Max Kretchsmer made it simple and clear "In 2008, the world experienced the worst financial crisis since the Great Depression. Financial institutions knew they were too big to fail and took reckless risks, in the confidence that taxpayers would cover their losses when things went wrong – a phenomenon known as moral hazard. With little incentive to act responsibly, ever greater risks were taken in the pursuit of private profit.
When the crash came, it devastated economies, triggered mass unemployment and left taxpayers to pay for huge bank bailouts. Trillions of euros in public funds supported emergency rescues, which strained national budgets, suppressed public services and deepened inequality. The aftershocks rippled through the economy for years, prolonging instability and fuelling the Eurozone Crisis. Society bore an enormous cost."
In response, he continues, "governments and international institutions introduced global standards to reduce risky practices and prevent another crisis. But today, hard-won safeguards are being weakened. Memories of the crisis have faded, and the financial lobby has returned in full force. At the EU, financial industry representatives are leveraging current concerns over stagnant growth to portray existing regulations as a burden, arguing that deregulation of the financial industry will improve the competitiveness of the European economy. Policymakers are buying into this argument, undoing the very rules designed to protect the system."
THE SITUATION IS WORSE THE US. DONALD TRUMP HAS REMOVED ALL THE SAFETY NET
Paul Krugman " pointed out how the AI investment boom shares a lot of similarities with the tech boom of the late 1990s—“a boom that turned out to be a huge bubble,” he wrote.He went on to highlight some unusual market behavior surrounding AI-related stocks—primarily, how they shot back up quickly following a period of decline. Krugman theorizes this is likely due to predictions that the Federal Reserve would cut its rates next month.“Analyst chatter about supposed causes of stock market swings should always be taken with many grains of salt,” Krugman said. “But it’s clear that this surge was catalyzed by remarks by Fed officials which the market interpreted as making a cut in the Fed Funds rate next month more likely.”Krugman warned that Trump would not be able to lead the U.S. through this unpredictable economy."
SINCE THEY ARE ADDICTED TO BUBBLES THE TECHBOOMERS WILL PLAY SURPRISED WHEN IT COLLAPSES JUST AS THE BANKS DID IN 2008
Easy prediction. Allow me to republished what I presented to the Canadian chapter of Club of Rome (Future Follies)
In today New York Times we are sternly reminded that in late 2008, at a meeting with academics at the London School of Economics, Queen Elizabeth II asked why no one seemed to have anticipated the world’s worst financial crisis in the postwar period. The so-called Great Recession, which had begun in late 2008 and would run until mid-2009, was set off by the sudden collapse of sky-high prices for housing and other assets — something that is obvious in retrospect but that, nevertheless, no one seemed to see coming.
All the experts in the audience made approval little noises. For once experts admitted they were wrong but for a good reason: nobody could have predicted the melt down. They all shook their heads in disbelief starting with the mighty former Federal Reserve Chairman Alan Greenspan.
On October 24th 2008, he explained he was “shocked” at the breakdown in U.S. credit markets Shocked and deeply surprised! Shaking his head he repeated that a crisis of this magnitude was unpredictable. “We cannot, he humbly muttered, expect perfection in any area where forecasting is required. We have to do our best but cannot expect infallibility or omniscience.” Three weeks later, Treasury Secretary Henry M. Paulson Jr. added to the point “We, he said, are going through a financial crisis more severe and unpredictable than any in our lifetimes”. ?
The remarkable feature of these words is they were uttered with a straight face, impervious to the rather predictable flurry of journalistic scrutiny[1] which was not long to dig up a list of analysts who had for a long time predicted the so-called unpredictable with some variations in style: from Paul’s Krugman’s bold clear statements to Nouriel Roubini’s detailed scenario[2] not forgetting Jeremy Grantham’s metaphor of “watching a very slow motion train wreck”[3] or Michael Hudson, Charles Morris [4] or Robert Shiller[5]. The list of accurate forecasters is long although not long enough considering the magnitude of a phenomenon which with hindsight appears so inevitable. But at the time, their warnings were dismissed, laughed at and ridiculed in the circles of power and its devoted press. Grantham was dismissed as an old pessimist; Krugman was accused to be ideologically biased. Roubini nicknamed “Dr Doom” became an entertainer at rubber chicken dinners, delighting those who revel watching catastrophic movies from the comfort of their home movies theaters.
Some insiders were also worried; Bernake himself had been warning for the last year Henry M. Paulson Jr., the Treasury secretary, that the worsening situation might ultimately force a sweeping federal intervention[6]. Lower profile analysts working directly for Greenspan and Paulson has been raising a flag of various tone of red for years. Analysts of Citi Group expressed concerned[7]. According to an Associated Press review of regulatory documents, remarkably prescient warnings foretold the financial meltdown.[8] [9]
What happened to these forecasters, futurists, analysts, professors? At best they were ignored. At worst they were they were fired. They were modern Cassandras.
Who was Cassandra[10]? A beautiful woman who was unlucky enough to irate a powerful lover, Apollo. He gave her the power of prophecy but deprived her of the power to persuade. Conform to the curse, she foresaw the danger posed by the Trojan horse; the people of Troy, ignored her warnings and the Greek soldiers hiding inside the horse were able to capture the city. The Troyans, the legend says, were all the more impervious to any warning as they drank themselves to a state of “irrational exuberance”.
Fate was implacable. There was nothing to do except what Cassandra did: pulling her hair out.