One senior policy maker asked, “Why didn’t we see this coming?” There was, of course, only one thing to say in reply, so I said it: “What do you mean ‘we,’ white man?”.... Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage.
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[continued from Krugman's op-ed]
Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.
About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?
Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?
Why did almost everyone believe in the omnipotence of the Federal Reserve ....
[ whole op-ed at NYT:
http://www.nytimes.com/2008/11/28/opinion/28krugman.html?bl&ex=1228107600&en=95e0984e8f92cc7c&ei=5087 ]
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