A Review of Trade Books That Warned of the 2008 Real Estate and Financial Meltdown

On October 23, 2008 former Federal Reserve Board Chairman, Alan Greenspan, arguably the most respected financial expert in the U.S., testified grim-faced in a Congressional hearing that the banking crash had taken him by surprise:

Political science is not very good at predicting the future – but once an event takes place we can explain why it was inevitable (1)

February 5, 2013

Experts were blindsided

On October 23, 2008 former Federal Reserve Board Chairman, Alan Greenspan, arguably the most respected financial expert in the U.S., testified grim-faced in a Congressional hearing that the banking crash had taken him by surprise:

“those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief” (2)

The U.S. financial bubble had received equal-opportunity, bipartisan nurturing. Chairman Greenspan and earlier federal officials’ discomfiture was increased by a PBS Television Frontline report that highlighted the battle by Brooksley Born, Chairman of the Commodities Future Trading Commission (CFTC) to control derivatives. Born felt that financial instruments like credit default swaps lacked transparency. She felt that their uncontrolled growth threatened markets and the economy. However her warning to President Clinton’s Working Group on Financial Markets was rejected by four powerful federal officials, Fed Chairman Greenspan, Treasury Secretary Robert Rubin, Deputy Secretary Larry Summers, and SEC Head, Arthur Levitt. When she went public with proposed regulation of derivatives trading, the above men essentially forced her to resign and got her replacement to rule out further regulation of derivative trading.

The scholars

The housing and financial debacle of August, 2008 led to a flurry of reexamination of financial models, trigger and warning indices in the scholarly literature. To illustrate, the key words: “warning”, “financial”, and “crash”, in the Google Scholar search engine recovered 65,000 titles of scholarly articles and books. Publications from 2008-2012 yielded 16,300 titles, nearly all involving the U.S. However, there had been no shortage of theoretical interest before the crash, the period from 2000 to 2006 yielding 16,900 titles. Random checks of publications from among these titles showed that virtually all scholarly publications dealt with financial models and generic issues involved in detecting instability in financial and economic systems. One of the most authoritative overviews, conducted by IMF researchers in 2000 (3) summarized literature on recent crises, time and regional effects, trade linkages, main variables, benchmarks, robustness of models, frequency of crises by country group, etc.


1 Lecture by Sydney Verba, Emeritus Professor of Political Science, Harvard University, and former Director, Harvard Library, May 2012
2 Hearing on October 23, House of Representatives Committee on Oversight and Governmental Reform (


To gauge perceptions of professional economists I canvassed the titles and abstracts submitted to the annual conference of the American Economic Association, the premier professional association for economists, for 2008 ( To the extent that I could discern, only a few papers, including one whose authors included Kenneth Rogoff, offered warnings or concern about a potential meltdown.

Who knew about the risks and issued warnings?

The above data do not mean there there were no warnings. In 2003 investor Warren Buffett called derivatives “weapons of mass destruction”. Although there are caveats, the five largest Canadian banks all made money in 2008. The largest and most substantial warnings came from “trade” or popular books, among which no fewer than 16 issued explicit warnings or predictions as early as 2000, usually backing up their assessments with data. The table provides a chronological list of books compiled from the Google Books search engine and the website using key words like “crash”, “meltdown”, “bust”, etc.

Poorly justified doomcrying books are not the norm

Knowing the contradictionary nature of predictions by stock market advisory bulletins, one might assume that any given time there might be books predicting bad economic news. However, the data indicate that books predicting crashes have been rare in the past; the recent spate of books predicting a crash is unique. There may be logical reasons why poorly justified predictions at book length are not common. Stock market experts, market journalists, and others who write books place their reputations on the line when they boldly predict negative outcomes that will be tested by future developments. Hence, authors who venture into this kind of prediction tend to draw on substantive data and rationales. Several of the authors included in the table already had reputations for making correct calls and enhanced their credentials.


The divergence of opinions noted above involves some complex factors. While American political partisanship has affected many agencies, leaders of the critical areas of finance and public security are so important to the nation that they have tended to be chosen on perceived competence and on a nonpartisan basis. Nevertheless, in the area of finance we can observe that prestigious ideas have carried a great deal of weight, even though they may have been flawed. These ideas appear to have discounted the kinds of information and perpectives reflected in trade books.

So should we replace academically credentialed leaders by predictors of economic trends like those listed? No, but we have an object lesson. People who work with advanced conceptual ideas and complex analytical systems and are in positions of authority, whether intellectual or political, are tempted to build walls that shield them from conflicting data and ideas.


3 Caramazza, F., Ricci, L., & Salgado, R. (2000). “Trade and Financial Contagion in Currency Crises”, IMF Working Paper


Year Author Short title Author occupation
2008Stanley J. Kazwell Jr. (F)The Mortgage MeltdownPresident of Kazwell Financial Services Inc., host of radio show real estate, publiserh of newsletter and speaker
2008Paul Muolo and Matthew Padilla (J)Chain of Blame: How Wall street Caused the Mortgage and Credit CrisisInvestigative reporters
2008John R. Talbott (F)Contagion: The Financial Epidemic ..Former investment banker Goldman Sachs, visiting scholar, UCLA Anderson School of Management
2008James Turk and John Rubino (F)The Collapse of the Dollar and How to Profit from ItTurk is an international finance, banking, and investment expert; Rubino is editor of a financial website and advisor on gold and preservation of capital
2008Michael J. Panzner (F)Financial ArmageddonColumnist for Real Money and AOL blog on stocks, works for companies like HSBC Soros Fujnds, Moregan Chase, Dresdner Bank
2007Stephen Leeb (with Glen Strathy) (F) (W)The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel (F)Well-known stock market analyst, specializing in energy investments
2006David Decker and George G. Sheldon (B) (W)Cash in on the Coming Real Estate Crash (B) (W)Founder Decker Properties, real estate brokerage, mgmt and development firm, and writer; Sheldon is a professional writer
2006Jim Mellon and Al ChalabiWake Up! Survive and Prosper in the Coming Economic TurmoilMellon is a well-known fund manager with international experience; Chalabi is a financial writer; both are British citizens
2006John R. Talbott (F,S)Sell Now The End of the Housing Bubble (F,S)Former investment banker Goldman Sachs, visiting scholar, UCLA Anderson School of Management
2005Warren Brussee (B-M,E)The Second Great Depression (B-M, E)GE plant manager, engineering mgr GE 33 years
2005Richard Duncan (F)The Dollar Crisis: Causes, Consequences, CuresFinancial analyst Richard Duncan worked for leading companies like Salomon Brothers, HSBC Securities, International Monetary Fund and The World Bank.
2005Addison Wiggin and Wm. Bonner (F,W)Empire of Debt: The Rise of an Epic Financial CrisisMaverick financial writers
2004Maverick financial writersFinancial Reckoning Day: Surviving the soft depressionMaverick financial writers
2003John R. Talbott (F,S)The Coming Crash in the Housing MarketFormer investment banker Goldman Sachs, visiting scholar, UCLA Anderson School of Management
2003Peter D. Schiff and John Downes (F)Crash ProofRuns the financial websites, Greenstock and
2002Daniel A. Arnold (B,F)The Great Bust AheadMgr and consultant with GE 15 years; started successful mfg co Santa Clara CA; bought out by larger co. Arnold focyused on investment & longterm economic trends
2002Robert Prechter (F)Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression,Stock market analyst, publisher, and popularizer of the Elliott Wave principle; said to have predicted bull market of the 1980s; now predicts major bust (also updated version in 2006).

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