Economics

The Amazing Zandi

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What new brainstorms are brewing under this receding hairline?

How many times can you be wrong about your subject before they stop treating you like an expert?

If your answer was "An infinite number of times," you'll love ritholz.com's list of picks, prognostications and tall tales from Moody's Mark Zandi.

Zandi defines the lethal center. He has regular access to the House, the Senate, Department of the Treasury, the Federal Reserve Bank, and the destination media. Could the pressure to please those five institutions account for a trail of error that dwarfs similar bad-guess highlight reels detractors have compiled for Paul Krugman and Ben Bernanke?

List builder XXX, an independent banking analyst, describes Zandi as "collegial, considerate, considered and smart. But his optimism is helping Washington avoid addressing the reality of our economic problems and the structural issues that must be addressed before our economy can sustain renewed growth."

Bad guesses are an occupational hazard for any pundit—though Moody's, a person of interest in the real estate bubble, the commercial real estate bubble, and the long delay in downgrading public debt, has an institutional responsibility not to be wrong repeatedly. Zandi's zeros are not terribly shocking: He has been expecting a real estate rally since 2007. He called a foreclosure peak that has since been outpaced by more than 200 percent (and foreclosures are still going up). And as for falsely seeing the end of the troubles, well, Zandi has given us more bottoms than the Eulenspiegel Society.

But the most disturbing quotes are not bad predictions. They're things Zandi seems to believe are just good ideas on principle:

"By paying interest rates on reserves, the Fed is able to provide so much cash to financial institutions that there will be no reason for them not to lend to one another and, by extension, to business and households."

USA Today – Oct. 30, 2008

He said extending unemployment benefits would yield $1.64 of GDP, a temporary increase in food stamps $1.73, aid to state governments $1.36, and increased infrastructure spending $1.59. "The bang for the buck is very high," Zandi said of extended jobless benefits.

CNN – Feb 21, 2009

Yeah, [the Home Affordable Modification Program] will help. It'll help stem the declining in housing values — house prices are going to decline further but this should help put a floor under prices and hopefully bring forward the day when we find a bottom in pricing."

CNN Money – April 2, 2009

That to-the-penny scruple on GDP? That counterintuitive call that banks would begin lending money they're already collecting a safe interest rate on, just because that's what D.C. has decided a reasonable person should do? That complete Hail Mary on HAMP? I agree that Zandi's sharp, and he has a gift for explaining concepts in plain English. But this man has been inside the institution for too long. Zandi wants to be free.

NEXT: Virginia Reasonoids: Hear Senior Editor Radley Balko Speak at Hampden-Sydney College and the University of Virginia Next Week

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  1. Krugnuts, Helicopter Ben, and Zanex Zandi were sitting at a bar…

    1. i followed that krugman link. it shows him supporting housing and interest rate cuts as late as…. 2001. hardly damning.

      1. Comment leech! Get it off me, get it off!

        Hardly damning? You mean damning hardly!

  2. Anybody ever heard of Rendigs Fels? He was my econ professor at Vanderbilt. Wrote a textbook which was nothing but a knock-off of Samuelson’s then forced us to buy it new. Mathematically proved the “multiplier effect.”

    1. And I “proved” that bagpipes are sufficient proof that God exists in Logic class.

      So much for the utility of logic and math proofs!

      1. Please, Sir, please share your proof.

        I’ve, I’ve been looking so long for this. Never would I have guessed that it would come down to something as simple as bagpipes.

        Oh, please, please–!

        // overwhelmed, unable to continue

    2. Mathematically proved the “multiplier effect.”

      Making what assumptions? The proving in economics isn’t in the proof, it’s in the assumptions.

