The writing on the wall

Again the press lies, this was seen and was forecast.

I predicted this would happen.

www.housepricecrash.co.uk predicted it would happen.

What you actually mean it that no one who's paid huge sums of money predicted it.

Question is are these people worth the money.

Why is the BBC using govt propaganda and calling this a downturn admit what it is a recession or a brownturn.

The amateur economists have the upper hand.

Perhaps the BBC should concentrate on what Roubini is predicting?

Forgive me for saying so but many people knew the recession was approaching. I remember having lunch with a director of well known US Investment bank way back in 2006 and he forecast what we are seeing today. It seemed unlikely at the time but as sure as night follows day it was coming. We have seen nothing yet - sadly. Optimism and confidence are needed now, not to end the recession but to bear what is to come.

"But from the standpoint of even a few months ago, it's a bolt from the blue. "

Sorry but any economist who didn't see this coming years ago is useless.

How was it not possible to see the biggest debt bubble in history and see that this would lead eventually to a depression?

Tell me again why the "experts" get paid so much?

My dog could do better.

"The astonishing thing is - nobody did. As HSBC's Chief Economist Stephen King pointed out recently, if you look at the consensus forecasts for 2009 at the start of last year, not one forecaster predicted the scale of the meltdown. Not one."


I'm afraid you are quite wrong Stephanie ... there was a whole school of economics that predicted the scale of the meltdown .. did anybody listen ? No ... Is anyone listening now? No.. The reason why nobody is listening is because the solutions are politically unpalatable consisting of contrasocialist measures (high interest rates and massive cuts in public spending).


The school of economics BTW .. the Austrian School.


I suggest you familiarise youself and read up on the subject, and perhaps visit/interview the good folk at the Mises Institute.
www.mises.org

Utter nonsense.

There were many economists who predicted the collapse we are now experiencing back in 2007 and earlier.

The problem is nobody listened to them.

The government, the regulators, the media, the bank executives not to mention the general public simply do not understand the basic principles of economics.

It all makes me wonder where leaders and experts live. I may not have predicted the savage downturn but - like lots of other non experts - it was clear that there was something seriously wrong with the UK economy. E.g. massive balance of payments deficits year-on-year; industry receding year-on-year (we are now only in the market for "screwdriver factories" against competition from low cost countries in Eastern Europe and the Far East); massive borrowing and house prices out of control; the combination of a strong currency and a Chancellor - now PM - who thinks it’s a good time, with our competitiveness at a low point, to increase the tax burden year-on-year using stealth taxes ; ditto local authorities and council tax; a Chancellor, now PM who takes over a Government budget surplus and borrows so heavily he turns it in 11 years into a deficit so big we wouldn’t get into the Euro - what a great starting point for a recession!; simultaneous unbridled immigration.
Sorry, but these are matters of daily experience being discussed in pubs and barber shops.

The problem is quite simple. A bubble was created which boosted activity. Look at the graph above and remove the bubble effect and what do you see. It is obvious. Decline has attempted to be avoided by creating a bubble. That is why this impact is so sudden. The bubble has popped. There will not be 'recovery' to previous levels anytime soon. The economy has to drop to a lower level where it would have been bar the bubble. The situation is all the worse from trying to buck reality. More damage will result not less because of this. The demand on businesses that we have seen recently was unsustainable, so downsizing, in some cases substantial has to happen. Where is the surprise in this.

As for economists. Sorry the situation is actually simple. Who wants to see problems, who wants to advise cut back when the the pressure is the other way. Marketing, ie opinion, which what drives things forward is notoriously unreliable and often driven by the ego and vanity of the person answering. Loaded questions, loaded answers. Economists are not immune. Garbage in, garbage out.

The implications are serious. Public services have to decline, Access to services has to be throttled by one mechanism or another, and long term unemployment is here to stay. It does not matter how robust what is left is, and much of it will be, it cannot help those pushed to one side. A particular problem for some will be that they have overspecialised which will affect new employment opportunities. It is a total mess and nobody on a comfy ride has wanted to listen to the warnings.

Incidentally the HMG message is a herd message. Let the global comunity act in sync. The real answer is to act to get through and out the other side first.

To keep thinking that the 'new' lower level of the economy to be exposed shortly is not where it should be will only cause further problems. It is a matter of perception. Growth can only come from new working practices which are more financially effective ie provide proportionally less tax revenue, which does not help public fiances. Sorry.

I can remember a car mechanic telling me in no uncertain terms that there was going to be a recession in Jan 2007 and that I should hold off trading my car in because I'd be able to pick up a better deal in a few months.

As for me, it's been beyond all reasonable doubt that a recession was imminent for the last couple of years. Recessions follow house price booms like night follows day - you might have thought that the MPC/City/Journos might have cottoned on to this by now, but no, we live in a true idiotocracy where a car mechanic has more of an idea about the economic climate than the guvnor of the BoE, just through the experience of being over the age of 30 and having a memory.

I can remember the time and place in 2002 that I started pointing out that the Country was heading in this direction - it was obvious as soon as it became obvious that house prices were continuing to rise at a rate well above wage inflation (what particularly alarmed me was that BBC journos kept saying that spending on the high street was healthy because house prices were going up - a numerate ten year old can tell you where that will end, surely) House prices crash when affordability ratios become too large - too many people indebted on big mortgages and you have a powder keg and where the spark comes from is irrelevant.

You should have visited
www.housepricecrash.co.uk
is all I can say

I think it was pretty clear at the beginning of 2008,from the way house prices were falling, and the property market in general was stagnating, that the UK would be in technical recession by the end of 2008.
The size and the timing of the banking crisis was probably less easy to predict, but it is worrying to say the least that the government, the Treasury and the Bank of England have apparently been so slow to take notice of the indicators.

No-one predicted it?

Well I did, and I'm an ex-estate agent, not an over paid economist.

Perhaps I should become an economist, and some of the failed economists can go and be estate agents? That would seem a better allocation of resources...

(I think you need to address this, because as you can see above, the "no one predicted this" line is beginning to look as silly as Brown's "no return to boom and bust").

Time to stop debating the why, wherefore, and all the fabulous detail..

So we're in recession.

What is my part, our part in any recovery?

Could the Guv't now perhaps move on slightly from justifying their position vis-a-vis banks (and little else) and apply their minds to that now?


Possession orders doubled and nobody came..

GC

"not one forecaster predicted the scale of the meltdown"

As several people have already mentioned it was not difficult to see trouble on the horizon, but did any one predict the scale of it?

I'd like to mention Elliott Wave International, and Robert Prechter who have been predicting this epic downturn for some while.

In their January 2007 forecast they predicted that 2007 would be “The Year of the Financial Flameout".

But as far back as 2003 they were warning that this was coming...
Stock markets around the world will continue to fall. Ultimately, the averages will drop more than 90 percent.
- Real estate values will fall more than they did in the 1930s and 1940s.
- Rating services will resume the trend of downgrading bond quality. Eventually, states, counties, cities, corporations and even nations will default on bonds in record amounts.
- Debt packages made of mortgage-backed bonds, auto loans and credit card debt will become viewed as unworthy investments.
- Many, if not most, pension plans will fall in value and be unable to provide the promised benefits. Anger over this development will result in demonstrations, violence and tardy and ineffective political reform.
- Prices for collectibles will continue to fall. Many will become little more than curios.
- More banks will fail than failed in the 1930s.
- The total amount of credit outstanding worldwide will decline substantially.
- The Federal Reserve chairman will be labeled a fool who is greatly responsible for the collapse.
- The trend toward economic contraction that began in 2001 will continue to develop into a depression.
- The unemployment rate in the U.S. and in most countries around the world will rise and eventually exceed 25 percent.
- A record number of manufacturing companies in the U.S. will fail.
- A Democrat will be the next president

This organisation has a far better understanding of what is going, and more importantly where it will end than any mainstream 'expert'.

