Editor’s note: This article was first published in August 2014, offering a forecast of an ‘imminent’ global crisis. Its references to quantitative easing, a coming ‘lost decade’ and high tech valuations reflect the situation then.
Jonathan Tepper is in no doubt. A new crisis is imminent, and the weakest, both the unemployed and people working for an employer, will have hardly any chance. If you have been offered the choice between being rich and being poor, now is probably a good time to move over to the upper class.
Jonathan Tepper is a respected economist who is shut out of most Spanish media, although we came across him through his appearance on the Catalan TV programme Singulars (watch the video).
Tepper was behind the report Variant Perception presented in 2009, which said that Spain was the mother of all housing bubbles and that unemployment would exceed 25%. His famous remark was that only someone who had smoked crack could say the Spanish financial system was sound.
Among his recommendations, Tepper said that the smartest thing the Spanish government could have done to get out of the crisis, when it all began, would have been to leave the euro, restructure public and private debt, and devalue our currency (the peseta). It is a recipe that has usually worked for countries to emerge from a crisis with their citizens alongside them.
It is clear that practically all of Tepper’s message has come true.
But now Tepper is warning of a new global crisis in his book Code Red: How to Protect Your Savings from the Coming Crisis.
How to protect your savings is the topic the book covers least, but it lays out the ingredients being thrown into a pressure cooker that will end in a crisis even worse than the one we have been through, because of the experiments governments and central banks are carrying out to protect the interests of a few.
In the book, Tepper discusses the risks of free money and of quantitative easing programmes, as well as the way governments are trying to get out of the crisis, which will probably end in the famous lost decade, with high government debt as one of the biggest problems.
What I like most about Tepper is that he is one of the few economists who is actually an economist, rather than someone using the title to push a political ideology. It is a book that will help readers who are less familiar with these topics understand many macroeconomic concepts and anticipate what could happen.
But perhaps the main message to take away is that salaried workers have not come out of the crisis, and will not come out of it as salaried workers, because protecting this group is not on governments’ agenda.
That is why financial knowledge is needed more than ever: even in a major crisis you can make money instead of losing it. And if we add to Tepper’s warnings the concern over the other bubble we are creating with financial derivatives and the high valuations of technology companies, there is no doubt that the next crisis, if it comes, will probably be catastrophic.
Further reading
Featured image: Tim Evanson, CC BY-SA 2.0, via Flickr.
