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9780691146836

Fault Lines

by
  • ISBN13:

    9780691146836

  • ISBN10:

    0691146837

  • Format: Hardcover
  • Copyright: 2010-05-04
  • Publisher: Princeton Univ Pr

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Summary

Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. Now, as the world struggles to recover, it's tempting to blame what happened on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed.

Rajan shows how the individual choices that collectively brought about the economic meltdown--made by bankers, government officials, and ordinary homeowners--were rational responses to a flawed global financial order in which the incentives to take on risk are incredibly out of step with the dangers those risks pose. He traces the deepening fault lines in a world overly dependent on the indebted American consumer to power global economic growth and stave off global downturns. He exposes a system where America's growing inequality and thin social safety net create tremendous political pressure to encourage easy credit and keep job creation robust, no matter what the consequences to the economy's long-term health; and where the U.S. financial sector, with its skewed incentives, is the critical but unstable link between an overstimulated America and an underconsuming world.

In Fault Lines, Rajan demonstrates how unequal access to education and health care in the United States puts us all in deeper financial peril, even as the economic choices of countries like Germany, Japan, and China place an undue burden on America to get its policies right. He outlines the hard choices we need to make to ensure a more stable world economy and restore lasting prosperity.

''Like geological fault lines, the fissures in the world economic system are more hidden and widespread than many realize, he says. And they are potentially more destructive than other, more obvious culprits, like greedy bankers, sleepy regulators and irresponsible borrowers. Mr. Rajan . . . argues that the actions of these players (and others) unfolded on a larger world stage, that was (and is) subject to the imperatives of political economies. . . . A serious and thoughtful book.'' - New York Times

''In a new book . . . entitled Fault Lines, Rajan argues that the initial causes of the breakdown were stagnant wages and rising inequality. With the purchasing power of many middle-class households lagging behind the cost of living, there was an urgent demand for credit. The financial industry, with encouragement from the government, responded by supplying home-equity loans, subprime mortgages, and auto loans. . . . The side effects of unrestrained credit growth turned out to be devastating--a possibility most economists had failed to consider.'' - John Cassidy, New Yorker

''The book, published by Princeton University Press, saw off stiff competition from five others on the shortlist, to be chosen as 'the most compelling and enjoyable' business title of 2010. The final intense debate among the seven judges came down to a choice between Fault Lines and Too Big to Fail, Andrew Ross Sorkin's acclaimed minute-by-minute analysis of the collapse of Lehman Brothers. The book identifies the flaws that helped cripple the world financial system, prescribes potential remedies, but also warns that unless policymakers push through painful reforms, the world could be plunged into renewed turmoil.'' - Financial Times

Table of Contents

Acknowledgmentsp. ix
Introductionp. 1
Let Them Eat Creditp. 21
Exporting to Growp. 46
Flighty Foreign Financingp. 68
A Weak Safety Netp. 83
From Bubble to Bubblep. 101
When Money Is the Measure of All Worthp. 120
Betting the Bankp. 134
Reforming Financep. 154
Improving Access to Opportunity in Americap. 183
The Fable of the Bees Replayedp. 202
Epiloguep. 225
Notesp. 231
Indexp. 247
Table of Contents provided by Ingram. All Rights Reserved.

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Customer Reviews

Fair and balanced look at economic crisis April 28, 2011
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Fault Lines by Prof. Rajan is one of an ever increasing number of books recounting the financial collapse of the past few years. Unlike many of the others, Prof Rajan is both knowledgeable and experienced having been at the IMF in a senior role during a portion of this period. Thus this textbook is written from the perspective of a highly credible professional as well as hands on operative. If you are a student in Economics or majored in Economics then you will find this rental textbook to be a rather easy read, yet still intellectual and stimulating. Read the book, you won't be disappointed.
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Fault Lines: 5 out of 5 stars based on 1 user reviews.

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