      1. Mathematical is the new scientific.

  3. For Fuck’s sake, Timmy, it’s literally a confidence game. No, fucking really.

  4. I’ve found that a well built guillotine has a rather impressive way of freeing most fools from the mess they’ve made…

    1. Great idea, Mr. Cheese-Eatin-Surrender-Monkey! Let ME market it to the citizens back stateside! We’ll call it the “DC Slap-Chop” and we’ll make millions offing the politicians!

      Err…MEANT to say that we’ll make millions OFF of the politicians!

      Fucking Freud and his goddamn slips!

      1. Mays, you filthy, smelly old corpse…I heard you tried to bugger Vince and he had to slam-chop your nuts into tasty, bite-sized morsels. True or false?

        1. He would still manage to sell those morsels to some asshole for a tidy profit! Shit, if there is an afterlife, old Billy is probably conning demons into buying Zippos! Love him or hate him, that fuck could move serious amounts of product!

        2. SugarFree or Warty?

          1. I know NOTHING!!!

        3. He should have tried to invent a better designed luggage compartment.

          Don’t hit me.

  5. Zandi is either a fool or a co conspirator, take your pick.

    The brutal truth is that HAMP, interest paid for excess reserves, TARP, QE1 and QE2 are all were all intended to benefit the bankster cocksuckers that cause this depression, not the “economy”.

    Ben Bernanke gets applauded weekly for flipping off taxpayers and the general public.

    1. No, they thought it would work. Other than HAMP, all of those things were intended to stimulate lending by increasing liquidity. That was the important thing, see, that the banks keep lending. HAMP was primarily political (keep voters in their homes) which is why it was limited to primary residences and has a cap. (Oh, how they must have crowed when they heard that it was being referred to as the “Obama mod” by borrowers.)

      Combined with the stimulus and the US auto industry turnaround, this would usher in a new era of prosperity for the US. Something which would be self evident by this point, with elections approaching quickly.

  6. I’m an electrical engineer. If I built systems that routinely failed to work, destroyed the equipment they were supposed to control and killed the operators it, would anyone think it even remotely true that I am “sharp” in my field just because I’m able to describe systems integration in plain English?

    Face it, Zandi’s an idiot, albeit a highly-educated one.

    1. …operators of it…

      There goes my bid for glory.

    2. Zandi isn’t highly educated. Perhaps he should be, but so what. I should be stinking rich and swimming in the lap of some blazing hot redhead…. Be that as it may, he’s a stupid scotch-swilling masterbator who couldn’t get a job grinding horsemeat into dog food in the private sector.

      1. Then again, someone in the private sector keeps given M. Night Shayamalan money to make shitty movies.

        1. And Deepak Chopra for repeating kindergarten platitudes with enough opacity for the left to presume they’re ‘profound’.

        2. Then again, someone in the private sector keeps given M. Night Shayamalan money to make shitty movies.

          Yeah, what’s up with that?

          1. Shammy is settin us all up for a megatwist. After he makes his next movie, he’ll reveal that he was really Bruce Willis the whole time.

              1. Is it bad that I equate shammy with Shaman. 60 shammy LFG!

                1. ele/enhance/resto?

      2. A phD in econ from a top 10 school for econ is highly educated. Regardless of what stupid shit you say.

        1. So, what you’re saying is, “educated” doesn’t mean what it used to? Like,actually being knowledgeable about your subject?

          The new “educated” just means you went to “good schools” and received a VERY important piece of paper. K, got it, just makin sure.

          1. He’s educated in the Mark Twain sense of the word.

          2. Macroeconomics is the most precisely vague analysis of a system ever designed. So there’s a fairly broad spectrum from Keynes to Classical or Austrian.

            I’ll guarantee you he is more knowledgeable about economics than most, he just chooses a model you disagree with.

        2. And here I thought that having a degree in econ is proof that he wasn’t good enough to study anything that requires actual skills

          1. Econ is the lowest undergrad GPA on almost every campus in the US. It’s also considered one of the harder PhDs from those I have spoken to. Regardless of which route you choose, mathematical or theoretical.

