HOW MANY SAW THIS COULD HAPPEN? (COMMENT). I posted here that perhaps I am too hard on bankers who were so completely unprepared for this financial crisis. I mentioned some economists who had seen that there might be a crisis. Elmer commented that Nouriel Roubini had predicted much of what happened. Here is a blog post by Dirk Ehnts analyzing how much credit can be given to Roubini. Anirvan Banerji has argued that “Roubini has used to justify his predictions of recessions and crises: rising trade deficits, exploding current-account deficits, Hurricane Katrina, soaring oil prices” and that “Roubini has been peddling pessimism for years.” Ehnts concludes that Roubini deserves credit because he identified the role of subprime mortgage financing and the important role of psychological factors. Elmer is right that there were some other economists who gave warnings about, for example, the mortgage market. After thinking about this subject, I have decided that I have not been too hard on unprepared bankers. There were enough warnings that should have been taken into account. I started this post with the caption: “HOW MANY SAW THIS COMING?” But that is the wrong question. Bankers didn’t have to predict this would happen. What they had to do was recognize that this could happen.

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