David Olive, the business columnist for the Toronto Star, writes Sunday about how he and other business journalists missed the signs in the economy that led to the current turmoil.
“Trees don’t grow to the sky, and bubbles always burst. I’ve reported on about half a dozen recessions, usually the aftermath of unsustainable booms. I should have grasped that there were two speculative bubbles underway, beginning in 2002 — an exuberance about North American stocks that became irrational by mid-decade, and a parallel, unprecedented boom in U.S. house prices.
“Financial journalism has too often been infected with the eternal optimism of those whose intimate acquaintanceship with money is presumed to give them special powers of intelligence.
“Knowing this, I should have inquired into the causes of the latest booms. In the case of the panic-buying in U.S. housing, the cause was manufactured money in the form of subprime mortgages, collateralized debt obligations (CDOs) and other ‘toxic waste’ that found its way onto the balance sheets of almost every major global bank and prestigious investment house. I should have been reporting, circa 2006, on the implications, and advising a shift to cash and cash equivalents, before the resulting, massive bank writeoffs of toxic-waste inflicted collateral damage on the stock market.”
Read more here.
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