Foresight and Fait Accompli: Two Timelines for the Global Financial Collapse.

Vote for three



Steve Keen concludes his JPKE paper “Finance and economic breakdown: modelling Minsky’s ’financial instability hypothesis’” as follows:

There are, however, severe doubts as to whether the kind of government that has been constructed over the last thirty years is a sufficiently powerful or balanced stabilizer to capitalist investment behaviour.

            From the perspective of economic theory and policy, this vision of a capitalist economy with finance requires us to go beyond that habit of mind that Keynes described so well, the excessive reliance on the (stable) recent past as a guide to the future.  The chaotic dynamics explored in this paper should warn us against accepting a period of relative tranquillity in a capitalist economy as anything other than a lull before the storm. [emphasis added]



 Wynne Godley in a paper with L. Randall Wray argued that the current stability in the US economy was unsustainable, because it was driven by the growth of households’ debt, which in turn was fuelled by real estate capital gains.  Using an accounting framework of the US economy developed by Godley, they predicted that when debt growth slowed down – as it inevitably would within years -, growth would stop.  


 Kurt Richebächer in September 2001 wrote:

the new housing boom is another rapidly inflating asset bubble financed by the same loose money practices that fuelled the stock market bubble. 



 Dean Baker in August published “The Run-Up in Home Prices: Is It Real or Is It Another Bubble?” in which he said:

While the short-term effects of a housing bubble appear very beneficial—just as was the case with the stock bubble and the dollar bubble—the long-term effects from its eventual deflation can be extremely harmful, both to the economy as a whole, and to tens of millions of families that will see much of their equity disappear unexpectedly. The economy will lose an important source of demand as housing construction plummets and the wealth effect goes into reverse. This will slow an economy already reeling from the effects of the collapse of the stock bubble of 1999, … Unfortunately, most of the nation’s political and economic leadership remained oblivious to the dangers of the stock market and dollar bubbles until they began to deflate. This failure created the basis for the economic uncertainty the country currently faces … [which] will be aggravated further by the deflation of the housing bubble. This process will prove even more painful if the housing bubble is allowed to expand still further before collapsing.



 Jakob Brøchner Madsen (month unknown) wrote:

I am very pessimistic. We are heading into something in the world which is worse than what we experienced in 1982. It will be the worst recession since the Second World War”.

 Ann Pettifor in August published in Open DemocracyThe Coming First World Debt Crisis”.  The article, which focused on “a giant credit bubble”, began:

The reckless financial policies of leading western powers in the last two decades make it likely that the next seismic debt crisis will be in America, not Argentina. It can be avoided . . . only by serious efforts to bring regulation and balance to the international economy.

 Ann Pettifor in September published her edited collection Real World Economic Outlook: The Legacy of Globalization: Debt and Deflation, which examined the growth and new dominance of the financial sector. Contributors included Dean Baker, Herman Daly, Wynne Godley, Michael Hudson and Joseph Stiglitz

Pettifor’s introduction said:

Removing controls over the finance sector paved the way for its rise to dominance, which in turn has led to a transformation of the global economy and increased instability.

 [One of] the consequences for the global economy [is an] enormous increase (or ‘bubble’) in the stock of financial assets in relation to the real economy, as measured by GDP or the stock of physical, human, and technological capital.

 There will be a collapse in the credit system in the rich world, led by the United States

 Once default rates approach 1 per cent of the value of the debt across the whole lending spectrum, the profitability of banks is called into question. If default rates reach 2 per cent, the probability of a financial crisis rises appreciably.

 Also in September, Pettifor restated her arguments for a forthcoming global financial collapse in a cover article for The New Statesman magazine.

 Dean Baker published in the Los Angles Times on December 3 “Who to Blame When the Next Bubble Bursts. This was the first of dozens of columns that Baker wrote on the bubble. (most can found at


 Dean Baker’s column “Building on the Bubble” in May appeared in six US newspapers. He wrote:

The fact that people are borrowing against their homes at a rapid rate (more than $750 billion in 2003) is more evidence of an unsustainable bubble. The ratio of mortgage debt to home equity is at record highs.

