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 explains 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.
©2010 Princeton University Press (P)2010 Audible, Inc.
This book is filled with interesting pieces of info about a forecast of the coming financial world climate based on insightful knowledge of the past.
I have to admit I was a little disappointed. I was expecting Rajan, former IMF Chief Economist and current CBI governor to be much more original, "out there". Maybe it's because his book was written earlier, I can't help but think that I've read this same book several times before.
I enjoyed his description of French govt annuities in the 17th century as a form.of securitisation -- that was original. I also found intriguing the idea that the US is ultra-responsive to economic shocks because of the Bush I jobless recovery cautionary tale, exacerbated by the relatively poor safety net available to US workers. The rest, however, incmuding his discussion of the financial sector, left me a little meh.
Worth reading, though, as with everything by Raghuram Rajan.
The book takes several steps back from the financial crisis to consider underlying factors - fault lines - that contributed to the crisis. While he provides some suggested policy responses to prevent a recurrence, he does not address any responses to the down turn itself for which he has been criticized (e.g., Krugman and Well in their review in the New York Review of Books). However, that was not Rajan's intent.
Overall the book is far ranging, thoughtful and interesting. However, I largely turned off the audible version to read it myself as I found the reader to be ham-handed, monotonic and completely unengaging. Perhaps with another reader the previous reviewer would have been less critical.
A bunch of rambling words for 13 hours. Rajan's book starts nowhere and goes nowhere. i think Rajan was carrying the pages of his book to the publisher and dropped the pages, scooped them up without regard to page order and the narrator read them like that. It sounds like this, blah, blah blah, blah, blah blah. i thought this would be a pretty good book with insight because i listen to Rajan before on TV. he is better with 2 or 3 minute economic bursts. SAVE YOUR CREDIT!!!!!!!!!!
"Good, but to complex for a wide recommendation"
Although this book is well constructed, written, and read, it is far too complex for me to give it a high rating. I have read other books about the financial crisis and have a reasonable understanding of economics. I think to get full enjoyment out of this book a very high understanding of macro economics is needed because the ideas and theories are highly advanced.
This may be a contributing factor to why very few of the recommendations suggested here are being implemented by policymakers.
But I definitely will be reading this book again, even though I can't give it an open recommendation. If you have a reasonable level of economics understanding in advance plus a basic understanding of the 2008 financial collapse then this would be a good book for you.
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