I have to admit that I am a bit shocked by the self-serving nature of the claim that 'no-one predicted it'. As other have pointed out, many predicted it. George Soros predicted it in January 2008, as reported on the BBC news website. I predicted it, and waited for house prices to collapse before upgrading my house (hint to others - expect a 33% decline from last year and do not pay more under any circumstances - the market will take four years to reach the bottom in real terms). I am sorry that journalists and academics appear to act like lackeys for bankers who cut and run, but not to have expected a recession is economic ignorance.

Incidentally I am tired of hearing about how mortage holders should be protected - they borrowed beyond their means, caused the crash, and are now whining. Their fault, they should pay.

What tripe! Clearly Stephanie Flanders is as out of touch with the real world as the vast majority of over employed city workers.

>Of course, economists weren't the only ones to miss the writing on the wall. Everyone did - bank chiefs, regulators, governments, and certainly voters.

Excuse me? And certainly voters? Did you ask any? There are a great number of real people around who have been predicting recession for a very long time indeed.

>"City mavericks can often lose their jobs, long before they are proved right."
That's a large part of the problem with the city. It's run for the quick buck and short term interests of the traders, not the long term good of the economy. Anyone that dares to think longer term and dare to suggest there might be problems should be promoted, not sacked.

How much tax payers money did Stephanie Flanders get paid for writing this rubbish?

Stephanie

Your article can effectively be summed up in four words - The Emperor's New Clothes.

Why do we have economists if they are all topo scared to question the concensus view?

avensis tom, is spot on.

The fact is political expediency has lead us to the situation we are in, and im afraid as unpalatable as it may be, indivuiduals who borrowed more than they could afford to pay back.

Had this government any bottle it would have stopped the irresponsable lending AND borrowing, but then they would have had to make the public aware that the whole noughties economic growth was built on sand.

Now if i could see this coming in about 2006 and im not the smartest guy in the room by any means, how is it so many people got away with this huge conjuring trick for so long?

One more thing, Gordon Brown is correct about one thing alone. he has created a more inclusive Britain, all must suffer for his cowardice and lies, the guilty (over extended borrowers) and the innocent, PRUDENT savers.

p.s. Gordon "prudence" Brown, do you know what condemns are sold as in Africa.

Blimey, such panic.

The rest of the world is just getting on with it.

You need to chill out a bit, Brits.

#9, Me
"I can remember a car mechanic telling me in no uncertain terms that there was going to be a recession in Jan 2007"

Sorry, I meant to write Jan 2008.

Hi Stephanie,

Some predicted this would happen. They were margianlised as nutters and doom mongerers.

No Economist wants to pick up that label.

But there was even intelligent discussion taking place on on-line forums.

I find it hard to believe that if ordinary people on an internet forum can come to the correct conclusion then bright politicians, banking, regulators and rating agencies couldn't.

Whether or not they had a vested interest in keeping quiet is another matter.

RB, London.

Come ON!

Nobody saw this coming? How did anyone with half a brain think the double digit increases in house prices were being paid for?

The majority of people in Britain know instinctively that a nation that relies on services (and financial services at that) will be badly hit by any recession, but this fact seems to have escaped the political class and the journalists.

A whole shadow banking system has been operated - derivatives trading - and this now threatens the existence of our country.

We are staring into the abyss and our journalists and politicians are still insisting the emperor has clothes on.

Dear oh dear oh dear.....

Once again the foolish media try to use statistics to explain what's going on.

Well you're all WRONG.

The measure of GDP has more holes in it than Gordon's bank bailout plan. It's an inaccurate measure now and has always been.

GDP does not include non-market transactions, the underground economy, non-market economy, unpaid work and a myriad of other forms of production.

What do you think happens in recession? Do all the redundant workers sit in a corner and don't move until it's over?
- No, they get on with unpaid work, either in their own homes or volunteering for charities, local schools etc.

All these continue to be part of GDP (although it's not measured).

All GDP measures is the tax revenue from various production activities. Just because the Government isn't generating the tax it did before - doesn't mean we're working and producing any less or growing any slower.
Nor does it mean the value or output of what the UK produces has declined - it's merely changed to something you cannot see.

GDP is nonsense - it does not reflect production which is unseen (un-taxed), but which still contributes to the Economic growth of this country.

As we speak my (recently made redundant) wife is at home cooking a lovely dinner for this evening with some home grown vegetables as an alternative to going out. Are we saying she's not producing? Are we saying there isn't going to be consumption later? Are we saying there is no product, and finally are we saying that the money saved by not eating out will not get spent elsewhere in the taxable economy in the future?

If I ate out tonight then my dinner would be counted towards GDP - so as more and more people 'take recession action" and cut back - of course it looks like we're producing less.

Just in the same way it looks like we're earning and producing less at home as we have a reduced income. However the production has switched from externally provided (and bought in) to being internally produced - JUST LIKE THE GOOD OLD NATIONAL ECONOMY.

It's very sad when we get to a stage where monetary value is the only way we can measure anything in this world.

It may be true that nobody (or not many people) predicted the SCALE of the meltdown. But it has been obvious for years that we were heading for problems.

Any country that runs thumping trade deficits and government budget deficits year after year for a decade is heading for trouble. The Conservatives certainly warned that the government was borrowing too much - and were ignored or even sneered at by the media including the BBC. The IMF also warned about public and private debt levels in the UK, two years ago.

It suits Gordon Brown to pretend that the present problems are an "act of God" that has come completely out of the blue. The truth is that Mr Brown followed the same policies as the US for the last decade. Low interest rates and ever-increasing government borrowing, mostly funded from abroad, and ignore the asset price bubble that was resulting. (Not just houses but also shares shot up during that decade.) Their policies have CAUSED the current problems and they WERE warned repeatedly.

Ah, so the first 15 or some people to reply saw this coming, and knew all along - but have only now decided to tell us. That's good.

I'm personally looking forward to reading more of this blog.

...and as for the prediction - well haven't hundreds of economists throughout the ages predicted recessions?

It's a 'feature' of capitalism - and as every idealist knows for every action, there is an equal and opposite reaction.

Boom follows bust follows boom follows bust.

Next big depression - 2080

In between we will have various minor recessions and downturns but 2080 will be 'The big one'.

I'm more confused about the who is the BBC Economics Editor than I am the economy.

After Evan went to Today in came Stephanie but then after a few short weeks I noticed Hugh Pym was now tagged as the Economics Editor. I searched the internet for an explanation but couldn't find one and now here we are in a new year and Stephanie is back and Hugh is now a Special Correspondent - whatever one of those is.

Does anybody know what is going on in a) the economy? b) the BBC economics department? c) how many special correspondents can the BBC have at one time? d) whatever happened to Kate Adie?

"economists weren't the only ones to miss the writing on the wall. Everyone did - bank chiefs, regulators, governments, and certainly voters."

I love this one.
More doublespeak from the BBC.

Fact is we don't believe anything they say any more. Neither the BBC nor the government.
Until the BBC get back a voice and have the guts to stand up and be counted, we'll have decades more wishy washy twaddle.

BRING BACK Robin Day.

