Mark Mobius Quotes
There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.
Mobius, Mark. Speech at the Foreign Correspondents' Club of Japan. 23 May 2011, Tokyo. Quoted in: Yamazaki, Tomoko, and Takashi Nakamichi. "Mobius Says Another Financial Crisis 'Around the Corner'." Bloomberg, 23 May 2011.
Born thought that her agency was responsible for regulating the new esoteric financial products—derivatives including credit default swaps—for otherwise there would be no regulation at all of financial products that could dwarf the stock and bond market. Summers persuaded her to back off. When the Meltdown of 2008 hit, the huge derivative exposure of the large banks and some insurance companies was so great that it was one of the major causes for the meltdown of the entire banking system. Summers, normally a great economist not only called this one wrong, but later, along with most other government and private economists ignored a very explicit warning—See {637168}, {637986}, and {620038}.
Economic is often called “the dismal science” as its ability to make predictions has never been very good. The Great Depression was also missed, else it would not have come as such a shock. There have been a few economists who correctly predicted these economic downturns but they generally continuously predict recessions and depressions that never happen.
Unmindful of the steady economic prosperity during the 1920s in America, Comintern “assured” American Communists that the economic growth was about to make an abrupt U-turn.
Sovereign credit substitution is where the government, one way or another, assumes and guarantees the debts of private corporations. This is an elegant way of saying: “taxpayer bailouts”
She had warned about the unregulated derivatives 10 years earlier, but to no avail. See {637987}. Then when she had been proven prescient in the Meltdown of 2008, Congress was more interested in how she thought they could prevent future problems with derivatives. Some were adopted but not all. The financial institutions claimed that they needed derivatives to hedge positions and hence “stabilize” the system. Of the members of Congress who voted on this issue, almost none understood derivatives and credit default swaps were and how they worked. But some were sure they were bad, and others were sure that they were necessary for stability. Derivatives can, and did, get so complicated that the people who originally created them sometimes cannot tell whether they are at risk or not. Even computer cannot calculate the value and risks of these instruments because the values and risks depend on what happens to other companies or instruments which themselves have derivatives insuring them. See {620038} for a good description of the difficulty.
Joseph Bernhard Mark Mobius is an American-born German emerging markets fund manager and founder of Mobius Capital Partners LLP.
