Punditry

CNN ran an article last week discussing the increase in popularity of financial and economic blogs, due to the economic crisis. The article noted that several renowned economists, such as Roubini and Krugman, are also bloggers, lending credibility to the practice. I'm not certain that I agree with this conclusion, but let me take this opportunity to point out my complete lack of economic and financial credibility. I don't consider this an economic, financial, or political blog, but merely the blog of someone who is very interested in the financial and political events that are unfolding. Regardless, the cliche that you get what you pay for is always applicable.

The author cited Big Picture author, Barry Ritholtz:

"Bloggers, or independent voices, are helping to define the debate about what's taking place in the economy and with policymakers in D.C.," he says. "The secret to reading anything is knowing who knows what they're talking about and who not to bother with."

Per the article, President Obama didn't see it that way:

President Barack Obama, who has a staff-written blog on WhiteHouse.gov, has even acknowledged the presence of financial blogs, although he didn't offer a particularly flattering review, as he told the New York Times last month that he didn't find blogs to be reliable, specifically citing the economy as an example.

Obama's response isn't too surprising, considering that his economic policies haven't been well received on the internet. Nevertheless, let's not forget that 99.9999% of economists, pundits, and financial experts missed this meltdown. There are some exceptions (Roubini, Schiff, Todd Harrison and his Minyans), but not enough to vindicate the industry. It has been argued that the entire discipline can't be judged by on a single failing, but I disagree. If the surgeon conducting your kidney transplant installed a carburetor, would another bite of the apple would be necessary? Regardless, this crisis was spawned from a chain of events, spanning a decade, that should have been discernible, particularly from 2005 on, to anyone purporting themselves to be a financial expert. While some of these people have sincerely apologized, a thousand mea culpas doesn't yield a single QED.

I have to admit that my personal animosity towards economists and finance experts has grown exponentially over the last 6 months. As I delve more deeply into the causes and assumptions that lead to the crash, I find it analogous to peeling an onion, except each layer is made of stale excrement. The recurring theme is the confident assertion that a complex process (derivative pricing, MBS risk, etc) could be accurately modeled without accounting for all inputs. Intuitively, we know this is to be false, since weather forecasts aren't useful more than a few days out. Yet, the finance industry used this reasoning to justify huge risks by proclaiming that trees could, indeed, grow to the sky.

Now, after the gravy train has derailed, we are told that there is a pundit meritocracy that must be navigated in order to hear financial truth. To which, I call bullshit: the baby and the bath water are equally offensive. These clowns have profited from leading us down the garden path twice, now. (Remember the New Economy and the viability of profitless companies claptrap they fed us during the tech bubble?) If we were to send Paul Krugman to truck driving school, the impairment to the common good isn't so apparent. Would society be that much worse off by exiling the source of The Theory of Interstellar Trade and his kind to the open road? Perhaps logistically, but I'm willing to take the hit.