Wednesday, April 27, 2005

Dutch Central Banker Concerned

If you have a subscription, has an editorial worth reading. "British and American policymakers appear to regard the recent period of house price inflation in their countries with equanimity. As long as neither inflation nor unemployment soars suddenly, we are told, the current level of house prices is sustainable and economic growth is not threatened."

"But not all central bankers are so insouciant. Nout Wellink, president of the Dutch central bank, last month warned that a hangover from the property boom could well exacerbate the next downturn. Both the Dutch experience and the history of housing booms suggest that this counsel deserves to be taken seriously. However, it is probably already too late for the leading Anglo-Saxon economies to escape lightly from the consequences of their property bubbles."


At 8:52 AM, Anonymous Anonymous said...

Something really strikes me as funny in all this: the inability of "analysts" and leaders to forecast things.

For example, the price of oil went up last fall. The word "inflation" was mentioned. Somehow everyone came out and said that the economy isn't really reliant on oil so much anymore and that there wouldn't be any implications.

Funny they say that when we use 25% of the worlds oil ! If we aren't reliant on oil, who is ???

Now we are starting to see the effects of higher oil prices: decreased consumer spending, reduced earnings by companies, increased costs, etc.

Now, finally, 6 months later, people are starting to see that high oil prices DO have a significant effect on our economy. It is like everyone goes through a period of denial before they realize the truth is unavoidable.

Right now the experts are in denial about the following:

- interest rates
- housing bubble
- consumer debt
- trade deficits
- gov't deficits

Just wait until everyone comes to the realization that these are real issues too.

At 9:30 AM, Anonymous Anonymous said...

You are making the classic mistake of believing that economists are paid to predict ANYTHING.

They are not. Economists are paid to do one thing- make "predictions" that their employers want to be public knowledge.

If you are an economist paid for by the current administration, your job is to predict growth and prosperity.

Economists on average have a prediction success rate lower than random chance would give. The reason is they are paid bullshitters, not unlike internet stock "analysts" in the late 90s.

BTW- there is no nobel prize in economics, because alfred nobel correctly stated that economics is not a science, but merely public relations and/or advertising.

what people think is a nobel prize in this field is actually "a prize in memroriam of alfred nobel" paid for by private companies (usually investment banks wanting to make people believe an economist employee of theirs can actually predict the future) and is in no way associated with the actual nobel committee. in fact, alfred nobel left it in his will that economics was never to be added to his award.

At 10:24 AM, Anonymous Anonymous said...


You are PRECISELY right about the role of "economists," especially those embedded within industry or academia (which is often underwritten by industry). They are they to either cheerlead and/or justify the latest asset mania.

Their so-called "analyses" are usually little better than warmed-over press releases. Critical thinking is nowhere to be found among these "forecasters." How many of them were calling the tech-wreck ahead of time? Zero, even though some older, level-headed asset managers and newsletter writers called it on the dime. Yeah, RE is going up because of high immigration demand and good fundamentals. Yeah right. Gee, is that why we have a long-end of the yield curve that simply screams "fear," even in the face or accelerating inflation. Pabalum, pure and simple.

I am frankly surprised that a semi--honest Chief Economist like Stephen Roach even exists on Wall St. He's a pure outlier! Also, he Morgan's Stanley playing-both-sides-of-the-fence hedge. Robert Shiller has some cred, but I don't think from reading his latest stuff and hearing interviews that he really fully "gets" the credit bubble dynamics at work in this thing and the parties responsible.

At 11:27 AM, Anonymous Anonymous said...


Rock on... i hear you... and i agree... i think that this narrow yield curve is going to bring this RE party down to a near screeching stop... banks and lenders are going to be forced to firm up lending standards... oh, the times they are a changing...

At 11:51 AM, Anonymous Anonymous said...

The Dutch central bank president? He much know from experience, considering he's probably still long tulip bulbs from 400 years ago.


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