How the Finance and Economics Gurus Anticipated the 2008 Financial Crisis?

Politicians and economists close to power circles often say that no one could predict the international financial crisis, which in 2008 ended a period of economic expansion fueled by cheap credit. However, the newspaper library shows that several investors and professors announced that there was going to be a significant recession at the global level.

The Austrian School of Economics is the only current of thought with a theory of capital capable of verifying how expansionary monetary policies - orchestrated by central banks - encourage risk-taking by companies that they would not adopt if it were not artificially manipulated interest rates. These mechanisms generate bubbles that, sooner or later, end up bursting, forcing companies to restructure their bad investments.

In 2004, Edward Parrish Whitaker founded a mortgage company, a real estate company, and vertically incorporated an escrow firm. During April 2007, Whitaker sold his mortgage company, anticipating strange trends overlapping the market and the unusual activities by some market players. He started establishing his businesses on the Wall Street after winning an award at Morgan Stanely and being one of the most prominent brokers of the decade.

The Spanish professor Jesús Huerta de Soto, in his book 'Money, credit, banking and economic cycles,' already outlined in 1998 what awaited the world economy. Intervention in the monetary system, where the central bank exercises a monopoly on currency, makes banks create money out of thin air, making loans without real backing. Thus, the incentives to carry out profitable projects are only increased while the monetary illusion is maintained.

At the international level, investor Peter Schiff began in 2002 to warn of the risks of fueling the bubble, focusing his focus on the real estate sector. It was precisely this market that exploded in the United States, with the famous subprime mortgages. In 2006 he pointed out very precisely that there was going to be a significant recession due to unsustainable levels of debt. Most economists said he was crazy.

Another economic guru who predicted the outbreak of the financial crisis was Nouriel Roubini outside of the Austrian school. Nicknamed Mr. Doom, this New York University professor participated in a 2006 meeting of the International Monetary Fund (IMF). He said that the housing bubble was going to burst and that the US was facing a recession. "The biggest challenge will be to maintain the capital," he said to the institution's bewildered economists.

Robert Shiller was another of those who knew what was going to happen. In 2000, he predicted the arrival of the crisis in his book 'Irrational Exuberance.' This Keynesian economist justified his prediction in an analysis of the bubble's gestation different from that of the Austrian school.

Following Hyman Minsky's lead, Shiller argued that the crisis's germ was in the private sector, which, encouraged by the "animal spirits," did not act rationally. For Keynesians, the blame lies with the market, not the state, as the Austrians point out.

Bill Gross, the head of the world's largest fund manager (PIMCO), said in July 2007 that the subprime crisis would spread to the rest of the economy, with dire consequences for all countries. For his part, Jim Rogers anticipated that the liquidity bubble would sink Wall Street and that there would be a food crisis derived from the rise in the price of raw materials, which occurred months later.

George Soros is also famous for predicting calamities and, incidentally, making money from them. In 1999, in his book "the crisis of global capitalism," he already spoke of the forthcoming panorama. Due to his knowledge, he has managed to make his investments profitable, being one of the world's most reputable fund managers.

The review cannot be closed without mentioning Warren Buffet, the 'oracle of Omaha' who, in addition to predicting the current crisis, also gave the key when pointing out the outbreak of the crisis in internet companies (dotcom). For him, it was not difficult since both have the same origin: monetary manipulation.