Some Steps of the Financial and Economic Crisis of 2008

The subprime mortgage crisis would get much worse
Despite all the talk of subprime being contained, my report “The Subprime Crisis is Just Starting” was published in March of 2008, a full six months before it started hitting the fan.

Major financial firms would fail
In May of 2008 I wrote “A Credit Derivatives Risk Primer”, which detailed how the same fundamental, predictable types of human-behavior-based mistakes that crashed the $1.2 trillion mortgage derivatives market would imperil the $62 trillion credit derivatives market, and lead to losses that the major financial firms could not possible handle.

Failures would continue, in a dominoes-like fashion
As explained in the Subprime Crisis report, these intertwined derivatives crises were the result of years of extraordinarily bad judgments on the part of the major financial firms, and carried the real danger of causing the rapid, domino-like annihilation of the highly leveraged and intertwined Wall Street firms in a flash, not from accounting losses, but from losing their sources of funding once creditors understood the extent of the derivatives losses.

A total meltdown would not happen
Both reports explained that, while investors should consider getting immediately out of financial assets to avoid the rush for the exits, they should not invest for a total market meltdown of the financial system, because it would not be permitted to happen.

A massive Government bailout would happen
Instead, both reports state that what you should anticipate is a massive government intervention to protect the financial system, and that the best strategy was to avoid the financial asset losses while positioning yourself to benefit from the bailouts.

Inflation is coming
The Federal Reserve and Government had already proven they would not hesitate to create a near infinite supply of new money out of thin air, without raising taxes or increasing economic output, and thereby create extraordinary inflationary pressures within the system. While deemed necessary to combat global asset deflation, you should expect this monetary inflation to show up as price inflation on real goods in the not too distant future.