Sunday, December 28, 2008
David Smith is back
What a horrible year that was. A full-blown credit crunch, of the kind I have never witnessed before, alongside a nasty commodity-price shock. Economists, unsurprisingly, found it a tough year to predict. That was partly because of the nature of the crunch itself. Things turned out gloomier than even the pessimists expected. Any economist getting it right during 2008 would have required mystical powers of prediction. A year ago, just about the gloomiest forecast for house prices you could find among economists was for a fall of 5% in 2008. Data from the main lenders, Halifax and Nationwide, point to a fall about three times that. I always argued that you needed a big economic shock to produce a fall in house prices, and I was right.