This is especially scary because equity values may be inflated by as much as 30 percent due to the bubble,

 Michael Hudson in June presented at an academic conference the paper “Saving, Asset-Price Inflation, and Debt-Induced Deflation”. He noted that the ‘large debt overhead – and the savings that form the balance-sheet counterpart to it” is the ‘anomaly of today’s [US] economy’.  He warned against the ‘self expanding growth of savings’ and the unsustainable ‘growth of net worth through capital gains’ induced by US monetary and tax policies.  He said that the:

natural limit to the process was reached in 2004 when the Federal Reserve reduced its discount rate to 1 percent. Once rates hit this nadir, further growth in debt threatens to be reflected in draining and amortization payments away from spending on goods and services, slowing the economy accordingly. 

 Dean Baker sponsored through the CEPR a $1,000 essay contest to solicit the most-convincing argument that the housing market was not in a bubble.  The contest was twice written up in the New York Times.

Jakob Brøchner Madsen (month unknown) wrote:

 There is something completely wrong. We are seeing large bubbles and if they bust, there is no backup. House prices and shares are completely out of proportion. And it will go wrong.


 Dean Baker and Paul Krugman in March predicted in a paper written with J. Bradford DeLong that asset prices in the US were bound to fall in the medium term.

 Robert Shiller in May in the Introduction to the second edition of his book Irrational Exuberance warned that home prices were looking “very anomalous” and that:

further rises in the [stock and housing] markets could lead, eventually, to even more significant declines… A long-run consequence could be a decline in consumer and business confidence, and another, possibly worldwide, recession. This extreme outcome … is not inevitable, but it is a much more serious risk than is widely acknowledged.

 Paul Krugman on 27 May wrote in his NYT column:

If housing prices actually started falling, we’d be looking at [an economy pushed] right back into recession. That’s why it’s so ominous to see signs that America’s housing market … is approaching the final, feverish stages of a speculative bubble.

 Nouriel Roubini in summer 2005 predicted that real home prices were likely to fall at least 30% over the next 3 years.

 Steve Keen in December, drawing heavily on his 1995 theoretical paper “Finance and economic breakdown: modelling Minsky’s ‘financial instability hypothesis’” and convinced that a financial crisis was approaching, decided to go very public with his analysis. He registered the webpage dedicated to analyzing the “global debt bubble”.  His site soon attracted a large international audience.  At the same time he began appearing on Australian radio and television with his message of approaching financial collapse.

 Jakob Brøchner Madsen (month unknown) wrote:

 I feel lost. Money growth is increasing, oil and commodity prices have doubled in the last 10 years. Therefore inflation and interest rates should increase, but nothing happens. All the models we use to predict inflation have broken down, it is chaos.


George Soros in January on CNBC television said:

There’s (a) problem that I think is brewing, and that is the end of the housing boom in the United States and the ability of households to spend more than they earn because the value of their house is rising.

So I expect that by ‘07 there will be a significant decline in U.S. consumer spending and I don’t see what will take its place because it’s so important as a motor of the world economy.

 And to an audience in Singapore Soros said:

the soft landing (for the US economy) will turn into a hard landing. That’s why I expect the recession to occur in 2007 not 2006.

 Michael Hudson in April published ‘The Road to Serfdom: An Illustrated Guide to the Coming Real Estate Collapse’, in Harper’s Magazine. In it he wrote:

almost everyone involved in the real estate bubble thus far has made at least a few dollars. But that is about to change. The bubble will burst… America holds record mortgage debt in a declining housing market… For those who bought at the top and who now face decades of payments on houses that soon will be worth less than they paid for them, serious trouble is brewing. …. Rising debt-service payments will further divert income from new consumer spending. Taken together, these factors will further shrink the “real” economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagnation or worse.

