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Why Didn't Anyone See It Coming?

IMG Auteur
Publié le 13 septembre 2012
877 mots - Temps de lecture : 2 - 3 minutes
( 13 votes, 4,9/5 ) , 8 commentaires
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Rubrique : Or et Argent





- And what do you do? - I ignore the biggest bubbles in history, ma'am...

SO, LIKE the Queen asked, why didn't anyone see it coming?

"At every stage," replied Professor Luis Garicano, showing Her Majesty the LSE's new £71 million ($140m) faculty building
in November 2008, "someone was relying on somebody else and everyone thought they were doing the right thing."

The British press snarled and barked at his sorry excuse for an answer. But given a few days – and then a few months, and then a few years – the economics profession finally got its explanation together...

"The simple response is that many people did see it coming."
- Prof.Garicano, defending himself in
The Guardian a week later

"Many people did foresee the crisis...but nobody wanted to believe [it]."
Open letter to the Queen, summarizing a Royal Academy seminar of experts, July 2009

"The answer is extremely simple: no-one believed it could happen."
- Mervyn King, governor of the Bank of England,
BBC Today lecture, July 2012 (no doubt reprising his own 2009 audience with Her Majesty)

So many people, such simplicity! But oh, so much disbelief too!

Contrary to what celebrity-economists would have you think, most people did in fact see the crash coming. Ask anyone you know. I promise they'll say they knew what was coming. It's just that, well, they didn't do anything about it. It wouldn't have been a crash if they had. Because they would have got out of the way, or – if they had any say in the matter – they would have done something (raising interest rates, trading more cautiously, reining back lending standards) to stall the bubble long in advance.

But contrary to the professionals again, a few people most definitely did believe it would happen. What else do you think drove the 150% rise in gold and silver investing prices in the half-decade before Northern Rock blew up? Reviewing global finance in the August 2007 edition of his Gloom, Boom & Doom newsletter, Marc Faber – a long-time advocate of buying gold – listed 13 clear warnings of trouble ahead, starting with the 2001-2006 period.

"Ultra-expansionary US monetary policies," wrote Faber of Alan Greenspan's response to the Tech Stock Bust, "with artificially low interest rates lead to bubbles all over the world and in every imaginable asset class.

"First Warning: The price of gold more than doubles..."

That red line marks the credit crunch of 9 August 2007, which all too rapidly for the all-knowing disbelievers became the Northern Rock bank run of 14 September. Over the preceding half-decade gold and silver had doubled in price. Over the following 5 years, they've both gone on to triple again.

So being early was smart – or lucky...or just doom-n-gloomy...depending on whether or not you got in. But buying even as the crisis broke has seen gold and silver investing deliver as expected, albeit with ugly swings in the meantime just to keep new buyers on their toes.

"I realised early in 2007 that the economy was going south," writes John, a BullionVault user since September 2007. "I had an endowment that was going sour, so I cashed it in and bought my gold."

Phillip, who also began buying gold when Northern Rock hit the headlines – 5 years ago this Thursday – says that "The high level of personal and public debt had concerned me since 2004, and I realised that there was only one solution: money printing and currency devaluation. But it was only in 2007 that I found BullionVault and saw how simple it could be to own gold."

"Given what's happened in the last 5 years," adds Armand, a British user of BullionVault since September 2007 who now lives in Spain, "I'm surprised more individual investors haven't bought bullion as a direct result of the crisis.

"I'm not a doomer, it's a question of confidence. To me, owning gold and silver is the only option in a financial environment heading for collapse in one of two ways: rapid, unexpected hyperinflation, or a long, drawn-out decline."

Now, that kind of gloom might sound all too common today. Newspapers and their comments section are after all full of savers moaning about zero interest rates, politicians panicking over money-printing, and economists and investment strategists fretting about hyperinflation. But look again at the first 5 years of this financial crisis. How many of the new know-it-alls – who now say they saw it coming – have actually done something about it, and chosen to buy gold or silver, the best-performing asset class by a country mile since 2007's credit crunch began?

