The 15 People Who Benefited Most from the Financial Crisis
| TBS Staff
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The 2008 financial crisis brought the world to its knees. No one expected that so suddenly after the devastating dot.com bubble, another fiscal storm would sweep over the world. And yet, just seven years after the stock market took an unexpected dive, the whole financial system buckled under the weight of bad mortgage debt. Many believed that if something was not done to stop the breaking dam, the world would be drowned by a tsunami of deflationary pressure. Lehman Brothers, one of the longest-standing and most-trusted banks in the world went under. Merrill Lynch, AIG, Freddie Mac, Fannie Mae and countless others threatened to follow suit. Had it not been for the emergency measures put in place at the urging of both Presidents Bush and Obama, all would surely have collapsed.
The fallout from this event has placed the world in an ethereal twilight zone. On the one hand, everything seems normal. We go to work, we pay our taxes and our bills, and we more or less get on with life the way it was before the crisis. At the time of writing this article, the Dow Jones Industrial Average is breaking all-time highs, and mainstream media is telling us to just buy everything.
But on the other hand, something is not quite right. We are living in a world dominated by negative interest rates. We have seen massive fluctuations in major currencies like the Euro, Yen, Yuan, Dollar, and Pound. Virtually every country on the planet has more debt than GDP, which in the pre-crisis era was considered a problem suffered only by Banana Republics. The BRICS nations (Brazil, Russia, India, China, and South Africa) have built an anti-dollar alliance and openly speak of what to do after the current monetary order dies. And the geopolitical landscape in places like the Netherlands, France, Italy, and Greece is teetering toward secession from the European Union. Britain has already chosen to fly solo and public life in the United States has turned turbulent, to say the least.
But whether you believe 2008 was a near-miss that is taking longer to recover from than expected, or the beginning of a substantial transition in economic world order, there is no doubt that the event ruined many fortunes and left us all with permanent scars. Nevertheless, in its wake, some individuals have profited handsomely. Certain figures on this list have benefited by being vindicated. Their ideas, often after years of being mocked or ignored, have become far more prominent, and careers that had previously been obscure have now moved into a glaring spotlight. Others on this list are financial experts who were called upon to clean up the mess. And others still used the chaos of the crisis to build new social realities that previously seemed unthinkable. Whether you agree or disagree with their ideas, each figure on this list would not be where they are today if it were not for the financial crisis that gripped the world in 2007-2008.
See also: What can I do with an Economics degree?
1. Donald Trump (1946-Present)
Before 2014, Donald Trump was a B-list Reality TV star and a well-known real estate tycoon. He was notorious for his aggressive business dealings and extravagant lifestyle, but little else. Today he sits in the Oval Office and is arguably the world's most powerful man. So how did this man with no political experience and a long list of enemies—some of the most influential people in the world among them—come to be president?
Far more can be said on this topic than what this brief article will venture to explain, but certainly Trump's entrepreneurial experience and his ability to penetrate a thicket of bureaucratic red tape have worked to his advantage. Trump criticized the Federal Reserve, blasted trade deals like the Trans Pacific Partnership and NAFTA, and called into question the reliability of statistics like the official unemployment rate.
Yes, the stock market may have been marching ever-upwards but very few of these market gains translated into real-world changes for those living in post-industrial America.
Times may have been good for men like George Soros, but the average American increasingly struggled to make ends meet as their healthcare costs increased, their car payments grew more exorbitant, their homes took longer to sell, and their children found part-time work after earning expensive four-year college degrees. The growing disparity between the rich and poor, and a sense of disenfranchisement among those who haven't benefited from America's slow economic recovery coalesced to feed Trump's momentum. And now, the Donald is president.
2. Bernie Sanders (1941-Present)
Bernie Sanders is a self-proclaimed socialist operating successfully at the highest levels of American politics. Before 2014, that would have sounded like a contradiction in terms. But now, a wave of popular support, especially from young Millennials, has elevated Sanders into the national spotlight. Some look to Sanders as the Democratic Party's best chance to dethrone Trump in four years. But what gave rise to Sanders' success?
Ironically, the same market forces that led to discontent among the masses and eventually resulted in the election of Trump also fueled Bernie's rise to prominence. The two men don't agree on anything beyond America's withdrawal from the Trans Pacific Partnership. Still, both men appealed to people who felt like America's economic failures were so grievous as to warrant overthrowing the establishment altogether.
Both men took the ideas that mainstream political parties had been selling for decades and turned them on their heads. Some will prefer Trump's emphasis on big business while others will prefer Sanders' call for a raise in the minimum wage, free college tuition, and a return to Glass-Steagall style banking regulations. But either way, mainstream conservatives and liberals alike must now spend as much time fighting challenges within their own parties as facing off against their old rivals across the aisle.
