, the prediction had to have some timing attached to it."

    On the basis of Bezemer's four selection criteria, he found only a dozen analysts qualified, includes Janszen's forecast in 2006 and 2007:

    “The US will enter a recession within years” (2006). “US stock markets are likely to begin in 2008 to experience a “Debt Deflation Bear Market”(2007)

    Bezemer wrote in his research paper: "Eric Janszen is an investor and commentator. He established the iTulip website in November 1998 to parody the then rampant ‘Internet Bubble’ as a speculative mania. He called the top of the dotcom bubble in March 2000 and shut the site down after the dotcom crash of that year; but started it again as the housing market developed into what he believed to be a bubble. In August 2001 Janszen (2001) “expected that after the technology bubble crash the Federal Reserve and government was certain via tax cuts, rate cuts, and stealth dollar devaluation to induce a reflation boom like the 1934 – 1937 reflation created after the 1929 stock market bubble bust. Like that reflation, the stock market after 2001 was unlikely to produce meaningful inflation-adjusted results.”

    "In 2006 he [Janszen] wrote in America’s Bubble Economy: Profit When It Pops that the US would enter a recession within years. In December 2007 he [Janszen] warned subscribers to his investment advice that US stock markets were likely to begin in 2008 to experience a “Debt Deflation Bear Market” market that would more or less track the Nikkei during the first year of the Japanese debt deflation, when it lost 40 % from December 1989 to December 1990. The Dow Jones then declined from 13,365 points in December 2007 to 7,880 points in December 2008, losing 42 % of its value. Janszen (2009) writes that “this forecast was uncomplicated if you understood the simple underlying dynamic: US households and businesses, and the government itself, had since 1980 built up too much debt. The rate of increase in debt was unsustainable… Huge imbalances in the US and global economy developed for over 30 years. Now they are rebalancing, as many non-mainstream economists have warned was certain to happen sooner or later, warnings which were argued as alarmist by mainstream economists. The global monetary system … started to come apart in 2007 following the crash of the securitized debt market, that followed the collapse of the housing bubble. It had to come apart anyway; the securitized bond market happened to be the proximate cause.”


    As Dirk J Bezemer wrote in the paper: "In distinguishing the lucky shots from insightful predictions, the randomness of guesses is a feature to be exploited. Random guesses are supported by all sorts of reasoning (if at all), and will have little theory in common. Conversely, for a set of correct predictions to attain ex post credibility, it is additionally required that they are supported by a common theoretical framework."

    In Bezemer's study, he "looks to identify a set of predictions which are not only ex post correct but also rest on a common theoretical understanding. This will help identify the elements of a valid analytical approach to financial stability, and get into focus the contrast with conventional models."


    You can read Dirk J Bezemer's full extensive research paper entitled "No One Saw This Coming” Online in PDF at ->
    http://mpra.ub.uni-muenchen.de/15892...aper_15892.pdf
    MPRA
    Paper No. 15892, posted 16. June 2009 / 14:58


    * Dirk J Bezemer, a Professor and Faulty of International Economics and Business at the University of Groningen in the Netherlands.




    Last edited by BDAdmin; 03-31-10 at 10:06 AM.
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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by BDAdmin View Post

    You an read Dirk J Bezemer's full extensive research paper entitled "No One Saw This Coming”


    MPRA
    Paper No. 15892, posted 16. June 2009 / 14:58

    Link doesn't work.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by Chomsky View Post
    Link doesn't work.
    here... try this...

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Thanks MM.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by Chomsky View Post
    Link doesn't work.
    Read it in PDF online -
    http://mpra.ub.uni-muenchen.de/15892...aper_15892.pdf
    Ed.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    some later-on comments on this one, which just popped up on 'the news'

    Re: "who saw it coming": ej gets a mention at ftalphaville


    Originally Posted by hayekvindicated
    They didn't mention Marc Faber, George Soros and Jim Rogers - all of whom warned about this well in advance. Soros has a video interview about the housing market back in 2006 which unequivocally pointed to the housing bust.

    Rogers put his money where his mouth is and shorted Fannie Mae and Freddie Mac back in March 06. And Faber pointed out the bubbles way back in late 05.

    and then....

    Quote Originally Posted by metalman View Post
    i bet they didn't get mentioned because soros, faber & rogers are traders? not economists? besides an interview or two they have no analysis to the authors of the paper to review... ej's is all online and google searchable... for anyone who's interested to know the facts from the bs.
    phreakin amazing all this stuff is...


    Quote Originally Posted by Thailandnotes View Post
    In retrospect, I think a lot of average homeowner saw it coming. My wife and I own a house along the Potomac River in Virginia. We spend a month or two there. It’s always been interesting over the last fifteen years to return, drive along the road, and see if anyone is selling a house. There are about 60 houses along the road. About five years ago, our friend John had put his house up for sale. He and about eight of his neighbors were sitting around on his dock. “So what are you asking?” someone asked. “$ 810,000” Everyone laughed. Beer came out of the nose of the guy sitting next to me.