What really hurts me and lots of others people of my age, who went through a lot under Thatcher to "turn the UK around" is -as we have also been saying for years down the pub - that New Labour has disippated our heritage. But when did any Labour government pay attention to wealth creation. Too busy re-distributing it. What's "New" about that

The definition of 'recession' as two consecutive quarters of negative growth was a term dreamt up for political convenience. There is nothing any more important about where we are now compared with six months ago, when signs of the downturn were already clear.
As for this financial crisis, you don't have to be Roubini to say 'I told you so.' Lots of us saw it coming as per earlier comments.
There's none more blind that those who refuse to see.

The old adage from the Great Depression was: “When even shoeshine boys are giving you stock tips, it’s time to sell”

A few years back when hairdressers and taxi drivers would tell me about the latest property addition to their portfolio. Large loud ladies on the TV suddenly became 'Property Experts'. I smelt a rat.

It would appear that Stephanomics is an already devalued subject.

Time to brush up on those text books, Stephanie

I've got bad news for you Stephanie this is NOT a recession, it is a DEPRESSION.

This will be much deeper and last a lot longer than your 'experts' are willing to predict (publically at least). The World financial system is broken and is highlighting that the trade imbalances cannot be sustained.

Until we can develop a new economic system that is based upon value and not money there is no way out of this bind. We are now in the first part of a decline that will lead us to have to adopt protectionist policies if we are to survive as a country.

2009-2011 - all bets are off. In terms of individual countries it will become 'each man for himself'. That will see the collapse of the US economy, the collapse of the Euro and maybe even the collapse of the EU itself. China and the Arab states will be left with a pile of useless paper. We will be lucky to avoid a major military conflict and a wild swing towards facism.

Think that is way out of line? Well how far out were your economic and financial forecasters?

I think there's a really interesting story lurking behind all this.

As others have posted above, plenty of people saw this coming. It's just that they, by and large, were not the people who were in a position to do anything about it.

And it's not hard to see why people could see it coming. Just look at the way house price increases had massively outstripped earnings increases. If anyone thought that was sustainable, then they were clearly living on another planet. It's not a very big leap from there to realising that historically, house price crashes have typically been associated with recessions.

But the really interesting thing is this: why did those in government not see it coming? Did they REALLY not see it coming? In which case, there is a great story about the total lack of even basic economic skills in government. Or, as I suspect is true, is AvensisTom (#5) correct and they did see it coming, but didn't want to face up to it because it would have involved doing some politically unpopular things? So they decided to ignore it and plan how they could blame it all on someone else once the excreted matter hit the fan.

Now wouldn't getting to the bottom of that be a good story?

#26: I don't think you searched the internet for an explanation very hard. There's a very clear explanation on Stephanie's Wikipedia entry.

As for special correspondents, I've always assumed that they were a bit like the FBI's special agents. Although I have absolutely no idea what makes them special either.

Writing on the wall, that one or two of these banks may go to the wall.

The Big Four firms have met Treasury ministers to help government prepare for the possibility of an audit raising doubts over a bank’s ability to continue as a going concern.

A source close to the meeting said it was a ‘precautionary’ measure to ensure a procedure was in place to deal with an ‘emphasis of matter’ statement ­ the key paragraph in an audit statement that signals auditor concerns about a business’s viability.

The meeting was requested by the Big Four because of anxiety that publication of concerns could become a ‘self-fulfilling prophecy’ and lead to a run on a bank if the statement appeared in an audit report.

To say that no one saw this coming is, as many posters ahve already said, rubbish.

Even i saw something like this coming, and hence got a BOE tracker mortgage before the debt buble burst, although i'll admit that i never saw it happening on this scale. i thought the UK would be in trouble but countries such as india and china would be relatively unscathed.

i'll admit that to simply say "oh someone predicted this ages" is a bit weak as there are always doomsayers . However there were certainly experienced professionals who saw this coming and some who were not only willing to voice their prediction but also to gamble on it as these traders did:

https://bit.ly/fWgF

Ms. Flanders,

I'm as new to the business of understanding economics as you appear to be experienced.

I've learned a lot by following comments on Robert Peston's blog in recent months. But I've found that his focus is on details which I often have trouble understanding because I lack a background in finance and/or economics.

I'm really looking forward to any articles you post which address things in the broader context of how the economy works. Not that you should provide an introductory on-line course "for dummies", but could you please, please respond to such comments as

# 5 AvensisTom, who mentioned the "Austrian School",

and (on your first article)

# 1 benhimself who mentioned Chris Martenson's "Crash Course"

https://bit.ly/38hGmo

Unlike some other posters I won't insult you by assuming you know nothing about what appear to be "alternative" economic ideas. However, if you could at some point take time to comment on why so many knowledgable people have predicted the current financial crisis, and why they seem to be thinking "outside the box", I, for one, would greatly appreciate it.

All the best with your new blog!

To add to the chorus of disapproval - it is quite wrong for you to say that nobody predicted this situation.

I read articles by George Soros predicting the downturn around three years ago. It's because I listened to him, rather believing the 'buy a house, do it up, make pots of money' programmes on every channel that I'm now in a small house awaiting a bargain after the crash.

Anne Pettigrew did and does say the same about the debt crisis we have in the world.

Similarly there are many many voices talking about the problems that our fractional reserve banking system creates..

It is unfortunate that the mainstream does not report this - but please - you are either exposing your ignorance or have clearly underestimated your audience, as evidenced by the comments above.

I predicted it. Get yourself over to the Motley Fool and have a look at their Property - Market and Trends board. Not only did I predict it but I predicted what Brown's inevitable response would be. Print more money. Inflate away the debt. I was predicting this in 2004.

The Nu Labour rebuttal squad was out in force then too though. Still, many examples survive. Take a random dip into 2004, 2005 and you'll see many posters holding their heads in their hands marvelling at the house price insanity.

Take a look.

What kind of economists are these people that with a UK housing boom/bust fresh in the minds of anybody over 40 that they went ahead and sat through the biggest housing boom in history and though 'yeah, that's rational, nothing could possibly go wrong there'.

Seriously. Even now the same BBC economists can't bring themselves to see that the UK housing boom was in fact engineered by Brown when he flooded the UK with 300bn of borrowed money to pay his 1 million newly employed state functionaires.

Naaaah. It wasnae me. Global problem that started in America. Did the Americans force you to borrow 300bn quid Gordon? Did they force you to borrow 3% of GDP every year just to make the payroll? In the so-called 'good' times when we should have been saving money for a day like today?

Started in America? Rubbish. The UK's bust was engineered, in the UK, by Gordon Brown.

And the coming (hyper) inflation is nailed on too. Anything to avoid the ignomy of a second IMF chit-chat in successive Labour governments.

The man is delusional or evil. Or both.

Christmas 2006: A Chicago-based hedge fund manager said to me over Christmas lunch, "Just you wait until real estate goes belly up, that's when the crash will come".

He certainly wouldn't cast himself as a maverick or financial genius, he was just repeating what was common knowledge in the States 3 years ago.

The reality is that, at the underlying level, we have been in recession for many years, but it has been masked by the unsustainable growth of debt. In future, growth should be quoted on the current basis but also on a debt-adjusted basis.

Economists were warning of the folly of relying on the ever increasing personal debt levels within the population for economic growth every time the debt figure came out.

It was a news article much like the exam results which is the same story every year only with the debt figures it was more like every quarter. You'd have someone report that we'd reached new record levels of debt and then an expert would go on about the unsustainability of this.

So the real problem was that the professionals ignored their own expert opinion and greed took over thus scuppering the banks themselves and with them the rest of us.