            1. Maybe that has more to do with Econ undergrads than with the difficulty? Every engineer I know thought that any of the econ courses we took were ridiculously easy.

              1. Every math major I know did well in econ as well. Maybe it’s the math? We can anecdotal the subject into next month.

    3. physical science v. social science

      Confusing the two is a mistake.

      1. Maybe because one is science and the other not?

        1. I’d agree that one has a firmer base in physical science and the other is more firmly based in social science. And neither should try to be the other. Unfortunately economics has been trying to be a physical science for decades.

        2. Disagree.
          Economics gets to deal with the actions of humanity; those actions are very hard to predict, which means the science is not only difficult, but pretty immature. Regardless, there are certain general predictions from econ that prove regularly.
          It’s far easier to deal with, say, neutrons that do what they do regardless of ‘other effects’, like humans lying.

          1. Regardless, there are certain general predictions from econ that prove regularly.

            By Jove, you’ve gotten it! I couldn’t have said that better myself.

          2. “Regardless, there are certain general predictions from econ that prove regularly.”

            The problem is that, even though they are regularly correct, predictions based upon modern (Keynesian and neo-Keynesian) economics are not reliably correct.

            “It’s far easier to deal with, say, neutrons that do what they do regardless of ‘other effects’, like humans lying.”

            Oh yeah? Electrons and photons and such behave differently one way when you look at them and another way when you don’t.

            1. Electrons and photons and such behave differently one way when you look at them and another way when you don’t.

              And people don’t do this?

            2. Like I said above. It’s not the proof it’s the assumptions.

            3. Particle Theory vs Wave Theory?

            4. Electrons and photons and such behave differently one way when you look at them and another way when you don’t.

              Step away from the New Age misinterpretation of the double slit experiment. They behave as both particles and waves, whether you are looking or not, and whichever manifestation you attempt to measure is the one you will get. Also, the act of observation requires bouncing other particles off the thing you’re observing…bouncing photons off a ball bearing rolling down a track in a gravity experiment has little effect, but bouncing photons off an electron is much more disruptive due to its lower mass.

              1. I see nothing new age in his desciption. It was literal truth, they behave differently (for the reason you stated, due to bouncing photons off of them) whether observed or not.

                Oh, and I hate the description that photons sometimes behave an particles and sometimes as waves. They always behave as photons, which has either wave or particle characteristics, depending.

                1. It’s not the looking that causes them to behave differently, though. That’s the snag that new agers try to exploit to back up their superstitions about thought directly influencing the physical world.

                  If you bounce a photon off an electron and then don’t bother getting any information from this collision (ie, you don’t “look”), the behavior of the electron is identical to what would have happened if you had gotten information from it (ie, look).

                  1. Thats not exactly true. Without the measurement, the waveform never collapses and you have a probability distribution of bahaviors, even with the photon bouncing off of it. Its Schrodingers Cat all over again.

                    Two effects going on:
                    1. Observation changing outcome via interaction with photon in order to observe.

                    2. Observation causing an outcome to exist beyond a probability distribution.

                    Where I think you and I (and Niels Bohr) agree is that “observation” doesnt require a conscious mind. This is where the new agers seem to go awry.

        3. One is hard science, the other is soft science.

          1. Please don’t squeeze the soft science.

          2. I prefer erect science and flaccid science.

            Yes, I do have rock-hard evidence to back up this assertion, just bend over so I may apply the scientific method.

            1. assertion. nice.

    4. The easy option of calling these people idiots will never solve the problem. They’re not idiots, they’re evil. That Moody’s still exists is proof that we’re doomed.

  7. Hey, we fucked up. We admit it. But we’re too big too fail, so the economy would’ve been doomed if you hadn’t saved us (thank you very much). And now you need us to help get things back to, y’know, normal. So we’d be happy to take the reins again.

