By CACOR member, Nicole Morgan Published on December 17, 2017
In today New York Times (THE WORLD IS PARTYING AS IN 2008) we are sternly reminded that in late 2008, at a meeting with academics at the London School of Economics, Queen Elizabeth II asked why no one seemed to have anticipated the world’s worst financial crisis in the postwar period. The so-called Great Recession, which had begun in late 2008 and would run until mid-2009, was set off by the sudden collapse of sky-high prices for housing and other assets — something that is obvious in retrospect but that, nevertheless, no one seemed to see coming.
All the experts in the audience made approval little noises. For once experts admitted they were wrong but for a good reason: nobody could have predicted the melt down. They all shook their heads in disbelief starting with the mighty former Federal Reserve Chairman Alan Greenspan.
On October 24th 2008, he explained he was “shocked” at the breakdown in U.S. credit markets Shocked and deeply surprised! Shaking his head he repeated that a crisis of this magnitude was unpredictable. “We cannot, he humbly muttered, expect perfection in any area where forecasting is required. We have to do our best but cannot expect infallibility or omniscience.” Three weeks later, Treasury Secretary Henry M. Paulson Jr. added to the point “We, he said, are going through a financial crisis more severe and unpredictable than any in our lifetimes”.
The remarkable feature of these words is they were uttered with a straight face, impervious to the rather predictable flurry of journalistic scrutiny which was not long to dig up a list of analysts who had for a long time predicted the so-called unpredictable with some variations in style: from Paul’s Krugman’s bold clear statements to Nouriel Roubini’s detailed scenario not forgetting Jeremy Grantham’s metaphor of “watching a very slow motion train wreck” or Michael Hudson, Charles Morris  or Robert Shiller. The list of accurate forecasters is long although not long enough considering the magnitude of a phenomenon which with hindsight appears so inevitable. But at the time, their warnings were dismissed, laughed at and ridiculed in the circles of power and its devoted press. Grantham was dismissed as an old pessimist; Krugman was accused to be ideologically biased. Roubini nicknamed “Dr Doom” became an entertainer at rubber chicken dinners, delighting those who revel watching catastrophic movies from the comfort of their home movies theaters.
Some insiders were also worried; Bernake himself had been warning for the last year Henry M. Paulson Jr., the Treasury secretary, that the worsening situation might ultimately force a sweeping federal intervention.  Lower profile analysts working directly for Greenspan and Paulson had been raising a flag of various tones of red for years. Analysts of Citi Group expressed concern.  According to an Associated Press review of regulatory documents, remarkably prescient warnings foretold the financial meltdown. 
What happened to these forecasters, futurists, analysts, professors? At best they were ignored. At worst they were they were fired. They were modern Cassandras.
Who was Cassandra?  A beautiful woman who was unlucky enough to irate a powerful lover, Apollo. He gave her the power of prophecy but deprived her of the power to persuade. Conforming to the curse, she foresaw the danger posed by the Trojan horse; the people of Troy, ignored her warnings and the Greek soldiers hiding inside the horse were able to capture the city. The Troyans, the legend says, were all the more impervious to any warning as they drank themselves to a state of “irrational exuberance”.
Fate was implacable. There was nothing to do except what Cassandra did, as shown in a painting: pulling her hair out.
Are we about to make the same mistake? The New York Times continues: All too likely, yes. Certainly, the American economy is doing well, and emerging economies are picking up steam. But global asset prices are once again rising rapidly above their underlying value — in other words, they are in a bubble. Considering the virtual silence among economists about the danger they pose, one has to wonder whether in a year or two, when those bubbles eventually burst, the queen will not be asking the same sort of question.
This silence is all the more surprising considering how much more pervasive bubbles are today than they were 10 years ago. While in 2008 bubbles were largely confined to the American housing and credit markets, they are now to be found in almost every corner of the world economy.