Er no.. this is not true - the Economist has been warning about the possibility of a recession for at least 18 months talking about house price corrections, assets that could not valued.
But the professional commentators had a vested interest in not facing reality - thats why they talked this up - as a student of economics will tell you - expectations is a major determinant of actions ..

Nobody saw it coming?

Fred Harrison wrote a book back in 2005 predicting a depression. Schiff and Keiser have been all over the foreign press for two years warning of an imopending recession.

And yet the BBC chose to accept the views of the CML and Savilles as an unquestionable indicator of the health of the economy.

Not one journalist at the BBC has had the bottle to question Gordon Brown about the level of incompetence at the FSA and the BoE.

The relationship is just a little too cosy (I didn't say corrupt).

Re: No-one could have predicted it.

I guess it just goes to show that if you tell a lie big enough some will believe it.

You're a good presenter Steph but don't ruin it by repeating what those responsible for it all keep saying. It makes you look like a shill or less smart than you normally appear.

Lots of people predicted and warned about it. I include myself in this group - shame I wasn't able to convince my company to prepare in advance for it.

foredeckdave, you may well be correct.
Already the lack of purchasing power in the West is affecting the eastern tiger economies, they too, will sink beneath the waves of recession. The wealth generated in those economies will no longer be available for investment in the western economies which will cause a further crash.

At the same time the middle eastern economies are already seeing a drop in demand for their commodities and will also be dragged down.

For the Uk we have a government that is proving unable to deal with basic problems casued by the recession at the same time there are lots of tensions in our divided country, rich vs poor, scots vs english, moslems vs every one else, black vs white, youth vs aged.
Any one of these issues is a powder keg waiting to explode. My own personal fave is that the Scottish mafia who run the Uk will force the English to declare their independence, before the ineptitude forces us to arms.

Ah, so the first 15 or some people to reply saw this coming, and knew all along - but have only now decided to tell us. That's good.

Fill your boots:

https://bit.ly/2k2f

I am very Sorry Stephanie but is this article for real or have you been given orders to attempt the re-writing of history so soon?

To try and say nobody predicted this is laughable. For heavens sake you just interviewed the man known as Dr Doom!
I have been frequenting his website and receiving his updates for almost 2 years now.

The problem with economists (or just eceonomics) is that it is not a proper science.

You may have an awful lot of knowledge but someone will always have a differenct point of view. It therefore becomes professional sensibility to agree with the majority so as not to expose any flaws in your understanding.

People that do go against the grain - the 'professional pessimist' you call them (as if being a professional optimist is a good thing?!) are the ones who have the courage of their convictions and the aptitude to arrive at contrarian opinions.

That they are not employed by the big banks is also a positive. I would hazard that most people who actually excel in a field would likely be better off working for themselves using their 'above average' ability/intellect. Better money, more control over hours, work life balance etc. I used to work for a bank (now bankrupt) for a few years out of university. Hated it - theres no room for dynamism in such a large organisation. Have been self employed ever since.

Can you really imagine an economist at a bank arguing against the rest of his team that the bank should perhaps decrease lending amounts/income multiples etc?

He would be seen as an obstruction and despatched quick sharp.

And just to echo some ther comments - yes Housepricecrash saw this coming IIRC in 2004!

Poor blog Stephanie.

I find the idea that a recession was not on peoples mind over the last 2-3 years. We have have the largest and longest period of growth under the labour goverment.

As good as this has been it was never going to last. House prices and growth could not continue indefinitally. That is one fact that everyone knew.

So a recession was always on the cards, however the timing and serverity of this recession could never be guessed.

More importantly is that if everyone knew it would come at some time why in the world did no one prepare for the rainy days? Not one bank or company (except Tescos which i assume will be here when we are all gone)!!

"I guess that part of the story is no surprise: if we - and policy makers - could all see recessions coming in advance, they would never happen at all"

Unbelievable comment from a so-called economist. You can't stop a recession happening, you can put it off by flooding the economy with cash but that only make the inevitable recession worse when it comes. Recessions are a natural part of the economic cycle

24. At 12:52pm on 23 Jan 2009, NotMeHonest wrote:

"Ah, so the first 15 or some people to reply saw this coming, and knew all along - but have only now decided to tell us. That's good.

I'm personally looking forward to reading more of this blog."

https://bit.ly/AOJk

I think you'll find I've been on about this for a few years and was ignored.

housepricecrash has been highlighting this for even longer.

We are not now just sharing the information, you'll find the information was ignored by the media to keep the myth of house price inflation going.

The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years.

Does anyone serious believe this was going to happen?

The banks wanted to keep house price inflation going as volume lending on ever increasing house prices was extremely profitable.

What was going to happen was inevitable debt had reached unsustainable levels and interest rate rises where going to trigger a huge default.

But yes your quite right we all kept quiet about until it all went pearshaped.

Perhaps some basic research before opening your mouth could be in order?

Where do these so called CEO's and forecasters live and where have they had and got their heads?
To a simple fella like me this situation was a forgone conclusion as far back as the 1990's ... The main signal being the manic level of private debt plus the emergence of China as a major pull on finite resources and demands. Plus the developing economies as India. In the 1970's it was obvious with the shift of work / industry to developing economies.

There has been a shift to the East since as far back as the 1950's. I pulled out of the UK years ago and have happily used my no brainer views to live and earn by seeing things as they really are. How these professional people did not see it probably means they were / are payed stupidly high wages and could afford to ignore reality and basic survival needs of us ordinary folk.

Mrs Brown took the pound out of politics and was a fantastic move which was way overdue. But the rest of his performance really makes him Mr Black news and Red balances. Why the guy sold all our gold (now nearly 6 times more in value) when all the indicators said hold don't sell is covered in Scot's mist.

The only saving grace the UK is has is its lousy weather. Fresh water is becoming more and more scarce ... Living in climates as the UK is very sensible .. so dont let it be sold off without a fight for survival. Me .. I still prefer hot n sunny ... Good luck to all of us ... it ain't over by a long way.

it is absolutely ridiculous to suggest no one could see it coming. I sold my house Jan 2006 and left the country based on my reading of many in depth articles from eminent economists and my own gut feelings. You only had to be reading comments on main stream housepricepricecrash.co.uk from 2006 and in particular the gold thread from march 2007 as a useful reminder to the gravity of the situation. Treat yourself to an orgy of information with the post dated Aug 22 2007, 06:53 PM -
"credit derivative meltdown in Progress" on the same link from people such as cgnao which has lots and lots of information on the coming magnitude of the crisis. Watch the moneymakers series of videos on youtube. Saying no one saw this coming on a massive scale is probably the biggest insult to the British Intelligence I have ever heard..... or maybe not. Protect yourselves...now.

That "and certainly voters" comment is both insulting and patronising.

As seen in posts above there are many voters who have complained for years that the housing and debt bubble would lead to a depression. What is true is that our voices were not heard in the din of self congratulation, and with the media promoting things like 'property porn' television.

Is this really the best the BBC can offer in analytic journalism?

Both sides of the issue are correct in that all the experts ALWAYS have skin in the game and so always tend to move together EXACTLY so the can then say 'nobody saw this coming'...... non experts by definition don't get referred to...

The other aspect... not exactly the same..is the estate agent comment paradox in which estate agents can never say it is bad ---- it has to be good...or bad but with the explicit rider that "this makes it a great time to buy"; but surely everyone knows this anyway?

But at the same time non-experts saying "I saw this coming in 2002, 2004, 2005, 2007 or 1794 isn't much good UNLESS there is a time frame...selling your house in 1999 'because the house crash was coming' isn't a winning strategy even now, after the meltdown, and won't be unless the meltdown doesn't just continue but deepens....