    1. Hey, I’ll drive!

  8. Yeah, [the Home Affordable Modification Program] will help. It’ll help stem the declining in housing values ? house prices are going to decline further but this should help put a floor under prices and hopefully bring forward the day when we find a bottom in pricing.”

    How do you find a bottom by putting an artificial floor under prices? How the hell can someone so highly educated be so damn illogical?

    1. When you put an artificial floor under prices, that level becomes the bottom, which prices will reach faster than the real bottom.

      1. No, you merely delay the inevitable at great cost.

        House prices have yet to reach bottom and if you think the economy is going to rebound before they do, you make Pollyanna look like Joe Btfsplk.

        The two major parties view on letting housing prices stabilize at their (much lower) natural level –

        Yech! That medicine tastes yucky. I won’t take it. I won’t! I won’t! I won’t!

  9. So, who is Zandi going to replace in the administration? Geithner? He sounds like their kind of material.

    1. Zandi will replace Monica Lewinski in Bill Clinton’s recurring homoerotic dreams.

      1. So Monica was a man this whole time?

        It’s all starting to make sense…

  10. Give me a Keynesian model and I will pull a fiscal rabbit out of my ass. Mark has mastered that trick, too bad time has proven it flawed beyond belief.

    1. Again? But that trick never works.

  11. How on earth did you learn about the Eulenspiegel Society?

    I was trying to figure out what Till Eulenspiegel or Richard Strauss had to do with bottoms.

  12. “How many times can you be wrong about your subject before they stop treating you like an expert?”
    Well, if you’re Paul Ehrlich, the number approaches infinity.

  13. I took a shit on economics at least once.

  14. C’mon. Reason is based in DC now. So, why not a shout out to a local source of ‘bottoms’, like The Black Rose?

    1. Seriously…

      What is with everyone setting up shop right in the middle of the swamp? Before too long, even the most skeptical-of-government libertarian starts getting sucked into the mindset of the ruling class: talking to all the same faux intellectuals that stink up the joint, repeating their talking points as if they actually bear any relevance to reality, etc.

      Explains why Reason feels compelled to discuss the garbage that spews daily from people like Ezra Klein and Dave Weigel: geeks who got their heads flushed in the toilet in middle school, who have grown up to become the darlings of the DC-NYC political media clique.

      1. To be fair, the original commenter linked to a BDSM site.

        1. Yeah, I saw the page he linked to. I don’t know if he meant it this way, but the first thought I had when the page pulled up was, “Hey, the only honest institution in DC — the whorehouse!”.

  15. He said extending unemployment benefits would yield $1.64 of GDP

    What the hell is that even suppose to mean? That GDP would increase by 64% if unemployment was extended?

    And for that matter, the phrase “to-the-penny scruple”, is equally meaningless to me.

    1. “to-the-penny scruple” describes the estimate’s tiny detail.

    2. I’m a bit unclear on that too. Perhaps it means every dollar spent on unemployment benefits will yield $1.64 in increased GDP?

      1. This is the only interpretation that makes sense. But the original statement we’re interpreting is clearly false.

  16. Get information on how to reduce your debt by filing for bankruptcy http://bit.ly/avB0jI

  17. http://www.bloomberg.com/news/…..worse.html

    This is both interesting and depressing.

  18. Man, WTF happened to Texas yesterday? UCLA? At Austin?

    And when will we start seeing demands for the Big East to lose it’s automatic bid? They are horrible this year, both the WAC and Mountain West are much better imo…

    1. Texas sucks is what happened to them. Their offense can’t run and can’t protect the quarterback. Their defense can only hold on so long. It is going to be a long year for them. I bet they lose to at least OU and NU and probably one or two other games. If they don’t play better than that, they won’t beat OSU, KSU or A&M.

      1. Credit where it is due, I seem to remember John calling attention to Texas’ vunerability in a thread just the other day.

        1. Yet, they will still be ranked higher than A&M in the polls.

  19. http://www.speakupmovement.org…..tails/3882

    Then fucking pay taxes. This is unbelievable.

