Sunday, February 14, 2010

Nobody predicted the financial crisis?

Have you bumped into claim that ”no one predicted the financial crisis”? I have, several times. It is easy to prove the claim wrong by finding just one who did so: Peter Schiff.

He is probably not the only one, but since I recently completed reading his book “Crash Proof 2.0”, I will concentrate on him in this post. The book I read is 2009 update on a book “Crash Proof” that was published before the crisis in February 2007. The 2.0 version is otherwise same except contains additional 2009 commentary in the end of each chapter.

By following the link you can read six first pages from the book. They pretty much summarize the problem described in the book. Chapter 6 of the book deals with exactly the problem that caused the crisis.

It is disturbing to see how well Schiff described the problems in US housing and lending market well in advance. It is also disturbing to see clips from CNBC and FOX where they basically laughed in his face when he indicated that there were serious problems brewing in housing market and in the bank sector.

However, the book is not about the financial crisis we all came to know so well. It is about something far worse. It is about downfall of the US economy and the US dollar.

In retrospect, and especially after reading the book by Schiff, I can not understand why the housing bubble was not spotted or burst long time ago. Rather embarrassing for all those economists, politicians and reporters who regularly follow, study and comment financial issues. Perhaps that is why claims like “nobody predicted it” are made.

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