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Economist Who Predicted Financial Crisis Says Another Crash “Almost Inevitable” (Video)

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An Australian economist who predicted the 2008 financial crisis now says another crash is “almost inevitable.”

Steve Keen heads the economics department at Kingston University in London. He was one of the few academics to anticipate the subprime housing crisis. On his advice, French investment bank BNP Paribas announced it was shutting down three investment funds specializing in the US subprime market in 2007. At the time, the bank said it was struggling to calculate their values against a backdrop of growing concerns over liquidity.

In an interview on RT’s Keiser Report, Keen said another crisis is around the corner, and the problem this time is debt.

Unfortunately, we’ve had regulators and bankers that have all made it more likely that we’re going to have the financial equivalent of a heart attack on a regular basis.”

Keen said the root of the problem is the “financial-political complex.”

Because the politicians have become so used to having an enormous financial sector as what they think is a natural part of their economy, they eat with financial people, they sleep with financial people, they’re certainly getting done by financial people, and they can’t imagine a world without a large financial sector. So when you have a crash, where-as in the 19th century that might have meant whatever the corporation involved got wiped out and that was that – they ended up in rags rather than riches. Here they throw rags at them called large amounts of government money and rescue them, and they end up making a fortune out of the crash that they caused in the first place.”

US Global Investors CEO Frank Holmes recently called debt “the mother of all bubbles.” Keen raised similar concerns about the massive levels of debt in Great Britain. Private debt in the UK stands at about 170% of GDP. He said that’s roughly three times the debt the country carried in the pre-Margret Thatcher years.

That’s the stuff that’s being ignored. Nothing is really being done about that. With the amount of debt just sitting there, we are still likely to have another crisis – but more likely, we are going to have stagnation.”

Keen said an even bigger problem is what he calls the “zombie-to-be economies.” A number of countries including Australia, Belgium, China, Canada, and South Korea, avoided the worst effects of the 2008 crisis by borrowing their way through it. Now they have an even bigger debt burden to deal with when the next crisis hits.

[The ‘zombie-to-be’ economies] are roughly equivalent in size to the American economy. So when they fall, then there will be a crisis that affects the rest of the world, including the UK.”

Keen said he likes bitcoin and other cryptocurrencies because they offer an alternative way of doing transactions. But he still prefers gold because of its stability. Regardless, he said alternate systems are important.

I’m all for system like that right now, because the people managing the credit system are A. making it worse and B. don’t understand it in the first place. So, parallel currencies, bitcoins, all the other ways of transacting, we need them right now because we have a bunch of morons in charge of a system which has been turned into a monoculture that should be a diverse one.”


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