 Wynne Godley in May in a paper with Gennaro Zezza, “Debt and Lending: A Cri de Coeur”:

demonstrated again the US economy’s dependence on debt growth and argued that only the small slowdown in the rate at which US household debt levels were rising, resulting form the house price decline, would immediately lead to a “sustained growth recession … somewhere before 2010

 Kurt Richebächer in July wrote in his newsletter:

The one thing that still separates the U.S. economy from economic and financial disaster is rising house prices that apparently justify ever more credit and debt”…

 … a recession and bear market in asset prices are inevitable for the U.S. economy. … This will not be a garden-variety recession, in which monetary easing unleashes pent-up demand, as it used to do in past business cycles”.

 … the great trouble for the future is that the credit bubble has its other side in exponential debt growth

 The U.S. liquidity deluge of the last few years has had one single source: borrowing against rising assets backed by the Fed’s monetary looseness… all hinging on further rises in asset prices. But they are going to plunge.

Michael Hudson published his paper “Saving, Asset-Price Inflation, and Debt-Induced Deflation”.

 Joseph E. Stiglitz et al. in August 2006 published Stability with growth: macroeconomics, liberalization and development which includes a chapter on “capital market failures” that looks “at how capital market liberalization can exacerbate the problems posed by coordination failures and broader macroeconomic failures” [p. 189]

 Robert Shiller on August 30, writing with K. Case in the Wall Street Journal, said:

there is significant risk of a very bad period, with slow sales, slim commissions, falling prices, rising default and foreclosures, serious trouble in financial markets, and a possible recession sooner than most of us expected.

 Nouriel Roubini  on August 23, 2006 wrote:

By itself this [house price] slump is enough to trigger a US recession.

On August 30 he wrote:

The recent increased financial problems of … sub-prime lending institutions may thus be the proverbial canary in the mine – or tip of the iceberg – and signal the more severe financial distress that many housing lenders will face when the current housing slump turns into a broader and uglier housing bust that will be associated with a broader economic recession. You can then have millions of households with falling wealth, reduced real incomes and lost jobs…

Like Baker and Keen, Roubini now put out repeated public warnings of the systemic implications of the housing bubble. 

Kurt Richebächer in September 2006 wrote:

There is no question that the U.S. housing bubble is finished. All remaining questions pertain solely to speed, depth and duration of the economy’s downturn.

 Ann Pettifor in October published her book The Coming First World Debt Crisis, an extension of the analysis she had presented in 2003 and which detailed legislation needed to avert the coming collapse.  She summarized her book’s analysis in articles for The Guardian and Open Democracy.

October – The boom in US house prices begins to reverse its course.  Defaults on home mortgages approach record levels.

 Joseph E. Stiglitz on October 30 on the Alex Jones radio show discussed the warning signs of plummeting real estate prices in the U.S. and the possibility of a global economic downturn. He said:

If it’s well managed it will only be a slow-down, if it’s not well-managed it could be a recession,


….I think we can avoid an implosion if we manage this carefully but it’s going to be very risky

 Steve Keen in November began publishing on his monthly DebtWatch Reports (33 in total). These were substantial papers (upwards of 20 pages on average) that applied his previously developed analytical framework to large amounts of empirical data. Initially these papers analyzed the GFC that he was predicting and then its realization. His first report was titled “The Recession We Can’t Avoid?”.

 Dean Baker in November, published the paper “Recession Looms for the U.S. Economy in 2007” (  in which he forecasts that weakness in the housing market was likely to push the economy into a recession in 2007, predicting -0.7 % GDP growth over 2007, Baker wrote:

The wealth effect created by the housing bubble fuelled an extraordinary surge in consumption over the last five years, as savings actually turned negative. …This home equity fuelled consumption will be sharply curtailed in the near future…. The result will be a downturn in consumption spending, which together with plunging housing investment, will likely push the economy into recession….Over the course of the year, the economy will shed 1.2 million jobs.”

 Nouriel Roubini in a Nov 17 blog said:

[t]he housing recession is now becoming a construction recession; and the construction recession is now turning into a clear auto and manufacturing recession; and the manufacturing recession will soon turn into a retail recession as squeezed households – facing falling home prices and rising mortgage servicing costs – sharply contract their rate of consumption.

