William White: Canadian Economist Warned Of Coming Crisis, And Was Ignored

International:

William White predicted the approaching financial crisis years before 2007's subprime meltdown. But central bankers preferred to listen to his great rival Alan Greenspan instead, with devastating consequences for the global economy.

Read the whole story: International

Comments

[funkalicious]

I'm a carpenter and have been on the BIS email list serve for quite a few years now.
Amazing to me that the morons at the FED have completely abrogated any and all responsibility and claim that they were ignorant of the facts of the destructive power of derivatives.

Pile on the fact that we as a nation have cast a blind eye on the regulation of the mortgage markets and used mortgages as one of the main drivers of money supply growth.. Japan melted down for decades when they tried it. Historically this has been folly.

If a guy who's job it is to hold a nail can figure this out why can't the so called geniuses at the FED who have piled it high and deep and read and written volumes on the subject get it so wrong?

[marijam]

Ok. So he knew THEN what would happen. What I want to know is this, what does he think is going to happen NEXT, if we don't do X, Y and Z. And what are X, Y and Z?

[dteg]

co-sign

[DiogenesOfAlaska]

It would be pretentious to make such claims.

That's how you can tell the experts from the crooks: just look at who will tell you what's going to happen tomorrow, even though what happens tomorrow depends on what you will do today.

[OxamsRazor]

With all due respect, there is no such thing as a "Free Market Economy". This concept has NEVER existed in the history of humanity.

It hasn't existed because, until the last 50 years -maybe- there have been no true "free" societies.

Even in America, voting rights for minorities and women were denied until the 20th century. You cannot have a free market without a free nation.

So, please, drop this mythical concept of free markets. It never has and never will exist.

[noneIn2008]

Are we ignoring all those who are waring about the extreme inflation to come? What will your article say in 1 year as inflation starts to accelerate?

[jayes]

HIDDEN SECRET OF ECONOMISTS:

At any given time, there are always a few of them who are right (not the same ones).

it goes like this:
take 100 people.
have them guess tomorrow's high temperature.
ta dum-dum

http://www.youtube.com/watch?v=vVkFb26u9g8

[DiogenesOfAlaska]

what's your solution?

Abolish economics? Abolish weather-forecasts?

[joebhed]

This story isn't significant because of who called it right. Nor when.

It should be about WHAT it was that he guessed right.
And what we can do about THAT.

As stated in the article, 'the problem was created by what the two BIS economists called the "inherently procyclical" nature of the financial system'.

The BIS' latest research paper on restoring financial stability calls for "counter-cyclical" financial system measures, at the macro-economic level.
Here's a clue BIS people, Bernanke and Obama. The fractional-reserve debt-money system is as pro-cyclical as it gets.
On the upside, it flows too much capital into the system, and on the down side it takes too much out, at great pain to the borrowers.
Here's how the Fed's publication Modern Money Mechanics describes that last item:

There is one important difference between the expansion and contraction processes. When the Federal Reserve System ADDS to bank reserves, expansion of credit and deposits MAY take place up to the limits permitted by the minimum reserve ratio that banks are required to maintain. But when the System REDUCES the amount of bank reserves, contraction of credit and deposits MUST take place to the point where the required ratio of reserves to deposits is restored.

During expansion, every $1 of reserves allows $10 to be loaned.
During contraction, the loss of $1 in reserves cause $10 to be recalled.
It's the money system that is pro-cyclical.
We need a new money system.

[jayes]

"We need a new money system." (nod)

[YeshuaBenJosesph]

Is everyone still asleep? This whole spectacle was engineered. Does anybody really believe Geitner and his band of crooks? Greenspan is part of a bigger deception. Nothing will change until we are honest about what is really going on and who is really behind the scenes and in power.

[PhilipTaylor]

I am with you 100% on this!

As Wilbur Ross, a WSt tyc00n admitted Monday on CNBC, "This it the largest transfer of Toxic Debt from private Banks and A1G to the Government in History and it will take many years."

Correlated to that is the "Largest transfer of Middle-Class wealth and FED Printed Money from US to the Wall Street Banks and A1G!"

All planned after they had created $700 Trillion in TOXIC Debts that were Bank Profits but were instead skimmed off in Massive Salaries and $10 to $100 Million Bonuses into the Wealthy (Employees) EL1TES Pockets!

[robinhood1]

I never heard of William White until I read this article. But I have heard of Canadian economist Jeff Rubin (formerly with CIBC), who is predicting $200 a barrel oil and a lot more inflation soon after the US economy pulls out of its deep recession (a depression for some of us). Blessed are the children, for they shall inherit the national debt.

[ErnestineBass]

If China manages to "score" two or three more large oil leases in Iraq...then, yes, OUR oil will soon cost the equivalent of $200 a bbl.

[orwell]

How can there be a free market if the lifeblood of same, money and credit, is created out of thin air by wizards such as "Sir Allan"?

If there is unlimited supply of a commodity, in this case money and credit, the cost should effectively fall to zero.

How can you entertain the notion of risk when the notion of loss is fundamentally undermined?

The system of risk and reward is broken, and has been for decades.

It is nice to know the the masters of the universe lose sleep over the wrong vintage of Rothschild...

