Daniel “money grubbing lacky of international capitalism, but not a bad guy, really” Davies is right to brag he saw the current crisis coming five years ago, but he wasn’t the only one:
Despite these returns for the lucky few, hedge funds are not without dangers for the rest of us. Since they borrow so heavily from banks, a really disastrous year for the speculators could do serious damage to the broad financial system — meaning that central bankers and regulators may face the choice of a bailout or systemic collapse.
From Doug Henwood’s Wall Street, originally published in 1997 and now available as a free download from Left Business Observer. the scenario he sketches is more or less what happened, with hedge funds being the first to collapse a year and a half ago when the mortgage bubble started popping. Since then they’ve largely transferred their risks and losses on to banks and with the media’s institutional memory not going back much further than three months or so they may seem to have weathered the crisis, but don’t believe anybody who argues this proves their bad reputation is undeserved.