 Steve Keen’s December report, titled “The runaway train of debt”, concludes:

Clearly households can’t go on like this. At some point, whether voluntarily or by duress, households have to stabilise, and preferably substantially reduce, their level of debt. They can only do this by either significantly reducing spending, or by liquidating assets. Long before this process actually causes the debt burden to fall, the economy will be in a debt-induced recession.

 Paul Krugman on 4 December in the NYT wrote

Right now, statistical models based on the historical correlation between interest rates and recessions give roughly even odds that we’re about to experience a formal recession.

 2007 (The GFC becomes a fait accompli)

 Steve Keen continues through the year with Debtwatch Report.

February – The decline in US house prices accelerates. HSBC issues its first profit warning in its 142-year history, citing bad debts in its US subprime unit.

April – New Century, the US’s largest subprime lender, goes bankrupt.

Wynne Godley in April foresaw output growth “slowing down almost to zero sometime between now and 2008 and then recovering toward 3 percent or thereabouts in 2009–10”; but warned that “unemployment [will] start to rise significantly and does not come down again.”

July – Investment bank Bear Stearns reveals it has made huge losses in two of its hedge funds.

August – Banks around the world begin to disclose that they too have large holdings in mortgage-backed securities.

September – British bank Northern Rock requests emergency funds, prompting a run on the bank.

Steve Keen on 14 September published, with the Centre for Policy Development, a 79 page report “Deeper in Debt”, analyzing the causes of the financial breakdown in the US and the possibility of it spreading to Australia.

October – Citigroup reports subprime related losses of $40bn.

George Soros in early November in a lecture at New York University said that after decades of overspending the U.S. economy is “on the verge of a very serious economic correction”

 Wynne Godley and others in November 2007 predicted “a significant drop in borrowing and private expenditure in the coming quarters, with severe consequences for growth and unemployment”.


 George Soros in January at Davos said:

The current crisis is not only the bust that follows the housing boom,… It’s basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency.

March – Bear Stearns collapses and, days later, is sold to JP Morgan Chase for just $2 a share.

September 14 – Mortgage lenders Fannie Mae and Freddie Mac are rescued in one of the largest bailouts in US history.

September 15 – Lehman brothers files for bankruptcy, prompting panic as investors had assumed the US government would prevent a bank of Lehman’s size – it was the US fourth largest investment bank – from going under.

As Merril Lynch approaches insolvency, it is bought by Bank of America for $50bn.

September 16 – Credit rating agencies downgrade status of AIG, America’s largest insurer. The US Federal Reserve loans the AIG $85bn and takes an 80 per cent stake.

September 19 – Henry Paulson, then US treasury secretary, unveils plan to use taxpayers’ money to stabilise firms and buy up toxic assets.

September. 29: Dow suffers largest ever one-day drop.

September to October – In the space of a month, banks around the world, notably HBOS, Royal Bank of Scotland, Washington Mutual, Fortis, Hypo Real Estate and Landsbanki, collapse.

October. 6: Dow drops below 10,000 for the first time since 2004.

October. 9: Dow falls below 9,000.

November. 19: Dow drops below 8,000 for first time since 2003.

November 25 US Fed announces further $800bn stimulus.

November 28The IMF approved a $2.1bn loan for Iceland.


 Januay. 29: US jobless claims hit all-time high.

March – Stock markets hit record lows, wiping out gains made since 1997. The Dow drops below 7,000.


* In compiling the Foresight Timeline, much use has been made of  Dirk Bezemer’s outstanding paper ‘“No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models’. Bibliographic details may be found therein.

  1. April 1, 2010 at 12:24 pm

    THanks for the Paul Revere Award competition. I congratulate Ann Pettifor and Steve Keen as well as the others who warned about this problem. It is important to recognise that for marxists, who read Marx and Lenin, the system is well known to have several other sources of instability. For example you can have an underconsumption crisis which is very painful for the people experiencing low incomes. You can have an inflation crisis, sometimes caused in part by well-intentioned populist gov’t policies. And finally there is the overall grim reaper of nature’s loss of animal species and insects, which is growing only in its obviousness – the seeds of this environmental disaster arose long back in the proponents of economic growth and rampant industrialisation for many DECADES of this, the previous, the previous and the previous Centuries. So I did not find our financial crisis as surprising as some ‘social democracy’ advocates did.