  20. http://taxprof.typepad.com/tax…..bait-.html

    This is even more outragous.

    Earlier this week on a conference call, President Obama and his top healthcare officials charged religious leaders across America with spreading a new kind of gospel ? the good news of nationalized healthcare. Isn’t it convenient how the pulpit is barred from promoting political opinion, until it is the opinion of the President? According to Politico, “Obama instructed faith leaders to treat the new law as settled fact and use their perches of power to convey that message to congregants and friends.” …

    1. And I will use my powers to tell any bible thumping fucker who tries to preech that shit to fuck off.

      1. You can tell them to fuck off now, John. No one’s stopping you.

        Oh, wait, you want to FORCE them to shut up. That’s different.

        1. Yes, i want to FORCE people to STOP FORCING ME to pay for their needs and wants. Fair enough?

          1. Wait, are you equating a tax break with govt spending?

            HERETIC! Burn him!!!!1!!!!

    2. So how does this work? If they preach about the benefits of the health care bill, they get a pass from the IRS? But if they preach against it, they could lose their tax exemption?

      Has Kathleen Sebelius set up a hotline to nail preachers who spread “misinformation” about health care yet?

      1. I think it’s a pretty regular thing for Prezes to meet with religious leaders and urge them to sell something, but John has a point that when the GOP does it the “Religious Right” meme is likely to be played while when the Dems do it an equivalent “Religious Left” meme will not be played so much.

    3. The tax exemption only bars them from supporting or opposing candidates (and I suppose referendums and such), not speaking on political issues. Otherwise, the Catholic Church would have lost its tax exemption a long time ago for calling for laws against abortion, gay marriage, and the death penalty.

      1. Unfortunately, the NCCB supports the health care bill too, so long as it doesn’t force Catholic hospitals to do abortions and such…

        1. Bureaucracy loves bureaucracy.

  21. Interesting poll. Seems the public dislikes Dems and GOPers about equally, but the GOP faithful are more enthusiastic about showing up in Novemember. It’s remarkable to me how much of politics is about getting people to just show up and pull the lever more than it is about changing the relative share of committed Democrats/Republicans in the public at large. It seems that was the key to Obama’s victory, in 06 and will be the key this year…

    http://www.google.com/hostedne…..QD9IEI5DO0

    All of this could ultimately work to Obama’s re-election. Seems one base only shows up when it is angry at the other side being in power and doing things that rile them, when their fav party is in power they feel safe and warm. If the GOP can win the House it may startle enough Dems to really turn out in 2012…

    1. Sort of like the Dems taking back Congress in 2006 riled up enough Republican voters to turn out in 2008.

      Oh, wait. That doesn’t work.

    2. It’s remarkable to me how much of politics is about getting people to just show up and pull the lever more than it is about changing the relative share of committed Democrats/Republicans in the public at large.

      It’s remarkable to me that you wish it was about “changing the relative share of partyX/partyY” rather than, i dunno, letting people live their lives. That WAS the whole point of Gov’t and property rights wasn’t it, to let people do their own thing and eventually die in peace?

  22. You would have be beyond stupid to still suppose that the truth of things counts for anything in the scheme of things in this world. This is what constantly baffles me – that Reason seems to be dumbfounded at the corruption and stupidity that dominate our society and government as though these things were aberrations rather than standard operating procedure. We all know, for example, that police routinely abuse their power over we mundanes and routinely lie under oath. We all know that those held up as experts are flat out wrong most of the time and this somehow does not diminish their stature. We all know that our leaders make terrible law all the time and make terrible policy decisions which often cost thousands of lives and billions of dollars. and so on. Reason still treats this kind of thing a anomalous which it obviously is not.

    1. Do you have a newsletter?

      1. I’m betting it’s a single page.

        1. “The Royal WEekly?”

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