Satoshi Nakamoto (???)
No one knows how old Satoshi Nakamoto is, or if he is really Japanese (as his name implies), or if he is male (again, as his name implies). For that matter, no one knows if Satoshi is a single person, a group, or for that matter, even human! All that we know for certain is that Satoshi Nakamoto is the alias used by the creator of bitcoin. Whoever this person is, his impact on economics is at the very least intriguing, and has the potential to become more influential than that of any known economist.
The reason for this praise is simple. Nakamoto challenged the very foundations of money itself when he created bitcoin in early 2009. For generations, people have thought of money as originating from universally-recognized, long-term stores of value such as gold, or from government mandate. Nakamoto invented the world's first working cryptocurrency, and ever since, the question, “what is money,” has been lurking in the background of the world economy, just like bitcoin's creator.
Cryptocurrencies have not supplanted the economic order. For that matter, bitcoin still has a market share of less than fifteen billion U.S. dollars. Nevertheless, bitcoin has produced an entire generation of brilliant programmers who are aggressively trying to build a totally decentralized form of currency. If successful, this could change life as we know it. Imagine a world where no government could discern how much money anyone had, and consequently could not levy taxes? Would such a world manifest as the anarcho-capitalist utopian dream? Or would it devolve into an anarchistic hellscape? Would the government eventually find a way to demand a flat tax and thus still acquire funds in a way analogous to how governments levied taxes before fiat currencies? For that matter, we do not know if the extraordinarily fortunate timing of bitcoin's creation just happened to perfectly correspond with the collapse of people's confidence in the financial system, or if Nakamoto waited for the right time to release his idea.
Despite all the questions, one thing remains certain. Satoshi Nakamoto, wherever you are and whoever you are, your idea is one of the most dangerous and intriguing ever produced.
4. Christine Lagarde (1956-Present)
Christine Lagarde is the managing director of the International Monetary Fund, (IMF), which is an international lending agency including 189 member nations. Stated otherwise, Lagarde runs the United Nations of money. The IMF has more influence over world commerce than any other transnational organization. It exists to assist in the smooth functioning of the global economy, and has undergone arguably its biggest transition in history under Lagarde. The IMF's basket of world reserve currencies decided what types of currency banks could hold as reserves.
Historically, the IMF's basket has only included currencies in the Western political arena. When Lagarde took office in 2011, the basket included the Dollar, Euro, Pound, and Yen. As of October 1st, 2016, the Chinese Yuan was added. Furthermore, with voting percentages among the member states being redistributed in January of 2017, the BRICKs anti-dollar alliance will have more voting power than America. This represents the first real challenge to American power in the organization's history.
Thus, Lagarde has had to deal with something that no previous IMF manager has seen; the systematic siphoning away of financial power from the developed West to the developing sphere. The 2008 crisis caused many big players on the global scene to rethink their commitments to established financial norms. Some have even wondered in recent years if the traditionally Western dominated IMF would remain relevant as the Chinese launched their own version of an international lending agency through the Asian Infrastructure Investment Bank. However, due to Lagarde's increasing willingness to grant China a seat at the table, it appears that the Chinese are very interested in working with, not against, the IMF. Rather than diminishing under Lagarde, the institution is now poised to make its own money, the special drawing right, the new currency of last resort. The IMF is firmly rooted as the central bank for central banks, meaning the financial future will be paved by IMF money. This makes Lagarde possibly the most powerful woman in the world.
5. Ron Paul (1935-Present)
Ron Paul was Donald Trump and Bernie Sanders before the 2016 election. He patiently advocated an extremely libertarian perspective of government for decades and was quietly ignored beyond his cult following of supporters. In many ways, this former medical doctor turned politician was seen as a nice old man who stuck to his principles but ultimately was too philosophical and not pragmatic enough to make a difference in serious political dialogue.
That was until the 2008 financial crisis. Suddenly everyone wanted to know how the mainstream economists could have possibly gotten things so wrong. The Austrian business cycle theory that Ron Paul had been espousing for decades, with its criticisms of central banking, suddenly made sense to people.
Since then, Ron Paul has written numerous books, made two presidential campaign runs in 2008 and 2012, and inspired a whole generation of young people to look closely into the conservative, constitutionalist theories of political economy that previously were excluded from the conversation. He has since left politics and has now built a substantial homeschooling curriculum with an emphasis on teaching the principles of liberty. Although his direct bids for the president were nowhere near as successful as those of Trump or Sanders, Paul laid the groundwork for their respective grass roots movements through think tanks, books, and independent media outlets that will surely continue to exert influence for years to come.