  2. April 1, 2010 at 2:43 pm

    You should add my 1997 article to the timeline. I wrote on “The Business Cycle” in the October 1997 issue of the American Journal of Economics and Sociology. I presented a theory of the business cycle, applied it to the history of depressions, and based on the theory and evidence, forecast the precise year of the crash of 2008. I publicly repeated my forecast many times. See

    My 1997 article is The Business Cycle: A Georgist-Austrian Synthesis.” American Journal of Economics and Sociology 56 (4) (October 1997): 521-41.

    Fred Foldvary, Santa Clara University

  3. M. Philippens
    April 1, 2010 at 2:58 pm

    You missed “The Housing Bubble Fact Sheet” from Dean Baker (July 2005), which even predicted the bail-outs.

  4. John McDonald
    April 2, 2010 at 2:48 am

    Thanks for the time-lines. I have not read many of these sources, but have read a few others not listed.

    Are you considering a future time-line and award geared toward the current writers who are arguing in one way or another that you can’t solve a private-debt-bubble-crisis with a public debt bubble?

    Cheers, John

  5. April 2, 2010 at 5:06 am

    Thanks! This was really interesting.

    Next time around, I hope the list of forewarnings will be a lot longer, and that as a result everyone will be wrong.

    Stephan A. Jensen, Tallinn University of Technology

  6. April 6, 2010 at 9:05 am

    Fred Harrison (with Frederic J Jones) in ‘The Chaos Makers’ (1997) warned of a property induced collapse at the end of 2007 based on his study of real estate cycles. This was repeated in 2005 in ‘Boom Bust: House Prices, Banking and the Depression of 2010’ the latter date being the trough.

  7. michael walker
    April 8, 2010 at 9:32 pm

    I am so frustrated by you guys. You claim to be an alternative to the status quo. I question this as your list is totally euro-anglo centric. Prabhat rainjan sarkar(Indian social and spiritual philosopher) was predicting this financial sector colapse back in the 1980’s. One of his students Ravi Bhatra even wrote a noteworthy book called “the great depression of 1990”. If you can’t think outside the square, make no mistake that you are supporting the status quo as well as any conservative economist. Try reading some PROUT theory. Otherwise, thanks for trying to broaden the debate on economic theory and practise.

    • Robert Locke
      August 12, 2013 at 5:20 am

      Thread # 7. “your list is totally euro-anglo centric” Correct, the problem in this blog is, even with dissent, what is being “globalized” is the euro-anglo centric view, when globalization in thought should mean the inclusion of the non-euro-anglo centric view. This problem in the thought structure will be taken care of automatically as the wealth shifts away from euro-anglo centricity. In the meantime learn another language.

  8. May 22, 2010 at 4:09 am

    The new quantitative nonlinear science of nonstochastic Saturation Macroeconomics prospectively predicted the exact high for the global macroeconomy’s proxy asset valuation marker, the composite formerly 16 trillion dollar Wilshire, on 11 October 2007.

  9. Jim
    January 19, 2012 at 8:45 pm

    I like Stiglitz a lot but I’m not impressed that he appeared on the Alex Jones radio show. Alex Jones is a conspiracy theorist whose ideas are at best obscure and at worst dangerous.

  10. Dave Taylor
    January 20, 2012 at 10:22 am

    @ #2: I’ve had a few ding-dongs with Fred Foldvary, so I’ve been delighted to discover this comment, gain access his work and get a fuller understanding of his viewpoint. Reading the very interesting 1997 article he referenced there, his comment in 2010 had a point.