Each quarter, Credit Bubble Bulletin’s Doug Noland posts a “flow of funds” report that analyzes the debt and securities markets data released by the Fed in its Z.1 Report. It’s always shocking to see the numbers we’re dealing with, but even more so lately as history’s biggest financial bubble starts to dwarf its predecessors.
To the naked eye, percentage debt growth figures for the most part don’t appear alarming. But there’s several unusual factors to keep in mind. First, the outstanding stock of debt has grown so enormous that huge Credit expansions (such as Q3’s) don’t register as large percentage gains. Second, overall system debt growth continues to be restrained by historically low interest-rates and market yields. Debt simply is not being compounded as it would in a normal rate environment. And third, it’s a global Bubble and a large proportion of global Credit growth is occurring in China, Asia and the emerging markets. U.S. securities markets continue to be a big target of international flows.
It does not take a specific gift in forecasting to predict the outcome. Bubbles burst on landing (there is not such a thing as soft landing). The Queen if she is still with us will go back to the London School and ask the same question and she will have the same answer of false innocence. Whoever wants to believe in progress and growth (a majority) want to ignore long term studies all together. It took us a long time to ingrain the idea of progress in the mind of humanity.
Greek mythology is a potent way to tell humanity about a story, which has no history, the story of fate, the master of the Greek universe. Let us understand the full meaning of this and not jump immediately to the “let`s-find-a-solution mode”. This is modern mind. We are so use to linear time (past-present-future) that we take as a reality and not a construction.
In an ancient Greek world, Time was a curse in itself (Chronos (i.e.”time”) ate his children) and it would be pointless to try from death, the ultimate end of life. “Three fates spin, weave, and cut the thread and cloth of life and whatever they do cannot be undone”. Prophecies and previsions were not an invitation to escape from fate but the proof that those who tried were fools (as Oedipus’s parents should have known). The belief in fate which is such an important part of our archaic psyche did not mean necessary despair.  Escapes in art, in other worlds, religious or metaphysical, in joyful nihilism or search for golden means of equilibrium were abundant and rich. Greek tragedy was the sublimated way for humanity to build a feeling of belonging. Future as we define it did not exists or let me rephrase it, it was not a goal for action. Plato’s Republic was not Thomas More’s Utopia: it was a desperate attempt to freeze time in space.
Thad said Greek philosophers did put wedges or rationality in the on-going tragedy of life. If Plato’s Republic was a desperate attempt to freeze time in space, Aristotle, his dissident disciple, tried to put some order of rationality in “the first pursuits into human moral philosophy”. 
The rest is history. We got hooked to the idea of a possible policy that is good government, an optimum organization of human affairs. Francis Bacon famous quote said it all: “Knowledge is prediction and prediction is power.” . Sciences and technologies blossomed, among them human sciences which have been entertaining for some times the dream of mastering the destiny of human societies. Karl Marx was sure that sociology as a science would open to a better society, as damned sure as Ayn Rand was that what she called “objectivity” had the existential status of a rock, a belief which has influenced so much one of her most fervent admirer: Allan Greenspan.
More recently some economists added figures and bell curves to the mantra and decided that the laws of the markets could explain all human behaviors , a formidable tool which would help us to wake in theses singing morning, promised by a Karl Marx whose intent was good but postulates false. The dream culminated with a book by Peter Berstein whose title says it all Against the Gods: The Remarkable Story of Risk “Why is the mastery of risk such a uniquely modern concept? 
Is the coming bubble business as usual? There is a theory on bubbles which demonstrates that bubbles are good for the economy if not necessary (sort of dialectic in more poetic). Indeed human beings do not think, they dream and they have always dreamed. The issue is that the mastery of risk (above Gods) is hubris. Cassandra is agitating. This supreme arrogance of drunken men going to a global economic war is going to meet its fate: being punished by a woman: Gaia who has been ignored all along.
But since I like my hair and want to keep it, I will not endorse her this time.
