I was asked at a party over the weekend whether anyone had foreseen the financial firestorm that we are currently experiencing. Lots of people had, I replied, and two of these are becoming widely known.
The first is veteran investor Warren Buffett, the so-called 'sage of Omaha'. He has many fans in the world of US finance, and these have pulled up his predictions of 2003 that the world of finance had grown over-mighty, and was set for a fall.
He predicted that it would be the unregulated spread of derivatives that would trigger the collapse, which I would say has been only half-true. More like derivatives were one factor amongst many – a symptom of a wider malaise rather than a cause.
The other apparent prophet of gloom is Nouriel Roubini, whose reputation has soared as the markets have plunged. Last year he wrote a 12-stage list of financial collapse, which has proven to be reasonably accurate – and certainly a great deal better than much of the over-confident guff that was being predicted by others at the time.
Others claiming prescience include Ann Pettifor, slapping herself wholeheartedly on the back for predicting the debt crisis back in 2003. Well, the book she wrote was entitled ‘Debt and Deflation’, but she seems to think that half right is good enough. Just like those folk in the City.
And your author? Well, he was wondering about securitisation and the housing markets five years ago too (the links at the now defunct ak13 are a little worn, I hope to fix them soon). But there's much of me that wished today I was rich rather than right.
3 days ago