MoneyWeek saw the financial crisis coming

Many people still think no one foresaw the financial crisis, says Merryn Somerset Webb. And that's just as the big banks would have it.


But we did see it coming, Ma'am
(Image credit: 2017 Getty Images)

"Why did no one see it coming?" This was the question posed by the Queen about the credit crunch and subsequent financial crisis when she was opening a new building at the London School of Economics in 2008. It is a question that is still regularly asked today. It's also a very silly question. That's because an awful lot of people did see something coming.

In February 2007, MoneyWeek wrote about subprime debt and the risks inherent in it as the US housing market peaked (which is also something we wrote about often in 2006). In March that year we ran a cover story on the "return of risk", in which we fretted about credit spreads being at record lows (ie, lenders were demanding very little more in terms of returns for lending to the risky than to the safe). By June we were telling you to "prepare for a market crash" on our cover, a warning we repeated twice in July.

But while our readers might have been luckier than those listening to fund managers at the time ("our advice is to stay invested", said JP Morgan in March 2007), we were hardly alone. For evidence, look no further than the Alex cartoon in this issue. Its author, Russell Taylor, had already been told by his City deep throats in the spring of 2007 that "big banks were badly exposed to these debt products and a large-scale bankruptcy was just around the corner". MoneyWeek and Taylor were hearing the same things from similar sources.

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My point here is not to pretend that anyone predicted exactly how the whole thing would unfold of course they didn't but to make it clear that the crash was not a bolt from the blue that no one could possibly have been prepared for in any way. It was not: most people working in finance were very well aware that something big was up. So why do most people think it was? Because, as John Stepek reminded me on our podcast this week (you can listen to it here), history is written by the victors. And the victors in this case are the big banks and the central banks.

The former are as powerful as they were pre-crisis and the latter are significantly more powerful. The idea that they knew of the risks inherent in the credit bubble (or for that matter that they caused it), and could have done anything to prevent disaster in advance, doesn't suit them any more than the suggestion that their solution to the crisis (bailouts and quantitative easing QE) hasn't worked out brilliantly.

The story of the crisis they want to see in the history books is this: no one saw it coming, no one could have seen it coming, the brilliance of the central banks saved the day, and bailouts and long-term QE were the only possible solution and the correct solution. Is that the correct story? We don't think so and our archives agree with us. But it's the one everyone now seems to believe.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.