 Financial Times .Chris Giles The vision thing. November 25 2008
 Published: August 15, 2008, New York Times Sunday Magazine. On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
 Jeremy Grantham, called by some the philosopher king of Wall Street even though he’s based to the northeast in Boston. In 1977, he co-founded Grantham, Mayo and Van Otterloo, now known as GMO. In his Quarterly Letters to clients, he assesses current market conditions and usually takes a longer view as well. His commentaries are detailed, scholarly, sober and clear…. (Early 2007) Grantham’s conclusion is these are all warning signs spelling eventual trouble because as noted above “Every bubble has always burst (with no exceptions, ever).” When the 2000 bubble deflation resumes, “it will be across all countries and all assets, with the probable exception of high grade bonds.” In addition, risk premiums will widen (and now are) forcing companies to pay higher financing costs for borrowed funds that will depress investor confidence and reduce economic activity”. By Stephen Lendman15 August, 2007.Countercurrents.org
 The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash (Hardcover)
by Charles R. Morris (Author)
 Robert J. Shiller Irrational Exuberance.
By PETER BAKER; DAVID M. HERSZENHORN CONTRIBUTED REPORTING FROM WASHINGTON, AND MICHAEL BARBARO AND ERIC DASH FROM NEW YORK.
Published: September 21, 2008
This article was reported by Peter Baker, Stephen Labaton and Eric Lipton and written by Mr. Baker.
WASHINGTON — For the last year, as the nation’s economy lurched from crisis to crisis, the chairman of the Federal Reserve, Ben S. Bernanke, had been warning Henry M. Paulson Jr., the Treasury secretary, that the worsening situation might ultimately force a sweeping federal intervention.
 In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.
There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.
Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.
For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.
 With the economy in awful shape and threatening to get even worse, this seems a good time — no, make that “an appropriate time”; good times are probably a thing of the past — to look again at two books that were considerably more prescient than most others in foreseeing the current crisis. Charles R. Morris’s “Trillion Dollar Meltdown”and Kevin Phillips’s “Bad Money” both came out earlier this year and predicted impending disaster. From today’s perspective, their warnings were, if anything, too mild — Morris’s “trillion dollars,” for example, was a scary number in the spring; now it looks like a mere down payment. (I confess that I reviewed “Bad Money” for The Times and thought it might have been too gloomy. My bad.)
But on the essentials they were both wonderfully, terribly, right. They pointed to the dangerous ascendancy finance had achieved in our economy because of new investment instruments like derivatives. Phillips was useful in showing how dominant the financial industry’s position had become since the 1980s; Morris was good at explaining the technical details of the new instruments. Both spoke of unregulated leveraging, debt piled on debt, speculative bubbles. Both mentioned Ponzi schemes in which banks and brokers sold pieces of paper that no one really understood back and forth among themselves, creating credit out of air.” Paper Cuts “Two Cassandras and Alan Geenspan” Blog NYTimes November 27, 2008
. She was the most beautiful of the daughters of Priam and Hecuba, the king and queen of Troy. Apollo, who wished to seduce her foolishly, gave her the gift of prophecy. She accepted the gift but foolishly, refused him (there are lots of fools in Greek mythology. That what makes it so wonderfully actual.) Being a gentleman (sort of) he let her keep the power of prophecy but he deprived her of the power to persuade).
At the end of the Trojan War, Cassandra foresaw the danger posed by the Trojan horse; the people of Troy ignored her warnings and the Greek soldiers hiding inside the horse were able to capture the city. During the sack of Troy, Cassandra was raped by the Locrian (or “lesser”) Ajax, and was then given as a war prize to Agamemnon. She returned to Greece with Agamemnon, and tried to warn him of the danger which awaited him there; once again her prophecy was ignored, and both she and Agamemnon were murdered by Clytemnestra and Aegisthus.
 although Heraclitus was nicknamed “the weeping philosopher”
 Mortimer Adler
 Religious Meditations, Of Heresies, 1597
 Public choice theory
 Peter L. Berstein. Against the Gods: The Remarkable Story of Risk “Why is the mastery of risk such a uniquely modern concept? John Wiley and Sons New York 1996.