    Fred, I appreciate your argument and what I am going to say doesn’t affect the point of it. From my point of view it is not a THEORY of the business cycle: it is a PROPOSITION that there is one and an application of the NEO-CLASSICAL theory to the analysis of the causes of it. My idea of a Theory of the Business Cycle would have as its major premise that business involves cycles and a minor premise that different economic activities operate on different timescales, from which (using the Fourier transformation of spectrum analysis) it follows mathematically (and can be heard musically) that cumulative peaks and troughs will occur if the dominant peaks (as in tunes rather than timbre of different instruments) occur at the same time. The focus is then on the conditions of continuity of business (circuital paths) and failures of continuity (as when the piper calling the tune loses it and the orchestra can’t maintain its harmonising). One crucial point we have of agreement is that there is more (e.g. land) to economics than money, though its continuity only follows if it includes people consuming and working to regenerate their supplies. We agree part of the solution is George’s land free of rent, but the concomitant is surely Gesell’s money free of interest rather your Austrian “freedom of banks” to operate on neo-Classical lines.

    • January 20, 2012 at 10:51 am

      Gesell is interesting in that he, uniquely it seems to me, ‘got’ both the land and money thing and had solutions for both.

  11. Alice
    January 20, 2012 at 11:27 am

    The reality is there were so MANY warnings but still those economics who sat at the rigns of power clutching on to their free market, excessive de-regulation visions of libertaria planted firmly in their head by “free to choose” Friedman and “the grass is so much greener and the sun so much brighter in the utopia of my supremely economic intellect Greenspan”..

    that their true believers and dedicated followers even turned around after the crash and said ” we didnt see it coming”.

    Neither do drunk drivers.

  12. January 20, 2012 at 12:04 pm

    I picked up this from a libertarian FaceBook friend: As I commented, since the Austrian school considers unemployment as voluntary – workers just preferring not to work for the wages on offer, I guess the solution is to abolish the minimum wage and the benefits available for the unemployed and force workers to take the pittance offered by their betters. I look forward to his response in due course.

  13. james hilferty
    April 2, 2012 at 11:26 am

    the Neo-classicals can’t be as stupid as they pretend as they are the the ones with the money. It all started with Milton Friedman trying to re-introduce slavery for the masses (globalisation) and his charter for C.M.E. ( if Milton says it’s true; then its true) even if it’s wrong to the Black – Scholes stupid formula.
    jim hilferty

  14. August 11, 2013 at 4:10 pm

    Lord Turner in his 500 page investigation into the demise of the Royal Bank of Scotland’s dreams of Empire; completely missed out the real reason for it’s downfall but he made the rather truthful statement that he had found a forty four year old “Fatal Flaw” in economic theory and try and guess what that was? Now this raises two pertinent questions: why did it take so long, and why did he miss out the real reason for RBS’s downfall? In my humble opinion things went badly wrong with Milton Friedman and the rest of those deluded Chicago School of Bad economist.

  15. August 12, 2013 at 7:42 am

    An old ancient Roman saying “success has many fathers; but failure is always an orphan” and so it is with that foundation stone of our financialised world and it’s strangely named “Toxic Assets”. The Black- Scholes formula is now an orphan, and no one wants to be associated with it; Krugman and Stiglitz say that it was only a financial metaphor of an “idealised” world ,a bit like Eugene Fama’s “Efficient Market Hypothesis” and note that the noun should be assumption but this leads on to the new in word; “hypothecate”.The financial lunatics have indeed taken over.

  16. Bruce E. Woych
    August 13, 2013 at 12:58 am
    “The financial industry, chemical industry, drug companies, nuclear industrial complex and dirty energy empire work “like tumor cells for the relentless destruction of the environment that they themselves depend upon for their very lives. And the rest of us stand by and watch it happen.”
    This is a joke,…right? We only noticed the ‘financial’ disaster?

  17. Bruce E. Woych
    August 13, 2013 at 1:09 am

    “As mindless, amoral, and unbridled as a malignancy destroying its host, Exxon-Mobil, TransCanada, Peabody Energy, Koch Industries and the like employ hundreds of thousands of people working like tumor cells for the relentless destruction of the environment and climate that they themselves depend upon for their very lives. And the rest of us stand by and watch it happen. In fact, if we work for a bank, we may not only be watching it happen, we may be loaning them the money to make sure it happens.”
    Fait Accompli?
    And we sit here quibbling over what cult of personality predicted financial Armageddon!
    I think Robert Locke’s recent phrase: …” the willfully ignorant” might be apropos, along with the woefully blind !

