(Bernd Debusmann is a Reuters columnist. The opinions expressed
are his own)
By Bernd Debusmann
WASHINGTON, March 12 (Reuters) - It's no longer in print but
you can get it over the Internet and $1.99 (plus shipping and
handling) buys you a well-preserved copy of DOW 36,000, a book
that has become an emblem for really, really wrong forecasts.
With the Dow Jones Industrial Average below 7,000 and the
U.S. in its worst financial crisis in 80 years, re-reading the
book is a bizarre experience, as well as a lesson that being
wrong does not necessarily harm the prognosticator's career.
On the contrary. Many have flourished, from the perpetually
upbeat hosts of financial cable television shows to authors of
"how to become a millionaire" advice.
Take James Glassman and Kevin Hassett, authors of DOW
36,000, The New Strategy For Profiting From the Coming Rise in
the Stock Market. It was published ten years ago, made
bestseller lists and catapulted Glassman, a financial columnist,
to celebrity status and a series of high-profile jobs, including
undersecretary of state for public diplomacy in the last 11
months of George W. Bush's presidency.
Hassett, a scholar at the conservative American Enterprise
Institute, a Washington think-tank, largely stayed out of the
limelight but John McCain valued his expertise so highly that he
made him senior economic advisor for his unsuccessful 2008
"A sensible target date for Dow 36,000 is early 2005," the
two said in their book, "but it could be reached much earlier.
After that, stocks will continue to rise, but at a slower pace."
If the history of earnings growth repeated itself, they
ventured, "DOW 36,000 itself will be a distant memory - of
happier times when stocks were still cheap."
This week, in an interview with the Washington Post, for
which he used to write a column, Glassman described as sound the
history and logic (stocks perform well in the long run) on which
the book were based and wondered "Are we in a period so
different that we can no longer take our view from history?"
Tricky question. Despite routine comparisons between the
Great Depression of the 1930s, there's no precedent for today's
crisis. And identifying turning points in history has defied
eminent historians. Remember "The End of History", the famous
essay Francis Fukuyama wrote after the fall of the Berlin Wall
in 1989? Mankind's ideological evolution had ended, he argued,
to be replaced by the "universalization of Western liberal
democracy as the final form of human government."
FROM OPTIMISM TO DESPAIR
That has yet to happen, if ever it will, in places as far
apart as Congo and Darfur, Egypt and Saudi Arabia, Russia and
The most memorably wrong financial predictions have tended
to be on the exuberantly optimistic side. Irving Fisher, an
economics professor at Yale, earned a place in the history books
with a speech, on October 14, 1929, in which he said "stocks
have reached a permanently high plateau." The worst stock market
crash in history came two weeks later.
Now, after years during which prophets of financial nirvana
commanded most attention, dominating TV ratings and bestseller
charts, it is the turn of the doomsayers, a development
reflected by the titles displayed at popular bookstores.
Meltdown, says one. The Return of Depression Economics, says
another. It sits next to The Great Depression Ahead.
One of the most dire predictions has come from Niall
Ferguson, the prolific author and Harvard economic historian who
thinks that the contagion that spread from the United States to
the rest of the world will have an impact that goes far beyond
finance and the economy.
"There will be blood," he told a Canadian interviewer in
February, "in the sense that a crisis of this magnitude is bound
to increase political as well as economic (conflict). It is
bound to destabilize some countries. It will cause civil wars to
break out that have been dormant. It will topple governments
that were moderate and bring in governments that are extreme."
Out on an apocalyptic limb? Ferguson has heavy-weight
company. Dennis Blair, the Director of U.S. National
Intelligence told a Senate intelligence committee that the
global economic crisis presented a greater threat to American
national security than anything else (terrorism included). "The
longer it takes for the recovery to begin, the greater the
likelihood of serious damage to U.S. strategic interests."
A bleak view on the speed of the recovery came this week
from the head of the International Monetary Fund (IMF),
Dominique Strauss-Kahn. He told Reuters correspondent Lesley
Wroughton in Dar Es Salaam that the advanced economies of the
world were moving too slowly to rid banks of problem assets, one
of the many interlocked elements of the current crisis.
How will it all end? One can only hope that things turn out
better than they did for Irving Fisher, the pre-1929 crash
optimist. At the time he made his "permanently high plateau"
forecast, his assets totalled around $100 million in today's
dollars. When he died, in 1947, he owned around $60,000.
(You can contact the author at Debusmann@Reuters.com)
(Editing by Sean Maguire)
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