[kasey_junk]

The markets watch the BLS numbers like crazy and compare them to estimates from private sources that come from a wide range of methodologies. Frequently the big moves in the markets are not triggered by the bare numbers but from the difference between the expectation and the numbers.

If there was a systematic fudging of those numbers lots and lots of people would notice.

[theturtletalks]

You're right, but what if revealing the discrepancies wouldn't be beneficial to the company? Many people knew about the subprime mortgages before the 2008 recession and no-one came forward, although some shorted it.

[kasey_junk]

I worked in that industry during that time period and its just not true that no one came forward. As early as 2003 Warren Buffett straight up called them “weapons of financial destruction”. In 2005, the World Bank released a report suggesting that the derivatives the banks were holding could cause a financial crisis.

I remember the day the yield curve inverted in 2005 because I was working for a company that made risk assessment software for MBS. Our call center blew up as the reports started showing how risky balance sheets were.

It’s a nice story that Michael Lewis writes in “The Big Short” about how only a few people made money shorting the crisis but a) its largely not true and b) its more the fact that shorting isn’t nearly as easy as HN seems to think it is.

[omarhaneef]

To underscore the point you are making, part of the drama of the The Big Short was the creative ways people had to find in order to short that particular market (or those markets. I think one group shorted credit spreads and another was shorting an index of derivatives tied to the mortgages? Been so long since I read it).

[theturtletalks]

You’re right, it’s a bit much to say no-one came forward, but enough wasn’t done to catch what was going before it came crashing down. The comment I was replying to was implying people would notice discrepancies and we would be able to catch it.

[kasey_junk]

If Warren Buffet & the World Bank said that the BLS was cooking the books I bet it would be a big deal.

[graeme]

Lots of people gave warnings. I was reading warnings about it in the Economist for years.

It was a damned complex system and so is the economy. A lot of stuff is only fully obvious in hindsight.

You also have the problem of knowing who to listen to. Many people are warning about many things right now. Some are prescient, some are wrong. How to judge?

2008 could have been better predicted and better prevented, but it's false to say no one warned.

[acdha]

It’s also worth remembering just how much money was at stake: everyone who stayed in was going to make a lot more until the crash so there was an enormous incentive to tell yourself that you could time it tightly. If the people making those calls get their bonuses now with little perceived long-term personal risk, that dynamic gets even more toxic.

[rdtwo]

A lot of people do notice but it’s not something that is tradable because you don’t know when the correction will happen or how the rules will change when it does