  18. Bruce E. Woych
    August 13, 2013 at 1:26 am
    [with transcript from TRNN]
    Scientists Warn Arctic Methane Release Would Cost $60 Trillion

  19. Bruce E. Woych
    August 13, 2013 at 8:50 pm

    Margaret Heffernan: The dangers of “willful blindness”
    “The former CEO of five businesses, Margaret Heffernan explores the all-too-human thought patterns — like conflict avoidance and selective blindness — that lead managers and organizations astray.”

    Why you should listen to her:

    “How do organizations think? In her book, Willful Blindness, Margaret Heffernan examines why businesses and the people who run them often ignore the obvious — with consequences as dire as the global financial crisis and Fukushima Daiichi nuclear disaster. Heffernan’s third book, Willful Blindness was shortlisted for the Financial Times/GoldmanSachs Best Business Book award in 2011.”

  20. Bruce E. Woych
    August 14, 2013 at 1:39 am

    Wall Street Take-Off: 2012 – 2013
    August 13th, 2013
    James Petras
    “The financial crash of 2008-2009 and the Obama bailout, reinforced the dominance of Wall Street over the US economy. The result is that the parasitic financial sector is extracting enormous rents and profits from the economy and depriving the productive industries of capital and earnings. The recovery and boom of corporate profits since the crises turns out to be concentrated in the same financial sector which provoked the crash a few years back.”

  21. davetaylor1
    August 17, 2013 at 10:23 am

    Thanks for these links, Bruce, especially for the Margaret Hellernan ones on Wilfull Blindness and the association with “wilfull ignorance”. I “dare to disagree” a little with Margaret and Robert on that, though Margaret’s reference to the legal status of the concept makes me wonder why the boards of offending companies are not being accused of genicide in the courts with that the argument against any defence.

    I disagree to the extent that knowledge being freely available is not enough: one needs to be able to understand it. While Margaret and Robert clearly do, 85% of the population clearly don’t and become impotent not as a direct result of personal will, but because they are genetically inclined and culturally programmed to see clearly only what is before their eyes and not the implications and possibilities of it. Hence their fear of the unknown and my own programme: using a diagram simple enough for a child to understand as a skeleton on which we can hang, locate and hence compare and integrate our different experiences. Sounds difficult, but its rather like using the arabic numbering system instead of having to agree on a different name for every number.

  22. September 6, 2013 at 6:15 pm

    It was the mathematicians who were mostly responsible for the financial crash as they failed to understand their own sum; The Black-Scholes formula; now as far as I know no one in the world can do this stupid sum and there is one very good reason for this; the maths are utter rubbish and any half decent mathematician should have realised this years ago but unfortunately because Milton Friedman, Eugene Fama and the rest of the Chicago School of bad economists backed it the other economists were afraid to contradict them.

  23. November 25, 2014 at 3:03 pm

    The Economists are just too stupid to do the Maths; but the Mathematicians don’t understand the Economics and just to illustrate this; ” I will tell a true story.” The so-called greatest mathematician in America and I did a derivation of The Black-Sholes Formula (supposed to evaluate the true price of future Options) and he gave it a clean bill of health but strangely enough he did the wrong sums and no one noticed. He actually did; now wait for it; “The Dynamic Delta Hedging Self Financing Replicating Portfolio of the B.-S. Formula” and not the real formula itself rather strange I thought. There is a hint in the Interest rate that this so.
    I have often wondered what the above formula looked like and now we all know. I tried to figure how he could have been so foolish and then it dawned on me; it was the smart move as there is only one Fatal Flaw in his derivation but if he had done the correct sum there are about Seven Fatal Flaws in it and surely some one would have noticed.
    The B.-S. formula is not difficult to do if you use “The Hilferty – Tamroe formula for Fighting Financial Fraud” for the B.-S. formula is just that, a gigantic Fraud .

  1. May 13, 2010 at 12:54 pm
  2. May 13, 2010 at 1:47 pm
  3. August 9, 2011 at 11:42 pm
  4. October 24, 2013 at 12:57 pm

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