THe issue is that if the experts all stick together, then nobody gets sued/singled out/ suffers...but if one or two ever break ranks then the chances become quite good that they ALL will suffer....... obvious, blindingly , completely...rearrange to suit.

Enron should have been a wake up call to all the " experts".
Accounts signed off which were LIES.
Banks should have had a wee panic attack then, so should all governments.
I have been warning the young for some time that it was all going to go belly up in the housing market and prices would tumble , therefore do not over extend yourselves, sadly mine did overextend themselves and I wait in sweaty panic as the recession/depression may rob them of the means to pay the mortgage.
Don't you just all love " EXPERTS"?
Crisis ,what crisis?
Just a downturn!
Mr Darling told the truth once, when he said that the public were pi$$ed off and there were really bad times coming economically.August last year ,if my memory serves.
Where did truth go eh??

"The astonishing thing is - nobody did"

Erm...

In 2005/2006 I was predicting a massive debt bubble burst to my work collegues. They laughed and laughed.

In 2006 I predicted a house price crash of massive proportions to my family. They laughed and laughed.

Yes, please report the news, yes please tell us what is happening... but don't try and tell me no one saw this coming.

BTW... We should have been in an "official" recession three months ago. I would love to see how much tinkering was done to get that GDP growth value half a year ago to exactly 0%.

Stephanie !

History is clear. The Bank of England pushed by the government encouraged a reflation of the economy based on rising personal and corporate debt starting in 2003/4. This policy is fully documented and was started as a temporary boost. Knowing this the BOE then watched as a weak and indebted economy was superheated by importing ever increasing levels of debt. It was clear by 2006 that a defacto ponzi scheme was running with high risk debt being passed off as AAA. Gordon the BOE and you are only right in that no one knew the exact date of the impending collapse. Many academics and impartial observers recognised a collapse as certain from late 2006.

Mervyn King has a lot to answer for in his failure to stop Brown from driving the economy over the edge.

Try a simple excercise take the GDP figures for the period 2003 onwards and remove the annual increase in personal and household debt.
The Brown Boom is merely debt fueled dream.

If you want a real horror just add in the increase in state pension debt, the increase in PFI liability and now the predicted hike in government debt.

Brown has let debt grow ten times faster than GDP.

Plenty of people predicted the recession, anyone with a grain of sense could see that the house price bubble, east/west trade imbalance and pension promises in the face of demographics and rising life expectancy were unsustainable. The only question was when it would fall apart and rebalance.

'City Economists' are apparently not stupid so they will have seen the signs too. They just kept their mouths shut and focussed on the positive message because it would have been career limiting to do anything else.

Any sufficiently large organisation creates this kind of behaviour when the truth is less important than the party line. The housing market predictions of the council of mortgage lenders and Nationwide which were regularly reported by the media were particularly blatant.

Perhaps the media should give less credence to the views of economists from institutions with an obvious agenda.

Is there an issue of responsible journalism here, not just poor forecasting. Surely good business journalists should have known about the extraordinary practices that were going on and asked questions?

"But the simple fact is that even twelve months ago, nearly everyone paid to get these things right had it very wrong. Shocking, maybe. But true."


Ok .. so the next question.

Why are we still paying these same people (who you quite rightly infer don't have a clue!) and let them attempt to haul us out of the situation that they allowed to happen?

Why shouldn't we look to the various experts and indeed schools who predicted this mess to help us get out of it?

And why isn't the BBC taking these people seriously?

I'm talking Austrian School, Mises Institute, Peter Schiff, Ron Paul, heck even the new Biophysical school of economics is far superior to the flawed Keynesian claptrap that is *still* being drummed out as a solution.

So what purpose does macroeconomics serve if it has no predictive certainty? Little? Some? Whatever, but I think that instead economists should focus on the fundamentals of understanding economic processes through the principal tenets of the discipline - I suppose these being self-interest (how people make choices, the logic of choice, what motivates them etc) and then use these principles to analyse and criticise what the see around them; are they logical, what are the unintended consequences, who benefits, who doesn't etc or something like this. Certainly marcoeconomics with its lack of rigour or predictive power is as valuable as a share in RBOS.

Stephanie,

Was considering your comment again about no-one saw this coming. May I suggest that some old fasioned investigative journalism is required back in the BBC.

All too often news is just regurgitated press releases or copy that is lifted from AP or Router's reports.

There's no attempt to get under the story and I may suggest that is why in the journo circles that you frequent you didn't see this coming.

If you scratched the surface, did some analisys, maybe ask the hard questions, you maybe would have seen this coming?

#34 Thanx for the reply.

All I can say is that when I read her Wickipedia entry back in the good old days (i.e. before the first bank bail out) it made no reference to her maternity leave.

All is clear but then it begs the question if Mr Pym wasn't a Special Correspendent before why is he one now? The other question of course is who is the better Economics Editor? Perhaps that's the subject for another day!!!

Welcome back - glad to know Evan's legacy is in such good hands! Can any business econometrician explain to me a recent phenomenon re Euro v. £? Namely, since the start of the New Year sentiment in the market is PREDOMINANTLY anti £ when the UK/ European markets are 'open' but when Asia and N. America are 'open' and the European traders are away from their screens Hey presto £ recovers! My Geordie mate down the pub reckons the pattern has been reinforced by unpatriotic educated Essex chavs sorry currency dealers, selling £s in the morning but buying them back after hours ! Surely not?

I think it was simply a lack of moral fibre and leadership that lead to ministers and financial regulators not stating and acting upon what was obvious to anyone with an ounce of common sense.

When society demands two wages in excess of £25K per year such that average house is affordable then there's obviously a problem.

many people predicted it,and many economists did, but they were ignored by the media because they were being told something they didn't like.
so, blame yourself and other journalists who didn't have the intelligence to see the obvious flaws in these so called expert economists ideas.

The BBC/Labour line that nobody spotted this coming is just plain wrong.

Public spending/debt was growing exponentially, tax revenues were lagging behind every year, property prices were reaching unsustainable levels as were private debt levels.

BBC/Labour probably only asked people who they knew would give them the right answer.

BBC/Labour should have talked to people who understood basic economics and who had no political ties; this has been on the cards for years, and was going to happen even if the credit crunch never happened.

The fact that the BBC didn't report on the increasingly worse state of the public finances over the last few years is proof of how bias they are towards labour; it's all been something that we've been inexorably running towards with labour's mad policies.

It was all going to happen, it was inevitable with labour's policies. It has always been simply a question of time when it comes to when the country does go bankrupt.

"But at the same time non-experts saying "I saw this coming in 2002, 2004, 2005, 2007 or 1794 isn't much good UNLESS there is a time frame...selling your house in 1999 'because the house crash was coming' isn't a winning strategy even now, after the meltdown, and won't be unless the meltdown doesn't just continue but deepens...."

It will deepen but I think anyone would find it quite difficult to sell at the moment.

This isn't about personal gain - selling at the top and buying at the bottom - i.e. speculation. This is about the obvious indicators of an overheating economy that a large proportion of the population saw coming a mile off. Personally, I would like to live in a Country where the 'experts', economists, politicians and bankers act in the long-term interest of sustainable economic growth. This is precisely what economists are paid to do. The fact that they are now claiming that no-one saw it coming is beyond a joke. To dismiss anyone that disagrees with the mainstream econosheep view as a doomsayer is absolutely outrageous and symptomatic of a wider malaise in our society, where the only virtues required of experts are to keep their heads below the battlements, deflect blame to someone else and dismiss those with an alternative view.

symptomatic of a wider malaise in our society, where the only virtues required of experts are to keep their heads below the battlements, deflect blame to someone else and dismiss those with an alternative view.

