Saving capitalism from the capitalists
Posted on March 17, 2009 by Richard Beddard
Filed Under Ramblings |
In a section in the profile of Nouriel Roubini I mentioned in my last post, he acknowledges other ‘whistleblowers‘, people or institutions that warned of financial crisis early on. It contains only two:Raghuram G. Rajan, then chief economist of the International Monetary Fund:
“Raghu Rajan gave a very strong speech in 2005,” [Roubini] says, about excessive risk taking in financial markets and the possibility of a full-scale financial blowout.
The Bank for International Settlements:
…which warned in its July 2007 annual report that the world economy was in danger of a major slump
The BIS describes itself as a bank for central banks, and the IMF oversees the global financial system.
When I started looking for economists that knew what they were talking about, because they had correctly predicted the current financial crisis before it was obvious, I expected to find mavericks, loners, and nutty professors.
I didn’t expect to find two of the pillars of the financial establishment warning of impending crisis, which begs the question, why didn’t our leaders, who so often profess ignorance and surprise at the unprecedented events of 2007 and 2008, listen to them?
Perhaps they should have read Rajan’s book, published in 2004: Saving Capitalism from the Capitalists.
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I blogged on this about a month ago. I think it is:
1) Really believing that “things are different this time”, and,
2) Hoping it will be someone else’s problem when the crash happens.
3) The unpopularity of any action to prevent a bubble.
They all sound plausible Graeme. I’d add that they probably had lots of other advisers telling them everything would be ok. And they realised only gradually, and too late to do anything about it, so it was better to present the whole thing as an unprecedented catastrophe from abroad (well that’s the UK’s leaders’ excuse, I guess the US can’t use that one, although sometimes you hear them muttering about the dastardly Chinese lending them all that money!)