Economist Who Predicted 2008 Crisis Warns of Looming Global Financial Risks

Richard Bookstaber, the economist who accurately predicted the 2008 financial crisis, is warning that the current global economic landscape presents risks potentially more severe than those seen nearly two decades ago. In a recent opinion piece for The Fresh York Times, Bookstaber outlined a confluence of factors—artificial intelligence, the private credit industry, geopolitical tensions in Taiwan and Iran—that are creating a dangerous environment for the world economy.

A Demon of Our Own Design, Revisited

Bookstaber’s 2007 book, “A Demon of Our Own Design,” warned of the dangers inherent in the complex financial instruments that ultimately led to the 2008 collapse. The book has since become a key text for understanding the systemic flaws in global finance. Now, Bookstaber argues that a similar pattern is emerging, with risks spread across multiple sectors and nations.

Two Key Threats: Iran and Private Credit

Currently, two major factors are contributing to the heightened risk: escalating tensions in the Middle East, particularly concerning Iran, and a growing crisis in the private credit market.

Geopolitical Risks: The Strait of Hormuz

The conflict involving Iran, including bombings by Israel and the United States beginning in February, has led to Tehran blocking passage of cargo ships through the Strait of Hormuz. This disruption has pushed the price of Brent crude oil above $110 a barrel and American crude oil close to $100 a barrel, with some analysts predicting prices could reach $200 a barrel by the conclude of 2027.

The Strait of Hormuz is a critical waterway for global oil supplies, particularly to Asia, handling approximately 20% of the world’s oil. Beyond oil, the region is also a key producer of helium, bromine (essential for microchip production), urea, and ammonia (critical for fertilizers), with the Middle East producing 50% of the world’s supply of the latter two. The potential for an energy crisis, coupled with disruptions to fertilizer and microchip production, poses a significant threat to the global economy.

Private Credit Concerns

For two decades, private funds like BlackRock and Blackstone have played an increasing role in lending to companies and startups, often filling the void left by banks that became more risk-averse after the 2008 crisis. Yet, the sector has experienced significant devaluation in recent months, triggered by investor attempts to withdraw funds.

The situation worsened in February with the launch of Anthropic’s Claude Code, a software capable of programming and managing corporate software. This led to a $285 billion loss in value for the benchmark index, a 25% decline. Since the end of 2025, the sector has lost over $265 billion in market capitalization, with companies like Apollo, Blackstone, Ares Management, Blue Owl Capital, and KKR experiencing significant losses. Apollo lost over 40%, Blackstone about 46%, Ares and KKR lost almost half, and Blue Owl 60%.

The Role of the Federal Reserve

Analysts are currently divided on the appropriate response from the Federal Reserve. Some believe that a cut in interest rates would signal an impending crisis, although others hope that Jerome Powell can persuade his successor to maintain current rates until the risks are better understood.

Bookstaber’s warnings echo concerns about the interconnectedness of global risks and the potential for a more severe financial crisis than the one experienced in 2008.