You are Gordon Brown and I claim my five pound tax credit.

What this boils down to is a systemic failure of economists welded to the present financial paradigm. Not one of them has managed to explain away how debt, on top of debt can be sustained with finite growth from limited resources.
The entire economic model is based on a parallel universe where the planet can sustain any amount of growth to pay the massive interest and debts that are created out of thin air, representing impossible future earnings that will never be earnt.
Now we can see that our ponzi house of cards is collapsing, with the very real possibility of national default. We are entering a depression, where the startling truth - that you do have to pay back debt or the credit runs out, is going to hit hard.

Here are some people who DID predict it :
Roubini
Ann Pettifor in 'The first world debt crisis'
Michael Rowbothem in 'The grip of death'
Most of the posters on houseprice crash.co.uk
Austrian Economists.

So far, the armchair economists are winning on all fronts. Professional economists you now look like the courtiers who were viewing the emperors new clothes. He was naked after all.

It's happened before - of course. I remember seeing a TV report on a parliamentary select committee where former Labour MP Greville Janner (wallowing in the chance to promote himself as usual) was listing very obvious economic indicators that his victim, ex Chancellor Nigel Lawson, had apparently not been aware of. But wasn't Lawson a journalist at one time ;0)

Of course they saw it coming, which is the reason everybody rallied to get the most out of it before it burst, and now we are left with the pieces.

The ultimate point in my opinion is to revisit all the fundamentals of economics and revamp the whole system as this economic model of constant growth is impossible to maintain. All the basics are wrong, period.

And we should be very happy if we end up on a recession, this looks to me rather like a depression in the making.

I think dare I say that BBC journalists like our politicians do not live in the real world. Ordinary people were telling me that the levels of spending and debt meant matters had to come to a head several years ago. My own business started to see a downturn in September 2007.

The terrible thing is that we the mums and dads and tax payers everywhere, will pay an awful price for the sheer incomptetence of our policiticians and so called regulators.

I do wonder when I see politicians being interviewed on the BBc whether the journalists are too close to the Westminister village and just scared to ask penetrating questions. Here is one to ask:

Why not let the banks go bust? Save the country a fortune in debt liabilities as a result.

A short word of praise to the journalist for responding to the bloggers (see update 1403 under initial piece).

This qualifies as good journalism, listening as well as informing.

Please keep it up - you are putting Mr Peston to shame.

Stephanie, thank you so much for the update at 1403. It's nice to see a bit more interactivity in these blogs than has sadly become the norm among many of your colleagues.

Just one question relating to that: I'm intrigued by the phrase "the top 36 major private and public sector forecasters".

Who decides that they are "the top 36"? Are they still in the top 36, or have they now slipped down the rankings?

re Update 1403

well in that case you asked the wrong people; maybe you should have listened to someone who knew what they were talking about who had a bit of common sense.

Everyone who I know saw this coming from years back. You don't have to have studied economics to understand basic maths, you just need to have a bit of common sense in how to apply it, and you also need to avoid having a massively warped bias and to avoid a blind sheep mentality.

Use some common sense, and have a mind of your own; you'll understand a lot more that way.

So Stephanie, successful economists are sheep!

Well I'll save myself a lot of time and trouble and go and ask the local flock what they think.

Baah.. I always suspected economists were a waste of space.

"It's all very well saying that the good times won't last forever; it's quite another to say that they will end next year. "

You seem to miss the point Stephanie. Firstly the good times weren't good times - they were times when individuals/organisations and government were running up unsustainable debt. Secondly, you don't need to predict when the bubble will burst, all you have to do to observe that there is a bubble, say so, and take corrective action, e.g. raise interest rates when house prices start rocketing, or whatever other tool/policy is at the government's/MPC's disposal.

"Today, it all seems so obvious."
Wrong again Stephanie. You are again trying to belittle those that saw this coming by saying that it's obvious now. No, it was obvious years ago to many, many people who have not had the benefit of your education.

"How could we not have a full-blown recession after so many years of excess? You could ask that question of every financial regulator and every economic policy maker - not to mention every local estate agent. "

Absolutely. It is beyond comprehension that there are are so many stupid people out there that do not understand the basics of budgeting, because that's all this is - balances between revenue/expenditure, earnings/debt, not putting money aside in the good times for the inevitable bad times. What I find particularly deplorable is the fact the journalists have not done their job in taking to task those with such obvious vested interests.

"But the simple fact is that even twelve months ago, nearly everyone paid to get these things right had it very wrong. Shocking, maybe. But true."

We do live in an true idiotocracy where those that can make the stupidest predictions can hold on to their jobs. It's not shocking, just depressing.

Interestingly ungenerous comments, as usual - many of them criticising Stephanie Flanders for things she didn't actually say.

I can claim, like many of today's contributors, to have seen some of what was coming. I put my house on the market in the spring of 2007, noticed how suddenly the market seemed to be cooling, thought about what I'd seen in the American press (on holiday) about sub-prime, and was grateful to make a sale at a reasonable but reduced price in June: I decided to stay in rented accomodation for the time being while I sat out the coming crash. I also noticed a kind of 'speed wobble' in the FTSE graph, thought about national and personal indebtedness, and decided to get rid of my shares. So far - so good - and so smug.

I wasn't alone, either. I remember Matthew Parris writing an article two or three years ago, saying, basically, that an economy based on estate agencies and overpriced coffee didn't feel sustainable. So it would be reasonable to join everyone else in wondering why professional economists were so slow to predict the coming crash.

Unfortuntately, my next decision was to put my money into Iceland... not quite so clever.

And were my other predictions and decisions really as impressive as they seem? I remember feeling more or less the same way about five or six years ago - and I suppose it cost me a lot in missed opportunities in property and so on. In general, that's a memory I tend to gloss over, which distorts my view that these patterns are easy to spot. Am I the only one? I seem to remember enjoying the annual attacks on Brown's over-optimistic forecasts; and annually, for several years, he was proved (temporarily) right. We don't hear much about that now from the journalists concerned. It might be fair to remember that Brown failed to see this slump coming partly because he had made the mistake of learning from those recent experiences.

Perhaps, thinking of the city, we should also remember that traders and brokers need to trade: if they're not buying, they're not in the market, and they won't make profits or get employed. Businesses hire consultants to help them to spot opportunities; they're not usually so keen on being told about risks.

As a recent study suggested, in general, pessimists are right - but optimists earn more. That's partly because they will always renew their efforts, but largely just because people like them: we all know what would have happened to a government which announced, amidst general optimism, that we were heading for disaster. It's not so long ago that David 'Broken Britain' Cameron was making his reputation by promoting himself as the voice of the new, patriotic optimism. (And Obama didn't get elected by looking miserable, either).

So, while a slump may have been forseeable, it would have been a disaster for a lot of people to forsee it.

In fact, there's often quite a lot to say for a bit of optimistic delusion. Even now, when it would be daft to take on debt but we need to boost spending to refloat the economy, we have to hope that there's a large population of cheerful idiots out there, ready to spend their borrowed money on unnecessary goods: our best hope is that they go on getting it wrong.

Why, in this financial era do we seem to have this combination of extreme market volatility compressed into such a short timeframe?

Obviously electronic systems speed communications up to an unprecedented speed but are there also more humanistic characteristics at work?

Whatever the reasons, here in the original land-of-nod, 'policymakers' (you know who you are) seem to be way, way, behind the curve instead of out in front, attempting to put some road-blocks in the way.

