The NYT has an article today noting how the bad news in credit markets is having an impact throughout the economy. The article, which relies exclusively on economists who were surprised by the recession, tells readers that "the size of the bad debts remains a mystery, with estimates reaching $400 billion." Actually Nouriel Roubini and I have both estimated the amount of bad debt in the financial system will exceed $1 trillion. Unlike the economists cited in this article, we anticipated the collapse of the housing bubble and the resulting chaos in financial markets.
--Dean Baker