6. Elvira Nabiullina (1963-Present)
We sometimes forget that economics, more so than any of the other social sciences, has immediate and often dramatic effects on the world around us. When things are running smoothly the science is academic, but when things go wrong, economics can decide the survival or extension of an entire nation. Elvira Nabiullina, who first rose to prominence as Minister of Economic development in 2007, was handed one of the most difficult balancing acts in recent economic history.
As the current head of the central bank of Russia, it was up to Nabilullina to decide what to do in the fallout of the Ukraine crisis. Much to the frustration of Western powers, Putin had not backed away from the Crimean region nor from Russia's long-standing military base there within, in spite of the fact that the smaller nation's revolution had permanently altered the country's political loyalties. Obama, in turn, leveled heavy sanctions against Russia, and encouraged other nations to do the same.
And then the fireworks began. The situation was already tense because of the damage dealt in 2008. Russia had self-consciously been moving away from the dollar since 2009, when it played a key role in organization the BRICS nations against the dollar. But the Russians had planned on slowly weaning themselves off the dollar, not suddenly getting pushed away from the world reserve currency. The Ruble lost roughly half its value in just several months, and the threat of economic implosion brought Russia's future into question.
Nabiullina dramatically increased interest rates to the highest of any nation in the world, let the currency float on the foreign exchanges, and consequently stabilized the ruble. In many ways, what she did for Putin's Russia was equivalent to what Volcker did for Reagan's America. Now the Russian economy has rebounded with newfound independence from the West, and Nabiullina has demonstrated that when handled properly and with a relatively debt-free balance sheet, inflation can be stymied by a central bank. What this means for the future of interest rate manipulation and international politics remains to be seen, but clearly Nabiullina has established herself as one of the boldest central bankers alive, and also one of the most powerful women in the world.
7. Ben Bernanke (1953-Present)
Most people, even most intellectuals, have a series of ideas about how the world should operate but never get the opportunity to implement them. Well, Ben Bernanke is one of the lucky few who actually had the chance to reshape the world in his image. Bernanke is the former Princeton professor who, as Federal Reserve Chairmen, was called on to save the world economy from the 2008 financial crisis that brought the banking system to its knees.
Bernanke spent his life studying the dangers of deflation. He wrote his dissertation on the Japanese deflation that has hampered their growth for years, and has written extensively on the Great Depression. As Fed Chairmen, he was quick to inject massive amounts of liquidity into the banking sector in the wake of the subprime mortgage fiasco. He quadrupled the money supply in three years over the course of the bailout and three rounds of quantitative easing. These controversial moves applied Keynesian principles in a way that has preserved the banking system as we know it, albeit at the cost of thrusting the world into a low interest environment and dramatically increasing the debt to GDP ratio.
Whether Bernanke's moves will prove helpful or harmful remains controversial, although so far their ramifications seem to have created an economic order that is shaky but still holding. Either way, the rest of us are left to live with the good and bad consequences of Bernanke's font-bold moves.
8. Mario Draghi (1947-Present)
Mario Draghi is arguably the world's most powerful economist today. He has been the head of the European Union's finances since 2011. It was Draghi who told the world he was willing to go to extraordinary lengths to stimulate the European economy, and he who embarked on a stimulus plan that included printing 80 billion Euros a month. But perhaps the most extreme of the former Goldman Sachs employee's moves came as he moved from his role as Italy's Central Banker to to Central Banker for all of Europe. Draghi brought the Euro's interest rates into negative territory. Stated otherwise, the price of debt in Europe is at a multi-century low.
This drastic move did not come from a vacuum. Draghi has presided over the European Union during a time of great financial strife. Europe had to deal with the consequences of massive dollar liquidity injections, which have caused upheaval throughout its own markets. Not long after America's quantitative easing, Greece went into multiple deflationary crises. Then Britain voted to leave the EU, Italy's Five Star political party now seems poised to create an Italeave movement, and in Cyprus, things became so bad that the authorities instituted a bank bailout.
Draghi has had to attend to one major crisis after another during his tenure. All the while. this MIT-trained economist has implemented Keynesian easy monetary policies in a series of decisions reminiscent of what Ben Bernanke did in the United States just before Draghi took office. At this point, the longterm effects of Draghi's decisions are unknown. We have never seen interest rates this low before, nor debt this high. If successful, his policies will make him a hero of finance and, some day in the future (assuming physical cash remains in circulation), we may even see his face on future notes. Conversely, if these previously unthinkable strategies fail, then Draghi—along with Janet Yellen and Ben Bernanke, may become the central figures in economic textbook examples of what not to do in response to a crisis.
