No One Saw This Economic Crisis Coming?

A research paper, published in June by Dirk J. Bezemer, Groningen University, addresses this question and says the answer is that many saw it coming but those with the power to act did nothing. Bezemer contends that the problem is that economic policy is executed using macro equilibrium models and what is needed to establish economic policy that can anticipate crises, such as we have now, and take actions to head them off, are micro accounting cash-flow models. The entire paper can be read here. First, let me show you a table that Bezemer has prepared lisiting some of those who saw it coming. Table is in two parts for graphics processing reasons.


In a lengthy appendix, Besemer analyses in detail what each of the individuals did over extended periods of time to highlight the then incipient crisis.

Besemer says that those who foresaw the coming crisis share the general characteristic that they viewed the economy through an accounting models lens. He wrote,

They are ‘accounting’ models in the sense that they represent households’, firms’ and governments’ balance sheets and their interrelations. If society’s wealth and debt levels reflected in balance sheets are among the determinants of its growth sustainability and its financial stability, such models are likely to timely signal threats of instability.

Models that do not – such as the general equilibrium models widely used in academic and CentralBank analysis – are prone to ‘Type II errors’ of false negatives – rejecting the possibility of crisis when in reality it is just months ahead. Moreover, if balance sheets matter to the economy’s macroperformance, then the development of micro-level accounting rules and practices are integral to understanding broader economic development. This view shows any clear dividing line between‘economics’ and ‘accounting’ to be artificial, and on the contrary implies a role for an ‘accounting of economics’ research field. Thus this paper aims to encourage accountants to bring their professional expertise to what is traditionally seen as the domain of economists - the assessment of financial stability and forecasting of the business cycle." ( learn more at )