Very interesting NYT article
 

About Noriel Roubini, an economics professor at NYU. This article was written in August, and reading it now sends a few chills up my spine. I'd be curious to know what Pelagius thinks of Roubini. Did he just get lucky in the sense that a clock is always right twice a day? Or is he spot on? I'd assume it's somewhere in between.

http://www.nytimes.com/2008/08/17/ma...ewanted=1&_r=1

Roubini on the hedge fund crisis from a Thursday article:

http://www.bloomberg.com/apps/news?p...OSc&refer=home

Predicting a recession is a pretty good bet usually. If you made the following statement you would be right for most of US history: I predict a recession within the next four to five years. I believe Roubini, like Krugman, has over predicted recessions (but I admittedly don't know much about Roubini so I could be wrong).

Still he got the essential mechanism right so you have to give him credit for that. However, even in 2006 there was plenty of talk of a housing bubble among economists. If one was inclined to make gloomy predictions a housing market crash made the most sense. Very few economists would have predicted the severity of the collapse (its without historical precedent), but lots of economist thought there was a housing bubble. Ownership costs/ rent ratios were at previously unseen levels.

Of course, hundreds of hedge funds will fail. The attrition rate for hedge funds is very high historically (the surprise is when hedge funds aren't failing). With the massive amounts of redemptions in October its hard to imagine that won't come true.

The second seems pretty unlikely but if it did that would sure make him into a first rate economic prophet. So it strikes me as well worth the cost of being wrong to predict a fairly unlikey event like that because if you turn out to be right you look very prescient and if your wrong your just another economist (we are wrong all the time).