Right on the money!
Sadly, mainstream financial media remains full of utter incompetence and callous deception.

With the exception of a few who not only knew it was coming but dared to predict it publicly, the hubris is total, complete, 100%. From the subprime NINJA guys to the maxed out credit card junkie, from the derivative trader to Greenspan. They too knew it somewhere inside, but no one can ride against the system. Everybody was making money like mad, or just having such a wonderful time loading up with the latest flat panel TVs and granite counter tops.

Now everybody wants bailout and blame others. Now even the AAA credit rating of the USA is now in jeopardy. And the dollar crash is only a matter of time. And yes, now the whole world is scrambling to readjust trading relations away from the USA. The great de-coupling is finally happening.

Like the collapse of the Soviet Union, the collapse of the USA is well-deserved.

Economists like Mankiw missed such a huge bubble and were surprised by it because their predominant paradigm of Rational Expectations precluded the existence of bubbles. The same midset missed the '80s bubble in Japan and the lost decade of the '90s there and missed the implications of the near worldwide financial catastrophe from the fall of that single infamous hedge fund LTCM.

The point being missed, me thinks, is that the stock and housing bubbles were a feature, not a bug. How else could the Randyian supply siders divert attention from (hide) the destruction of American production capability and capacity ?

The bubbles were the created through intentional and outright fraud by our banking industry. Why does the MSM continue to throw up the smoke screen and fail to report the truth on what has really transpired ?

The supporting cast of the government of the idiot prince were old hands at real estate bubble scams and looting. Remember the S&L scam under Reagan/Bush/ Cheney/ Rumsfeldt ? Without the financial and real estate bubbles there would have been no so called recovery in which the stupid Americans were fed back there own savings to buy foreign made goods and put themselves out of work.

The "productive" economists were just playing the tune the piper payed for. The non-productive academic economists were cheerleading to sustain a theoretical hypothesis about global trade that was failing the road test, badly.

Like Cheney, Mankiw is on a mission to cover his own ass and should not be given the time of day.

The supporting cast of the government of the idiot prince should have read "Greenspan/Reagan/Bush/ Cheney/ Rumsfeldt".

At the very least, regarding the housing (or any other financial) bubble, economists should have expected years of ensuing mean-reversion.

Brand-name economists like Mankiw keep their jobs, status and prominent media platforms because they serve an important economic role, which is to help legitimize the status quo.

Mankiw makes no mention at all of fiscal stimulus. However, fiscal stimulus is more effective than monetary policy when interest rates hit zero. While his textbook mentions fiscal stimulus, Mankiw has sometimes claimed that this refers to tax cuts. What about deficit spending on projects that need to be done? No mention.

I wonder if Harvard Freshmen are missing an important part of their econ education?

100% agree.

From now on I will only listen to those who correctly described & predicted the current crisis.
It is very troubling that so many still hold on to their positions and reputation - this can't be good.

Read Nassim Taleb's "The Black Swan" and you will see exactly why the economists will always say "We never saw it coming".

Peter Schiff not only predicted it, he wrote a book warning about it and appeared multiple times on Fox News warning about it...only to be dismissed by the pundits. Schiff is a famous Libertarian. Here's a short video of his appearances on Fox and some of the economists who said he was completely wrong, including Ben Stein:

http://www.youtube.com/watch?v=2I0QN-FYkpw

It's naive or ignorant to suggest that Bernanke, Mankiw & al "missed" the housing bubble. Clearly, they're the one's living in the real world - where nonsense repeated often enough (by the "right" people) carries more weight than the reasoned argument of "outsiders". It's the rest of us who still cling to the tired belief that reasoning will, in the end, carry the day that are sadly out of touch.

The only unanswered question about Gregory is, why does he hate his three kids so much that he is so anxious to destroy the economy & social structure of the country their great grandparents emigrated to. Shame on Gregory Mankiw.

Blaming economists for the current debacle is ridiculous.

"Blaming economists for the current debacle is ridiculous."

