Friday, May 3

Olivier Blanchard’s Five Lessons for Economists From the Financial Crisis

I take no pleasure in being prescient but one of the reasons we are ahead is because I lived thorough 3 recessions now. Son what goes up must come down. Details matter. Value investing is always going to win out. There are no silver bullets in investing returns. Find undervalued companies and invest. Look for good growth stories and good management. You read the intelligent investor. 

Still as an economics student this article is worth reading son. The plumbing matters. The connections, the pipe width, the material, the angles all matter in the financial and economic world. And you can never be 100% right. 

What people don't understand is that they don't understand what the future of the economy and financial system will be. So when people don't understand what's happening they react in bad ways. Go pray to god. Or bite people's heads off like the reaction against bankers. Or throw more laws. Like more laws against rape are supposed to lead to less rape. The thinking goes like this. 

We have a problem. So something must be done. This is something. Thus this must be done. 

Weird ass thinking son. 



Olivier Blanchard’s Five Lessons for Economists From the Financial Crisis - Real Time Economics - WSJ

What did the worst financial crisis and deepest recession in 75 years teach academic economists and policymakers on whose watch it happened? At a recent London School of Economics forum, convened to honor Bank of England Governor Mervyn King,Olivier Blanchard offered some answers.

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Olivier Blanchard

Mr. Blanchard, 64 years old, is well positioned to offer such reconsideration. An internationally prominent macroeconomist, he spent 25 years on the MIT faculty before becoming chief economist at the International Monetary Fund in September 2008, just before the collapse of Lehman Brothers.

Here are Mr. Blanchard¹s five lessons in his own words, lightly edited by The Wall Street Journal’s David Wessel:

#1: Humility is in order.

The Great Moderation [the economically tranquil period from 1987 to 2007] convinced too many of us that the large-economy crisis -­ a financial crisis, a banking crisis ­- was a thing of the past. It wasn’t going to happen again, except maybe in emerging markets. History was marching on.

My generation, which was born after World War II, lived with the notion that the world was getting to be a better and better place. We knew how to do things better, not only in economics but in other fields as well. What we have learned is that¹s not true. History repeats itself. We should have known.

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