If history tells us anything (it tells us just about everything), heavy investors in the stock market and the rest of society should be preparing for a repeat of 2007-2008 economic meltdown.
We cite none other than the chairwoman of the Federal Reserve (the FED), Janet Yellen, who said recently, “Would I say there will never, ever be another financial crisis? No, probably that would be going too far. But, I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.”
Normally, we could accept that as a rather benign statement. She sits at the head of the table of the U.S. financial prognosticators, deciding when to raise interest rates and when to lower them, usually solely as a response to the threat of inflation.
But, Yellen was preceded in her job by the man widely accepted for years as a financial guru whose tortured and turbid statements probably sold more dictionaries and thesauruses than any other government official. He once said, “If I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”
Alan Greenspan, believed the big banks didn’t need added regulation and although the already scary derivatives trading was a bubble that had to burst at some point, he believed the banks would not do anything against their own self-interests.
The guru blew it on a massive scale, the incoming Obama administration in 2008 had to deal with the massive task of re-righting not just the domestic, but the international economies.
In October of that year, Greenspan told Congress, “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.” He had sworn by “the presumption of neoclassical economics that people act in rational self-interest.”
And now, the 70-year-old woman who sits in the chair where he once presided over the economy assures us that “not in our lifetimes” will there be another financial crisis.
This, despite the efforts to repeal the regulations put in place after 2008 to prevent a repeat, and a failure to replace the regulations removed in the Reagan through Clinton administrations that originally were put in place to prevent another Great Depression.
Perhaps the mattress market would be a good investment right now.