9. Alan Greenspan (1926-Present)
Alan Greenspan was, for many years, the world's most influential economist, and to this day retains a respected opinion amongst the world's financial elite. He served as chairman of the Federal Reserve from 1987, under Ronald Reagan, through 2006, under George W. Bush. As the son of a New York stockbroker, Greenspan grew up around money. He pursued several degrees in economics from New York University, culminating in his PhD.
Most of the figures on this list are here because of their extensive writings. We can read their magnum opuses and see what ideas they fought for after many hours of careful deliberation. Greenspan's influence, however, comes less from his formal defense of ideas and much more so from his actions. As the chairmen of the Federal Reserve, he was charged with addressing the aftermath of the 1987, 2001, and 2008 stock market crashes. It was Greenspan's decisions which contained the Asian contagion in 1998 that almost shut down the international banking system, and likewise his bailout of Mexico in 1994-1995 which helped save that nation from its Peso crisis.
Given his illustrious career, one might think Greenspan would be in line for a well-deserved retirement. Instead, he has remained a major figure in the financial commentator's world. Greenspan's reputation has only improved in the wake of the 2008 crisis as people look back to the successful period over which he presided. He is regarded as an intellectual window into a more prosperous era, one to which Americans hope to return. And while Greenspan has discovered this new lease on financial life, he has also changed his rhetoric substantially. The former fiscal conservative turned easy money Keynesian has returned to his former gold bug ways. Which of Greenspan's predictions prove true will be of great interest to all who follow the markets.
10. Janet Yellen (1946-Present)
Janet Yellen became the first chairwoman of the Federal Reserve in 2014. Upon doing so, she became arguably the most important economist in the United States. This Yale-trained scholar has taught at prestigious institutions such as Harvard, the London School of Economics, and Berkeley. She has also spent her life working for powerful people in government. Early on in her career, she became an economist for the Federal Reserve. Later, she worked for the Clinton Administration under the Council of Economic Advisors, and eventually she became one of the Federal Reserve governors. She was also a voting member of the Federal Open Market Committee. Thus, Yellen was in the background throughout the build-up to, and through the financial crisis. Her willingness to continue the policies of her predecessors is part of why she is now Fed Chairwoman.
Upon ascending to America's economic throne, Yellen has taken a notoriously dovish policy. Many expected her to raise interest rates several times a year upon taking office, but instead she has only raised them 25 basis points once in December 2015, and once again in December 2016. This extremely cautious approach garnered heated criticism during the 2016 election.
Yellen is ideologically in line with a Keynesian approach to economics. By continuing the cheap credit policies of her predecessors, she has shown herself to be much more afraid of deflation than an overheating economy. Like many economists put into positions of economic power, her influence will largely be felt rather than heard. Yellen is known for her decisions more so than her writings. Just like Mario Draghi, the success or failures of those decisions remain to be seen.
11. James Rickards (1951-Present)
James Rickards' influential book, Currency Wars: The Making of the Next Global Crisis, changed the way that economists and generals alike think about money. Rickards entered into the monetary arena after studying international economics at the School of Advanced International Studies and acquiring both a law degree and an LL.M in tax law. He was working for Long-Term Capital Management in 1998 when the Asian markets began suffering from a currency collapse that brought down Russia and was about to spill into markets the world over. He negotiated a bailout for Long-Term Capital Management that prevented the crisis. Still, from that point forward, Rickards felt that prevailing economic theories were insufficient.
Rickards began studying the field from a fresh perspective and eventually borrowed concepts from complexity theory in physics, which he believes do a better job of explaining economics. In his view, complex systems naturally want to break down into simpler ones. Consequently, the more complex a system is, the more unstable it becomes. In Rickards view, the current world economy is excessively complex and exists as a super-leveraged, debt-based derivatives system that essentially needs to collapse. The world was given a warning in 1998 and a trial run again in 2008, and instead of de-leveraging, the global economy has instead only continued to expand the balance sheets of insolvent banking institutions. Now, Rickards believes a major banking crisis that drastically surpasses what happened in 2008 is inevitable.
Rickards also describes in detail how nations can use numerous methods of financial manipulation in order to undermine each other. He notes that when properly executed, policies that corrode a rival's financial posture can be a more cost effective way of attacking, and that the world's nations are already engaged in this kind of warfare. Rickards has acted as a CIA and Pentagon informant on the subject of financial warfare, participated in the Pentagon's first financial wargame in 2009, and continues to be the leading authority on the subject.
