Lessons from financial crisis

There is one economic school of thought that has stood out as forecasters of the current crises, this is the Austrian School. The Austrian school, whose founders were mostly from Austria, believe in free market economics and commodity money. Two members of that school who saw the crises coming are Marc Faber and Peter Schiff. Peter Schiff has stood out more because he was more vocal and wrote a book foretelling in explicit detail why the recession would occur, when, and what mistakes he hoped the government would not make afterwards eg bailout of Fannie and Freddie Mae.

His book is called Crash Proof, how to profit from the coming economic collapse, it was written in 2006 and published in January 2007. He began appearing on various media networks like CNN, FOX and CNBC warning that a huge financial crisis was about to occur, beginning in the sub-prime sector, spill over into the wider mortgage market and bring down the entire US economy. He also stated that the recession would last not for quarters but for years. He was often ridiculed and laughed at for his dire predictions. If one is a fan of YouTube the videos “Peter Schiff was right” show him from 2005 - 2008 debating with other economists and financial “experts” about the state of the United States economy and the crises that loomed ahead. These videos are eye opening and show his incredible prescience. His website is www.europac.net and he also has regular video blogs.

In Wikipedia they have listed 12 economists and commentators who foresaw the crises of the late 2000s.

In Trinidad and Tobago I can recall the late Lloyd Best questioning why the then PNM government wanted to build an aluminium smelter plant at a time when there will be a global economic downturn.

Many so called experts did not see it coming, Even the late great economist Milton Friedman missed it. In a 2005 interview he said that the US was at its peak of its prosperity and that the US economy was in really great shape. This however is a stain on his somewhat impeccable legacy.

One also has to note that the same people who predicted the crises of 2008 foresaw the technology bubble bursting and even the stock market crash of 1987. However those who missed it also missed the previous collapses. What is most disturbing is that these so called experts are on television today ranting and carrying on like nothing happened.

The financial crises of 2008 have taught a lot. To see so many people not aware that a crisis of this magnitude was impending makes one wonder if they are wrong about other things. It has showed who knows what they are talking about and which school of economics seems to have things right. I find the Austrian school most insightful and anyone interested in economics can read about them at www.mises.org.

DUANNE WINCHESTER

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