[Artos]

The reason no one listened to Mr. White is the same reason they rarely listen to anyone who tells them what they don't want to hear. People love having visions of Sugar Plums dancing in their heads and they love living Fairy Tales. The Corporations, which includes the media, like to dangle pretty things in front of the Commoners eyes (ie, Lifestyles of the Rich and Famous, Flipping Houses, Home Makeovers, etc.). These kinds of Programs dangle the goodlife and luxury in front of the Commoners eyes and make them want to have it all. So when someone comes along with bad news and tries to warn people, do you really think that they want to hear it, doubtful. We as a people earned this mess and now we have to live it. Those that benefitted from it will continue to use tried and true methods and the public will continue to ignore good sense and repeat their lunatic behavior. It is written.

[abbyrose86]

Hear, hear! People want to believe what they want to believe....even when the facts aren't in evidence. Remember the Fable of the "emperor's new clothes".....people never learn.

[nelilio]

Artos, all due respect, but speak for yourself. My family do not live beyond our means. We have a long-paid off (and paid off early, I might add) roof over our heads, with no other debt to speak of. Yes we watched those eye-dazzling house flip programs, but knew those people were gambling. We knew there would be a lot of pain when the housing market took a nose dive. Those stratospheric house prices couldn't rise indefinitely.
Why were people gambling so heavily in real estate? Because the money they were able to make was far better than the pittance most people try to survive on at their service sector jobs? I'm sorry if any of this sounds harsh, but I get pretty tired of the "it's all our fault" meme. Greed in the boardroom, profit uber-alles, offshoring the costs (read good wages and benefits) to some third world country practically guaranteed "this mess."

[Artos]

When a Percentage of the population equals so many that it becomes extraordinarily high, such as around 95 to 97% then it becomes We the People. You are probably one of a mere pittance of Americans who follow good discipline over your finances. Unfortunately you will end up paying, just as I probably will, for the mistakes of the many. You, nor I can escape it, where would we go.

[Bigidea]

Hm, Well, I am not Canadian and I am not an Economist and I still predicted the Crisis years ago. It was that foolish. Everyone it seems poked their eyes and scraped their brains out of their skulls. It was that simple.

[Swedishgal]

If anybody was paying attention and knew anything about Glass-Steagall then they knew it was only a matter of time before we would have another crash due to outright greed. The high price of gas without the usual supply and demand scenario and high housing prices due to flipping were a warning that something was going to happen and soon. I'm glad it did to be honest because now you've got the people's attention about the dangers of credit cards and lack of savings because of the "I want it now" mentality. Maybe now we can get back to basics and start living within our means and due to the lousy job market, below our means. I don't see Congress or Obama or anybody that has any say so talking about bringing back anything resembling Glass Steagall so I'm thinking they must like giving our money away to free loaders like Citibank, Chase, and those other losers that caused a huge portion of this mess. Depressing.

[outnow]

White was unable or unwilling to answer the question of who actually is controlling the banking sector worldwide. Der Speigel leavesus hanging with the implied conclusion that nobody is at the helm. If Greenspan was totally wrong and intentionally ignored all warnings from White and many others, then the opposite of Greenspan's theories and his ill-advised policies must be true.

My conclusion is that the banking virus has spread into a infection. Individual governments should create money and credit. Why all this hocus-pocus in Switzerland? Modern risk assessment theory is dead. Derivatives broke the backs of the entire global financial system.

A bank has to rich before it can lend. This is a law of the universe. It is all about adequate reserves and proper risk assessment.

Black swans are in clear evidence, even Greenspan admits that he was wrong. So why don't the rest of the jackasses?

[KCFreedom]

Well, Greenspan sorta "admits" he was wrong. He doesn't take any blame whatsoever and defends his record despite any "admissions".

[outnow]

He equivocates extensively but admits to faulty assumptions. White won the argument with the facts as history unfolded. It was all a gigantic cooking of the books to create economic growth that was all on paper based on models using computers. In other words, banking, like insurance is nothing more than a "Ponzi scheme with a computer."

They all danced around the golden calf they had created and great was the fall thereof.

Greenspan looks like a buffoon now. He can say what he wants..it's mostly gibberish now.

[jeffrey678]

Gerald Celente of the Trends Research Institute predicted the Crisis almost to the day. He expects the Crisis to get worse with food riots in the United States. I remember his prediction almost a year before it happened.

[LunaPark]

Yet another Austrian economist.

[vagabondvet]

Any journalist since 1980 that uses "Greenspan" and "free market" in the same sentence without using a negative operator has no integrity. So many economists of the Austrian School, such as Dr. Ron Paul and Peter Schiff, predicted this current crisis long before it happened (Ludwig von Mises and FA Hayek predicted this crisis in principle in the 1930's based on central bank credit expansion; Hayek even won a Nobel Prize for his work).

[BPCentrisAmerican]

Paul O'Niel saw it coming, low interest rates, tax cuts no one was asking for on the credit card, war of choice on the credit card, it didn't take a rocket scientist to see it coming, just an inflexible president who could not adjust his own policies to meet the new realities, and Greenspan was the enabler. This same inflexibility got more than 4,200 American men and women killed in Iraq, not to mention a million or so Iraqis.

[KCFreedom]

That's why O'Neill was sent packing quickly.

He did not sign onto the wreckless Bu$h tax cuts as well.

By the way, what happened to all of those jobs the tax cuts were supposed to create?

From what I can tell, there were less people employed when Bu$h left office than when he came in.

[LunaPark]

Chalk another one up for the Austrians

[Furby]

Mr. White was born in Kenora, Ontario, Canada and has lived and worked in Canada most of his life. I'm sure he loves Austria too but I'm not quite seeing the connection here.

[LunaPark]

I'm referring to the Austrian School of economic thought.