The mass of economists who are responsible for public policy have shown over and over that they can't predict important trends even a few months in advance and often don't know what is happening under their noses. So to some extent this is a case of "fool me once, shame on you, fool me twice, shame on me". But public awareness of economic problems is shaped by the media, and the media could play a role in getting better economists into positions of responsibility by keeping some track of who has been right and who has been wrong and not publishing the opinions of those who are consistently wrong. It would not be necessary for editors and reporters to actually understand the economic theory, just to have some memory of what people have said and whether it turned out to be right or wrong. This blog is really about bashing the media, not economists.

This may be a little unfair to Mankiw himself, who did see the possibility by 2006, http://gregmankiw.blogspot.com/2006/06/housing-bubble.html, even if he didn't write on it afterwards. The post definitely doesn't endorse the view that everything is for the best in this best of all possible worlds. Mankiw may have been stung by his own (unfortunately incorrect) 1989 prediction that because of the aging of the baby boomers, the housing market in the 1990s and 2000s would be slack, http://query.nytimes.com/gst/fullpage.html?res=9907E0DC153EF930A2575BC0A9639C8B63&pagewanted=2.

I think it's fair to criticize people for missing the housing bubble, but the appearance of Debt-Deflation might well have caught many intelligent people by surprise. It certainly caught William Gross by surprise.

On the housing bubble, I don't believe that it was totally crazy from a human point of view, but it was economically crazy. I mean by that the desire to own a house was driven by fears of being impoverished during old age. For twenty years, we've heard warnings that we will not receive social security. Pensions have also been seen as less viable. Consequently, many people looked into saving more for retirement. This was sensible.

However, many people find it very hard to save for retirement. Hence, it seemed sensible to see if they could find savings from their monthly expenses. This led to the perception that renting is a sucker's game, and that the only real possible for saving for retirement was to turn rent or housing expenses, which are necessary, into an investment. This was not a stupid idea.

The bubble was dependent on this perception, and another one often heard during the bubble, which is that, if you don't buy a house now, then you never will. That was the real motivation behind the asinine theory that housing prices always go up.

I guess you can tell that I believe that people were taken advantage of in this crisis. This motivation also fed into the tech bubble.

To not understand the panic that many people feel about retirement will skew the explanations of what really caused this crisis.

I know that other countries don't fit this theory as well as the US, but I haven't seen enough data to discount it.

I could say more about this issue, but I simply want people to understand why people felt desperate to own a house.

Look at excess asset focussed broad money supply growth: this tells you there was an asset price bubble. Do not know how you could really miss this.

I would also like to add that the managers that are laying off staff in a massive incomprehensible fashion are the same ones who mishandled their budgets before hand. Many of these layoffs are much more catastrophic then they might other wise have been. There is no accountability for these managers whether they are in finance, automobiles, or human rights.

The CFOs of these companies just shrug their shoulders and take no responsibility for not warning or recommending prudence during these times. Their boards of directors do the same by endorsing flawed and incomprehensibly inept managers. Human Resources and other institutional proponents merely support the management’s party line: their justifications merely sophistry.

Many of the people being laid off are valuable to assets with experience that cannot be replicated. No one seems to care. Bloodbaths are taking place with incompetent managers settling scores and creating mythologies to justify their actions. Often laying off the ones with the knowledge to reveal the mistakes as well as help rebuild the organization.

OK, OK, if these massive dislocations have to happen why is it that the management who did not foresee and make corrections to avoid them is not being held accountable?

There is now a management class that is so incompetent it reveals a caste whose training and philosophy is couched in unreality. These literal bankruptcies are merely the veil covering a massive intellectual fraud.

On the other hand, even if you see a crisis like this coming, you don't have go for a Cassandra mission. You may keep your realization private, or you may even muddle the common perception that indeed the booming economy will be greatly fine, and then take advantage of the regular fools. How many Wall Street insiders could have chosen this strategy of basically assisting the bubble and then gaining monetary power?

A concrete example: Swedish banks had a famous crisis less than 20 years ago, and lately they created the same kind of terrible real estate bubble in the Baltic countries. Are we supposed to think that those banks did not know what they were doing?!

This crisis was predicted over 1900 years ago. Don't belive me? Read Revelations Chapter 18. Welcome to the End Times.