Bringing banking back down to earth and being boring and stable cannot happen soon enough.

PS. I happened to be walking past Lehmans in NYC last autumn when they started coming out carrying their boxes and I now realise that I was witnessing a real piece of history, whilst our Steph, of course, had her feet up on maternity leave (joke!). But I bet she was gnashing her teeth at missing all the fiscal action. Exciting enough now for you Steph?

https://bit.ly/iE6Y

Has anyone at the BBC seen this graph????

Have any of these expert economists seen the graph?

Can you spot anything slightly worrying about it?

The US has already far exceed the debt bubble prior to the 1929 crash, if all the variables are the same this recession is going to be bigger, longer and deeper than the Great Depression. The only difference is this time the whole world suffers.

Why isn't anyone at the BBC doing some basic research?

Many thanks for the update.

The main point still being missed however is that we a rehappy to listen to and accept the opinions of the the herd mentality/vested interest spivs that get paid to provide it.

Assessing all available information and coming to a rational conclusionn is vastly different to deciding what you want the answer to be (to meet targets ususally) and then looking for evidence that will support your claim.

This is excactly what happened in banks.

Off topic but seeing as half of Newcastle, including several of my good friends are receiving their bonus from the Rock today, I thought I would let you know that until it all went pop, Northern Rock had no way of actulally calculating potential looses/liabilities.

A freind of mine moved to the treasury in the restrucutring and there were 2, yes opnly 2 people there responsible for this type of return. She was absolutley flabbergasted.

Apparently, they were long timers as well who sound like they would probabaly have been out of their depth running my football teams kitty. They were pretty much making it up as they went along and using the old fiunger in the air technique for calculating possible defaults.

I assure you this is straight from the horses mouth...

Hi Stephanie, As the problem is the lack of credit, not its price, I think we are wrong to reduce interest rates. why do economists not agree to this? But maybe they do, apparently if we went to the IMF for a loan, we would have to increase interest rates and cut public expenditure, and is the IMF not run by economists? Increased interest rates would boost the pound, attract money from overseas, and provide funds to lend to businesses and home buyers. surely this is what we should be doing?

I agree with No.6 ACharmlessMan, there WERE many economists who predicted the collapse. Nobody WANTED to listen and thought the bubble (in houses especially) would go on forever.

May I suggest you visit the Peak Oil forums, especially LifeAfterTheOilCrash.net and read some of Matt Savinar and his associates' work. You'll get a real insight into what's going on (which is the biggest "DEPRESSION" to ever hit the world --- and we're not coming out of it either!).

May I suggest the British "Sheeple" finally waken up and not listen to the laggard main-stream media and finally realise what's going on.

I'm not an economist, I'm not a journalist, I'm just an average Joe trying to scrape a living as retirement looms - BUT - I can remember a fair way back, and to anyone who would listen to my boring diatribes, like many others, I didn't so much as predict, as offer the certain knowledge that it would all end in tears that day in 1997 when Princess Tony was hailed as the saviour of the world, the universe and everything. There are in fact three certainties rather than two in life, death, taxes, and the fact that avery single Labour administration in this country always brings the economy to it's knees. The only difference this time is that it's taken longer to get there, and it's going to be a whole lot worse, before it gets any better. This was always an economic certitude, and you didn't need to be an economist to see it coming. God help Cameron when he has to sort the mess out.

Lankidden

Many of those who claim to have predicted the recession predicted the wrong kind of recession - i.e. a recession like previous recessions where inflationary pressures led to high interest rates which lead to unemployment and stagnation. What we have is a recession caused by the collapse of credit and much of the world is suffering including countires like Germany who thought that their 'prudent' economic policies would protect them.

That's why the so-called solutions of those supposedly predicted the recession are wrong, because they predicted the wrong type of recession. What is needed is what is being done i.e. bailing out the banks, loose monetary policy and fiscal stimulus, not loony 'free market' solutions of letting the banks fail, increasing interest rates and cutting public spending. It will take time to work, and interest rates will eventually have to rise as present rates aren't sustainable in the long term.

Stephanie did make a very important point about the herd-like behaviour of economists and if I was a policy maker, either in government or in business I would not rely on economists for advice. It is particuarly worrying that the worst predictions came from the IMF which is supposed to bail countries out!

Dear Stephanie, This phenomenon is well document by the great post-war economist J.K.Galbraith.He criticised economic theoryfor ignoring and obscuring the economic power of large corporations and politicians who aligned themselves with the objectives of the large corporation instead of the public interest. He censured his fellow economists as ‘idiot savants’ who perform sophisticated mathematical analysis but make no attempt to understand the real world. He made it his life long quest to expose business's capacity forself-deception; “When you see reference to a new paradigm you should always,under all circumstances, take cover. Because ever since the great tulipmania in1637, speculation has always been covered by a new paradigm. There was never aparadigm so new and so wonderful as the one that covered John Law and the SouthSea Bubble — until the day of disaster”. As he said, when “faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof”.

What we have is a recession caused by the collapse of credit and much of the world is suffering including countires like Germany who thought that their 'prudent' economic policies would protect them

SO you didn't see a recession coming? You thought that the government borrowing 3% of GDP every year and consumers borrowing 6% of GDP every year to give a grand total improvement of 2.5% in GDP every year was a sustainable economic policy.

New Labour's new mantra. It's the 'wrong' type of recession. British Rail are going to want their excuse back when you're finished with it. It's the 'wrong' type of leaves. It's the 'wrong' type of snow. It's the 'wrong' recession.

Whatever helps y'all sleep at night.

Stephanie's update is right and some of the comments just confirm this: many people have been predicting imminent recession ever since the boom started. For over 10 years they were wrong and events have finally fallen into line with what they were saying. It doesn't mean they were right in the first place. housepricecrash.co.uk is a good example.

Even a stopped clock is right once a day, and even a blind chicken finds a kernel now and then.

Did *anyone* predict that a recession of approximately this kind would strike, in 2008 give or take a year? Not that I heard of.

I think Stephanie's update at 1403 neatly knocks into a cocked hat the self-styled sages in the comments who claim to have "predicted" this recession.

I doubt they did any such thing. They're probably the same people who bore everyone to death with their incessant whining about the state of the country. Even a broken clock is right twice a day.

The depth of this recession is jaw-dropping. A 1.5pc decline in a single quarter makes for sorry reading for a country which not so long ago had strutted around the European stage claiming to be the example that all other EU nations should follow economically. How laughable that now looks.

When Mr Brown loses the next General election to the equally economically clueless Conservative Party he should replay those tapes of himself pointing his finger in the faces of other nations because they chose not to sell their financial souls to unaccountable and corrupt City spivs.

And he should reflect on the monumental wasted opportunity to turn this country into a fairer, more educated, more long-term focussed nation that will be Labour's legacy.

I'm shocked that no-one saw the light back then and I'm still shocked no-one will tell the truth about the depth and length of the forthcoming depression.

Last March I blogged:

"The Budget

Well, what a rubbish budget todays was. Too many sticks and hardly any carrots. I guess it's no suprise as the government has borrowed way too much, splashing cash around in order to win last years election that never was. Of course the cost of borrowing went up and now they're in the poo. No room to maneouvre, no more sweeteners.

Instead we go back to a typical 70s budget, so cars, foreigners, alcohol and fags get clobbered. I suppose it's just one more similarity to the tail end of the 70s that I can see. All the rest is just tinkering around the sides, or Gordon Browns legacy as policies announced last year come into effect.

