Some Famous Macroeconomic Predictions from 1929-2009

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2005-2009: More recent macroeconomic predictions

As we approach the 88th anniversary of 1929’s Black Thursday stock market crash, here are some predictions by several famous economists and policymakers.


"We will not have any more crashes in our time"

-John Maynard Keynes (Keynesian School), 1927

"There will be no serious consequences in London resulting from the Wall Street slump. We find the look ahead decidedly encouraging.”

-John Maynard Keynes (Keynesian), November 1929

"Stock prices have reached what looks like a permanently high plateau"

-Irving Fisher (Quantity Theory School), October 17, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most”

-Irving Fisher (Quantity Theory), November 14, 1929

"[The economy is] in its 150th month of unparalleled, unprecedented, and uninterrupted economic expansion" and has taken a 'dramatic departure' from the past."

-Arthur Okun (Keynesian), LBJ Council of Economic Advisors, from “The Obsolescence of the Business Cycle" in his book "The Political Economy of Prosperity," 1970. Over a decade of stagflation would follow

“Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”

-Paul Krugman (Keynesian), Nobel Laureate, October 2001

“The good news about the U.S. economy is that it fell into recession, but it didn’t fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed’s dramatic interest rate cuts helped keep housing strong even as business investment plunged.”

-Paul Krugman (Keynesian), Nobel Laureate, December 2001

"On the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero."

-Joseph Stiglitz (Keynesian), Nobel Laureate, 2002

"The stability of our economy is greater than it has ever been in our history. We really are in remarkable shape... The United States is at the peak of its performance in its history... I think monetary policy is primarily responsible for it."

-Milton Friedman (Monetarist School), December 2005

“The United States economy has never been in better shape… … monetary policy is spectacular.”

-Arthur Laffer, August, 2006

“To be honest, a new bubble now would help us out a lot even if we paid for it later. This is a really good time for a bubble… There was a headline in a satirical newspaper in the US last summer that said: 'The nation demands a new bubble to invest in,' and that’s pretty much right.”

-Paul Krugman (Keynesian), Nobel Laureate, May, 2009

“A great crash is coming, and I don't want my name in any way connected with it."

-Ludwig von Mises (Austrian School), summer 1929, to his wife when asked why he turned down a lucrative job at Austria’s largest bank, the Kreditenstalt, which failed spectacularly in 1931.

“Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans...

...However, despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing...”

...Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever.”

–Ron Paul (Austrian School), Congressional Testimony 2002

…and a few bonus quotations!

“The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.”

-Paul Samuelson (Keynesian and Nobel Laureate), in the 1989 version of his textbook “Economics.” The Soviet Union collapsed that same year.

“[i]t is a vulgar mistake to think that most people in Eastern Europe are miserable.”

-Paul Samuelson, in the 1976 version of his textbook “Economics”


“Can economic command significantly accelerate the growth process? The remarkable performance of the Soviet Union suggests it can. Today it is a country whose economic achievements bear comparison with those of the United States.”

-Lester Thurow, MIT economist, and Business School Dean, in 1989. Also co-founder of the progressive Economic Policy Institute. Again, the Soviet Union collapsed two years later.


“What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth. . . . The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.”

-Paul Samuelson (Keynesian), 1985


“I fear that those who think the Soviet Union is on the verge of economic and social collapse are kidding themselves.”

-Arthur Schlesinger, famous liberal historian, “court historian” to John F Kennedy White House, social critic, and public intellectual, in 1982.


“A Messiah rather than a dictator.”

-Joan Robinson (Keynesian), about North Korean leader Kim Il-Sung from her report “Korean Miracle.”


“[o]bviously, sooner or later the country [Korea] must be reunited by absorbing the South into socialism."

-Joan Robinson (Keynesian)


"As the North [Korea] continues to develop and the South to degenerate, sooner or later the curtain of lies must begin to tear.”

-Joan Robinson (Keynesian)


“moderate and humane"

-Joan Robinson (Keynesian), regarding Chairman Mao Zedong’s intentions in her 1969 book “The Cultural Revolution in China.” Robinson was both an admirer of Mao and of his Cultural Revolution.