12. Paul Volcker (1927-Present)
Paul Volcker was chairman of the Federal Reserve under Jimmy Carter and Ronald Reagan holding the office from 1979 through 1987. Volcker studied economics at Princeton and Harvard before entering the professional world at the Federal Reserve Bank of New York. He came to national prominence at a dangerous period in U.S. economic history. During the 1970's through early 1980's, America was undergoing a massive inflation crisis in the wake of the collapsed Bretton Woods gold standard. By some measures, America was even experiencing mild hyperinflation.
Thus, when Volcker came to power, many believed something drastic needed to be done. Consequently, he initiated the most aggressive interest rate policy in U.S. history. He raised the interest rates to a staggering 20%, which seems all the more incredible in today's low interest rate world. By raising interest rates, Volcker helped restore confidence in the U.S. dollar as a longterm store of value, which laid the foundation for what would eventually be called, “Reaganomics” and the era of “King Dollar”.
Since leaving the Federal Reserve, Volcker has spent most of his time in banking. However, he did serve on president Obama's Economic Advisory Board, and has occasionally spoken out about current issues in economics. Obama instituted the “Volcker Rule”, which regulated banking activity in the wake of the financial crisis and was inspired by Volcker's staunch pursuit such rules. In the post-2008 landscape, many have contrasted Volcker's extremely aggressive interest rate hike policies with Yellen's extreme dovishness. Those critical of Yellen will often site Volcker's success as a counter-example.
13. Mike Maloney (1956-Present)
Mike Maloney represents one of those success stories that Hollywood likes to make movies out of. Despite being born with severe dyslexia and struggling so much to read that he dropped out of school in the 10th grade, Maloney has become a successful entrepreneur and author. His challenges in reading forced him to develop an incredible memory and eventually he utilized Apple's OS 10 text-to-speech program to listen to books. He went on to write Guide to Investing In Gold & Silver, the all-time bestselling book about precious metals investing.
Between 2005 and 2007, Maloney came to see the writing on the wall and began warning people about the coming financial subprime mortgage crisis. He even went so far as to describe a remarkably accurate outline of what the economy would do over the coming years. He now runs a business selling precious metals, and has produced one of the most successful video tutorials describing financial history and a cycles-based approach to investing called Hidden Secrets of Money.
Maloney's work has credited him a growing reputation in the financial sphere, and a particularly strong following amongst gold bugs. But unlike many likeminded figures within his school of thought, Maloney never gave into sensational or apocalyptic predications, and never made the mistake of explicit date-setting. Instead, he grounds all of his judgements in patterns repeated throughout history, and has consequently made both himself and many others a great deal of money.
14. Peter Schiff
Peter Schiff is an American investment consultant, author, radio show personality, market analyst, and the CEO of Euro Pacific Capital Inc. He is known for his contrarian views, including his sharp criticisms of central banking, Keynesian economics, and other mainstream perspectives. He instead endorses limited government and free market ideas.
His father, Irvin Schiff, was a famous tax protestor who considered the federal income tax illegal. Some see Peter as a healthy dose of common sense in a market gone mad while others seem him as too stubborn to change his mind, but no one can take away the fact that he predicted the housing market crash and then made a small fortune. He has since been derided for predicting hyperinflation in the wake of America's quantitative easing program. This forecast as yet to come true, but some still believe a banking crisis is imminent.
Schiff's warnings are stark and rarely what the average person wants to hear, but well-timed crisis investing can make a person rich. Consequently, many still listen closely when Schiff speaks. His financial platform has also given him ample opportunity to extrapolate upon his social and political perspectives.
15. Walter Block (1941-Present)
Walter Block is the quintessential intellectual contrarian. He has defended an anarcho-capitalist position taken to its absolute logical conclusion. Under Block's perspective, all standard government should be done away with and replaced with voluntary organizations ruled by the market, as opposed to city hall. He has defended the privatization of everything, including the construction and maintenance of roads, and even law enforcement. His most famous work is a book appropriately called Defending the Undefendable, which argues that various besmeared occupations such as drug-dealing and other black market operations are largely scapegoats for power-hungry governments.
Some of his other controversial opinions include the right to sell one's self into slavery. He earned his Ph.D. from Columbia University, then taught at several universities, and eventually acquired the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at Loyola University in New Orleans. He has written hundreds of articles in a variety of publications ranging from the academic to the popular, and written numerous books.
Block's radical ideas struggled to gain traction in the pre-crisis world. Before 2008, most people would have swiftly dismissed anarcho-capitalist thinking. But things have changed. As a larger portion of the population grows restless and frustrated in a world where the stock market hits all-time highs and one out of six Americans is on food stamps, anarcho-capitalist ideas have increasingly moved from the fringe to the defendable.
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