Sunday, May 16, 2010

Nouriel Roubini's Missing Speech

In Michiko Kakutani's NYT book review of Nouriel Roubini's Crisis Economics, and in the book's foreward, a September 7, 2006 IMF speech is highlighted as containing specific warnings about US housing, and how this would lead to a financial contagion. This would seem to be highly prophetic. So I went to his website looking for this speech. It linked to something from 2009. To get to this point I had to register at his site, and they sent me a an email message, asking what I wanted to know (they seem to sell different levels of access at the Roubini Global Economics--a sort of CNBC with only negative spin). I asked to see the 2006 speech mentioned in the NYT book review, and they pointed me towards a different speech in 2006 that was rather vague. So I asked again for the rather prominent September 7 2006 speech, and they did not answer.

I bet the speech mentions not merely the housing problems, but a bunch of things that could go wrong that did not, which would suggest indiscriminate crisis prediction that is not so impressive. I noted that in his book, he highlights that he predicted exactly two Investment Banks would fail, and as Bear Stearn and Lehman failed, this was spot on. Such specificity is not a sign of accuracy, but tendentious hindsight. To predict '2', and then to count '2', in the maelstrom that occurred, is silly. Why not count Merrill Lynch, as such a failure? It's like trying to say Nostradamus predicted 9/11, or Robert Prector predicted last Thursday's intraday low of 1,065.79, because being that specific shows you can read anything into predictions if you look hard enough.

Nouriel Roubini is a permabear, having continually predicted crises from a variety of influences all the time. He's sensitive to this criticism, and so states he is not a permabear, in that if we make the right investments we can avoid crisis, as if his allowing the possibility of a non-collapse proves he sees both sides. Yet as we never do make the right investments that hypothetical is not very relevant. Further, all his bearish statements are hedged with 'may' in a way that they are nonfalsifiable (eg, there may be a calamity this year--alway true!).

I read his book Crisis Economics, and there's a lot of good stuff in there, but also a lot of strained assertions. For example, he notes that the invigorated SEC in the 1930's was responsible for the next three decades of financial stability in the US. Was that the true cause? Wasn't there a lot going on as well? How could one be confident the SEC was the primary driver here, reading the SEC's 1934 investment act (a lot of signing papers, kinda like our voluminous mortgage paperwork that proved irrelevant)?

It's an insanely naive post hoc ergo propter hoc type of proof, one that he would never find compelling for any of his adversaries. His recitation of the run-up to the housing crisis is, at this point, not interesting (everyone--government, investors, homeowners, banks--levered too much into housing, I'm bored reading about that fact).

Anyway, if anyone has a link to his singular speech, the internet could use it.

5 comments:

Anonymous said...

The speech is referenced at http://www.imf.org/external/pubs/ft/survey/2006/101606.pdf but I haven't found an actual transcript so far.

randian said...

I would argue that, to the contrary, the SEC's onerous restrictions on who may invest in private equity and how private equity may be marketed serves only to retard economic growth and hinder stability.

James said...

It looks like ECRI (where Roubini and other sites linked for the transcript) had all of their 2004-2006 press releases disappear.

James said...

Yes, everything from Jan 04 to Feb 07 has disappeared at ECRI.
http://www.businesscycle.com/news/Press/page:12/sort:pubdate/direction:asc

And 2006 is to new for the internet archive. I am stumped.

Drewfus said...

Interesting that economists never site culture as a contributing factor to economic stability.

Post-WW2/Depression, surely the prudent attitude of the population towards things like risk and debt played an important part in the post-war prosperity.

Why is it we never give the public any credit? It's always those in positions of power and influence that are self-congratulating themselves on any positive outcomes.