Anyone else predicting other 70s economic effects like inflation starting to soar, the economy to shrink, public sector unrest and massive job losses?

In fact there was nothing I could see in todays budget that adresses the problems that we'll face over the next 1-3 years, absolutely nothing. The modern equivalent of fiddling while Rome burns.

I despair, I really do."

"While economic textbooks claim that people and corporations are competing for markets and resources, I claim that in reality they are competing for money - using markets and resources to do so. Greed and fear of scarcity are being continuously created and amplified as a direct result of the kind of money we are using. For example, we can produce more than enough food to feed everybody, and there is definitely not enough work for everybody in the world, but there is clearly not enough money to pay for it all. In fact, the job of central banks is to create and maintain that currency scarcity. Money is created when banks lend it into existence When a bank provides you with a $100,000 mortgage, it creates only the principal, which you spend and which then circulates in the economy. The bank expects you to pay back $200,000 over the next 20 years, but it doesn't create the second $100,000 - the interest. Instead, the bank sends you out into the tough world to battle against everybody else to bring back the second $100,000."- Bernard Lietaer, Former Central Banker

Here's a professional economist who saw it coming.

Fred Harrison.

He even wrote a book in 1999 entitled "Boom Bust: House Prices, Banking and the Depression of 2010"

How does Stephanie explain Mr Harrison's amazing accuracy?

Just to add a "big" name: Warren Buffet predicted the turn with sublime timing. He gave thirty days warning of the start of the credit crunch.

Also, did you notice how in the Summer 07, a couple of months before the credit crunch, the two mega-banks: HSBC and Citigroup both sold and leased-back their headquarters buildings; pocketing billions in the process? They knew what was coming!

Even the Bank of England knew. Read the Wiki entry on Deputy Govenor David Clementi - he told the Treasury Select Committe it would all end in tears.

I shan't add to the (IMHO justified) chorus of criticism of the main thrust of your post, Ms Flanders, but there is a wider point I should like to make.

You seem to accept the City/govt/meeja groupthink as natural, normal and acceptable. Natural and normal yes - but NEVER acceptable. As this fiasco proves, it can be extremely dangerous. One looks to apparently serious commentators to seek out such phenomena and expose them and their potential consequences, not to shrug and look the other way. Even now, the BBC is in great danger of being seen as cosying-up to the government's incredibly risky line, yet one of your chief functions is that of the informed critics. Look like propagandists, and you lose all credibility. Analyse and criticise and you'll draw Mandelson's fire, but you'll also continue to draw the licence fee.

It's not as if all this is novel. Having spent too much of my life trying to understand aspects of business, I recall ages ago reading something by Drucker, concerning his time as henchman to Alfred P Sloan who was in the 1930s pulling together disparate auto firms into General Motors. Drucker accorded great significance to Sloan's refusal to accept Board unanimity on some major project: Sloan refused to believe that there was no downside and deferred the decision until they had thought up some negatives.

In other words, >70 years ago, a titan of industry recognised groupthink and its dangers. This generation, his heirs, have failed to know their history and, like the man said, are therefore condemned to re-live it.

Perhaps if the dumbed-down ejukayshun system would return to respecting anything written before 1980 its victims might dimly recognise that hubris leads to nemesis, and see the need for caution. But not under this government.

I saw it coming around 2004
and started paying my mortgage off with every spare penny I had.
I now owe 2500 pounds.
The BBC as most journalists except for Jeff Randall are just not up to the job.
They all have been bigging up Emperor Brown’s new cloth but many as you can see on here have always seen him as economically naked.
The problem for us is Brown is still in power and the BBC is now seen as a joke.
The BBC needs root and branch editorial reform.
I think we need to see a structural diagram as to the responsibilities for editorial decision making for news and current affairs.
How many of the BBC editors have family or other connections to the Labour party?
The BBC treats the British public as mushrooms and is now just a government mouth piece.
So no you and all of the Experts could not see this coming where as many people with independent minds could but we had no voice due to you slavish worshipping at the altar of Brown.

many people have been predicting imminent recession ever since the boom started. For over 10 years they were wrong and events have finally fallen into line with what they were saying.

There is some truth in what you say. The problem was that right up until it bust the same economists who failed to time the bust also failed to spot that they'd been in a bubble.

At least the folk who were warning of the dangers could see we were in a bubble. If their warning had been heeded we might have deflated the bubble before it got to the ludicrous level it did. We might have averted runs on banks, record unemployment, massive debt. Stuff like that.

And if the government hadn't employed every means possible to keep the bubble inflated (flooding the UK with borrowed money, rigging interest rates, rigging the BoE's remit, introducing shared equity schemes, key-worker schemes etc etc) then the bubble would have run out of steam in 2005. Which was what was happening until Gordon had Mervyn put the fix in. and cut interest rates to re-inflate the bubble.

Even now all the political talk is of returning lending to 2007 levels. Yeah, get that borrowed money out there!

This is why we are stuffed. Politically Brown cannot admit the disastrous policies that got us here so he can't fix the problem. Further, if anybody else tries to highlight them he goes for the last refuge of the scoundrel (patriotism) and claims that they're talking the country down. Another reason we are uniquely stuffed by this most mendacious of chancellors/PMs in history.

So nobody may criticise the lunacy that brought us to this point and nobody must criticize the lunatic suggestions for 'fixing' this Brown-made problem. And any suggestions he does take on board from the 'do-nothing' party he fails to acknowledge. The man is dangerous. He's wrecked the UK economy and he's still not finished!

Dear Stephanie,

I don't think it's right for people to comment on you personally failing to predict the recession, because after all you are only supposed to report the news, not make them.

A few comments beckon though. First, this illustrates the need for all economy journalists to take more distance with the world they are reporting on. In my experience those pundits are the ones most closely "embedded" with the world they are reporting on, either having been or even being economists forecasters or financiers themselves. Certainly many of them are either part of, or attached to, the famous top 1%, and so have vested interests in publicizing the so-called mainstream ultraliberal view.

From what I read about your own personal background I would say this specifically applies to you, I do not mean to attack you personally but to illustrate my point. I guess you will agree that this is somehow different as to, say, scientific journalists having been scientists before...

Indeed, for a BBC who prides itself on balance, there was a remarkable lack of it in the reporting of this then. It seems there were certainly more people predicting recession compared to the others than, for instance, there are serious and credible dissenters in the case of global warming, yet somehow these nuts always make it on the studio of Newsnight. More media-friendly I guess.

The other comment which really you cannot avoid is that, whilst it is expected that forecast is an imprecise science, to not even predict a downturn, let alone predict its occurence shows remarkable blindness on the part of mainstream economy. I wish you would push the discussion further in your post (or another one). Either economy as a science has very little value (compared to say physics for weather forecasting or even human sciences for demographics or sociological studies), or what is practiced within all the "official" organisations which you mention is faulty or partisan economy. In both cases, there is a major news item!

Thanks,

Arnaud.

So let me see.

The economists who never saw "it" coming are now the economists who pronounce upon the "only way" is through a rigid and narrow interpretation of "Lex Keynesia", among whom our esteemed Prime Minister seeks to be numbered.

They are the same ones who were in denial for months (and many still are) about the impending crisis. This wasn't an overnight happening. Paribas was quite a long time ago.

So what are the mavericks, who predicted this mess, saying now?

I don't know whether you, Stephanie, or other BBC bloggers read the replies and comments on these blogs. A lot of what is posted is drivel (mine included, perhaps), but there's also a lot of "out of the box" thinking. You'll also find there are quite a few here, who actually know what they're talking about.