Permabears at RGE
One of the bookmarks in my browser is pointing to Roubini's economic blog at http://www.rgemonitor.com/blog/roubini
This popular site is an interesting place for a psychological study. It's a macroeconomic blog by a professor who keeps predicting an economic recession that will supposedly be caused by the eventual collapse of what he thinks is a housing bubble. It is also the last refuge of die-hard permabears who always believe that housing prices are overvalued and are set for a comeback.
I'm wondering what could cause supposedly rational people to ignore all the hard evidence year after year after year and cling to the same discredited belief whose "actualization" is always looming on the horizon like the global advent of communism used to do in the Soviet mythology. Is that some apocalyptic vision or fascination with end-of-the-world theories? Come on, folks, economics is not a religion! Or is it a simple disappointment of the lower-middle-class folks that the American dream is escaping from them? Well, I could certainly understand that motive, hey, I wouldn't refuse the chance to buy a house for $1 for myself. But I wonder if that's a sufficient reason to go against your better judgement and delude yourself that prices are falling when you see with your own eyes that they are rising.
A couple of months ago I posted several messages on their discussion board, pointing out (very politely) that the numbers didn't support the idea of imminent price reductions. Reading the responses, I felt like Mark Twain's hero who ran for the governer and learned new facts about his biography as the result. I found out that I was:
a) a moron
b) a homeowner
c) a desperate house flipper
d) a troll
e) a realtor
f) a part of the NAR $40 mln campaign.
Good guesses. Thanks, fellows, for reminding me who I am. How could I have forgotten? And, oh, by the way, who moved my paycheck from the NAR?
That was in December. Since then, it became clear that:
-Housing is not getting any cheaper
-Construction recession is not leading to an unemployment
-House equity loans are not disappearing
-Consumption is not dropping
-Interest rates are not getting any lower
-Mortgage rates are not getting any higher
-The stock market is not collapsing
-No slowdown happened in Q4
-No recession in Q1 2007
-No recession in Q2 2007
Must be really hard to beat the coin. At least, it's accurate 50% of the time.
What do we do when a spectre of recession that is looming on the horizon fails to materialize? Correct, we move the horizon. The recession is now expected to begin in the second half of the year. The rising prices of new homes are reinvented as falling. The interest rates is a taboo topic. And of course, the original call was correct. It was discounting at retailing stores or some other accidental factor like that that made Robini look foolish, while in fact he was right. If the theory is in disagreement with the experiment, so much the worse for the theory.
The members of the Roubini cult may sit through the expansion phase to eventually see the next recession and say "You see??? Didn't we tell you?" But I suspect they will have to wait for a long, long time.