Terrific graphic from Der Spiegel:
Graphic courtesy of Der Spiegel
“White recognized the brewing disaster. The analysis department at the BIS has a collection of data from every bank around the globe, considered the most impressive in the world. It enabled the economists working in this nerve center of high finance to look on, practically in real time, as a poisonous concoction began to brew in the international financial system.
White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market. To give all this money somewhere to go, investment bankers invented new financial products that were increasingly sophisticated, imaginative — and hazardous.
As far back as 2003, White implored central bankers to rethink their strategies, noting that instability in the financial markets had triggered inflation, the “villain” in the global economy.
Now White has been proved right — to an almost apocalyptical degree.
Hat tip Riverdaughter
THE MAN NOBODY WANTED TO HEAR: Global Banking Economist Warned of Coming Crisis
Der Spiegel, 07/08/2009
Beat Balzli and Michaela Schiessl