    Quote Originally Posted by FRED View Post
    you guys are UNBELIEVABLE (or at least undeniable... ;)

    like i said a few daze ago - i havent been this 'spellbound' since i read dr hunter s thompsons fear-and-loathing-in-las-vegas !
    (all in one night, whilst 'living the moment' virtually-speaking and enjoying several of the vices so mentioned... ;)

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    Default Re: "who saw it coming": ej gets a mention at ft.com/alphaville

    A bit off topic...

    I was at my community college library last night and saw EJ's book prominently displayed on the recommended reading table at the entrance. I also gave a copy to our mayor.

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    Default Re: "who saw it coming": ej gets a mention at ft.com/alphaville

    Quote Originally Posted by shiny! View Post
    A bit off topic...

    I was at my community college library last night and saw EJ's book prominently displayed on the recommended reading table at the entrance. I also gave a copy to our mayor.
    local borders books... check out the competition... free money... derp...


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    Default Re: "who saw it coming": ej gets a mention at ft.com/alphaville

    Quote Originally Posted by metalman View Post
    local borders books... check out the competition... free money... derp...
    I enjoyed Good to Great, found it a solid case study with thoughtful conclusions.

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    Default Re: "who saw it coming": ej gets a mention at ft.com/alphaville

    Quote Originally Posted by thriftyandboringinohio View Post
    I enjoyed Good to Great, found it a solid case study with thoughtful conclusions.
    Beat me to it ... if EJ's book is sitting with Good to Great - he's certainly in good company

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    Default Re: "who saw it coming": ej gets a mention at ft.com/alphaville

    Quote Originally Posted by metalman View Post
    local borders books... check out the competition... free money... derp...

    Here in Portland the local heavyweight bookstore is Powell's, self-determined to be the largest independent bookseller in the world. The main store is 68,000 square feet, divided into nine areas on multiple levels.

    Last fall when I went to buy the book there, I first looked in the Business section and nearby categories, where I saw books similar to the competition shown in the photo above. This section is in a fairly prominent location near the secondary entrance (which is now larger than the older front entrance). Alas, no EJ. I went to one of the help desks, and she pointed me to the Economics section... upstairs, tucked away in the middle of a long row of floor-to-ceiling shelves. No one there but me. There were two copies.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by metalman View Post
    i bet they didn't get mentioned because soros, faber & rogers are traders? not economists? besides an interview or two they have no analysis to the authors of the paper to review... ej's is all online and google searchable... for anyone who's interested to know the facts from the bs.
    What about Doug Noland? http://www.safehaven.com/archive-2.htm
    Very much online and searchable. BTW, it would be nice to interview this guy.

    However, the main question is not, who gets the credit and who does not. The question is, why the mainstream analysis is so delusional. Having 10-20 very smart analysts shouting FIRE did not help most people.
    медведь

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by medved View Post
    What about Doug Noland? http://www.safehaven.com/archive-2.htm
    Very much online and searchable. BTW, it would be nice to interview this guy.

    However, the main question is not, who gets the credit and who does not. The question is, why the mainstream analysis is so delusional. Having 10-20 very smart analysts shouting FIRE did not help most people.
    but isn't the answer obvious? these 12 are not collecting a paycheck from the fire econ.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Quote Originally Posted by medved View Post

    However, the main question is not, who gets the credit and who does not. The question is, why the mainstream analysis is so delusional. Having 10-20 very smart analysts shouting FIRE did not help most people.
    We differ on the importance of well deserved credit.

    If one wants to know why it didn't help most people and why mainstream analysis is so delusional, then listen more to those 10-20 or more analysts that got it right... and get it generally right, year after year. Answers are there.
    I hope this doesn't come across as accusatory.



    And to follow up on metalman:
    "The few who understand the system, will either be so interested from it's profits or so dependent on it's favors, that there will be no opposition from that class."
    -- Rothschild Brothers of London, 1853

    Tinfoil hate enabled and/or cynical?... perhaps, but also true as so much of human history shows.



    And one last item:
    According to Aristotle one Greek city state had a fundamental law: anyone proposing revisions to the constitution did so with a noose around his neck. If his proposal lost he was instantly hanged. (from Jerry Pournelle )
    Last edited by bart; 07-16-09 at 05:13 PM.

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    Good find, nice try to reform economical thinking - but now, isn't the realistic view of academia that new & better ideas will be accepted only after the demise of the current entrenched powers?
    Justice is the cornerstone of the world

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    Default Re: "who saw it coming": ej gets a mention at ftalphaville

    I haven't read the paper, but looking at the picture it seems to me that they center around the housing bubble. Isn't Ka-Poom a theory from the last century ?

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