Sure, precious metals might be edging into the presidential debate. But amongst investors and savers, they remain very much a minority sport. No doubt because, quite simply, no one really foresees the crisis continuing. And amongst those who do, no one believes it. Not enough to take action.

To quote
The Economist magazine's Free Exchange blog, 11 September 2012:

"We have learned that in most situations central banks are more than capable of controlling inflation on their own. Markets [today] show no sign of a fear of looming high inflation."

Phew! That's alright then. Economists and the financial markets don't believe there's a problem.



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Evaluer : Note moyenne :4,9 (13 votes)
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great article except the ads for bullion vault
Evaluer :   5  0Note :   5
We talk about the collapse in past tense but the BIG one is still yet to come. We're just in a bounce.
Evaluer :   11  0Note :   11
A simple question can sometimes explain more complex developments and now, in hindsight, it is the logical question to ask. Statements such as, "We didn't see it coming.", are relatively meaningless especially as Rome continues to burn. A more appropriate response to the economic carnage might have been, "Who stood to profit the most from the destruction of the economy?" and progressing along those lines, "Who did profit the most as institutions began caving in?" and along those lines, "What were those who profited big time up to before the destruction began radiating through our economy?"; but who am I to ask such impertinent questions? Just another schmo, oh, yeah, a schmo who managed to step out of the way when when those crooked roundhousers were landing fast and furiously on the trusting and unsuspecting American worker, investor and entrepreneur. I do not claim any special powers of acuity; yet I understand a simple but increasingly obscured truth. Free or easy money is never free or easy and when someone claims to have a line to the ultimate treasure, run the other way - quickly. I did.
Evaluer :   44  39Note :   5
Interesting to see you get hammered for your correct assertations Denny C............Its time for the cartels paid poison pen writers to accept the games up!!
Evaluer :   7  0Note :   7
Thanks, Phil. There was no boasting intended. I would imagine those who had a negative response were either seriously burned or profited themselves. I will continue to confine my financial moves to stepping out of the way when I feel it's necessary or to investing in a business which actually makes something other than money out of thin air. I refuse, heartily, to capitalize on someone's misery or even potential misery and will never, I hope, make money on the ruins and debris of what was once a thriving business. Sadly, there are too many vultures out there who like to pick through the remnants of someone else's life work and sometimes they make moves which insure failure so they can skip happily away with a fistful of cash. That's not capitalism to me. That's cannibalism and it's much too late in the game for that kind of financial activity to be running rampant. Capitalism, if anything, is a process which builds and hopefully, provides. It just takes hard work and sacrifice to get there at times. There's a lot of work to do, a lot of repairs to make and a lot of business practices which need to be thrown on the ash heap. I am satisfied with the response, though. At least there are still folks out there who pay attention. Guess I must be doing something right.
Evaluer :   9  1Note :   8
To quote John Maynard Keynes:"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."
Evaluer :   3  0Note :   3
Here-here Gypsy!! I too read the Mogambo's warnings in late 2005 (after Katrina hit) and took heed. Most of the close associates that I relayed that warning to looked at me as if I'd joined some religious cult. Within a couple of years they had that look in their eyes of "Why didn't you shake me 'til I rattled and listened"!
Evaluer :   4  0Note :   4
The great Mogambo Guru, Richard Daughty (probably retired now) warned us all (the Daily Reckoning site) The Collapse was coming ~ way back BEFORE the crash of 2007. Many of us heeded his warning ~ gathered up whatever resources we could and bought gold.

In my opinion, those Gigantic Money-Sucking Squids were/are greedy and they decided they wanted more and more money, Money, MONEY. Upon learning their activities were crashing the economy, they decided to ignore those facts and continue grabbing all the money they can. It's not that those Banksters didn't see it coming: it's that The Great Collapse is only a Side-Issue, more like a Navigational Hazard to those Too Big To Fail ~ who dodged around (avoided, bypassed, evaded) that issue to get to their goal of getting ALL the Money. As you can see: it worked.
Evaluer :   9  0Note :   9
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To quote John Maynard Keynes:"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." Lire la suite
The Recusant - 14/09/2012 à 19:46 GMT
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