Crisis Economics: A Crash Course in the Future of Finance, by Nouriel Roubini
Audible Audio Edition | 13 hour(s) and 35 min. | Audiobook | Unabridged | Publisher: Penguin Audiobooks | May 11, 2010 | Language: English | MP3 | 425 MB Single RAR |.
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Nouriel Roubini gained great notoriety as one of the few economists who correctly predicted our current financial crisis, specifically pointing to the 90 percent increase in home prices from 1997 to 2006. While Roubini has written other books, ‘Crisis Economics’ is his first foray into economic literature aimed at the mass market and serves to expound on his argument that most financial bubbles are not only predictable, but avoidable. To borrow a phrase from Nassim Taleb, these are not unpredictable ‘black swan’ events, but can be forecasted with some degree of probability. The authors aptly point out the difficulty in defusing bubbles as they inflate as no one within the financial markets or the regulatory structure typically wants to take the punchbowl away from the party. As bubbles inflate they typically open the door for schemers and opportunists who become the inevitable scapegoats for the inevitable crisis, conveniently deflecting criticism from those who deserve it. Worse still there’s little accountability in either the public or private sector for those who should have known the bubble was over-inflated and took no corrective measures to stop it. What compounds the problem this time is governments are re-leveraging the system by taking on massive debt to prop up the private sector, leaving them vulnerable and unable to respond when the next crisis inevitably comes. Worse still, these ‘balance-sheet’ crises hobble government finances resulting in anemic recoveries that drag on as happened in Japan in the 1990s. And for all the talk of the private sector de-leveraging there’s little real proof that’s occurring and instead it appears to be stabilizing at unsustainably high levels, setting the stage for the next liquidity crisis. The authors look over economic history and point out a well reasoned argument, namely that economic collapses are both likely to occur and are predictable. They are not freakish, unforeseen occurrences, but oncoming events whose warning signs are ignored by policy makers, executives, and politicians. Even recent history proves this to be correct, pointing out crises limited to specific countries over the past few decades (Thailand, Mexico, Argentina, Indonesia, etc) that have led to more large scale economic problems. By now you’d be inclined to feel that Roubini truly is living up to his ‘Dr. Doom’ nickname, but he is hardly finished. The authors roundly criticize the current tendency to socialize losses and privatize gains and calls on governments to do more to break up too-big-to-fail institutions before they do fail, as the temptation to bail them out when they do fail (and they will) will prove irresistible for policy makers and politicians alike. The sad reality is that policy makers have not yet learned their lessons and are tinkering at the margins when a more massive overhaul is required. While keeping interest rates near zero percent has kept the economy from totally collapsing it is unsustainable and new bubbles are appearing in the form of commodities prices, which have surged greatly in price. But the authors do offer ways in which policy makers, executives, and politicians can get out of our current situation and avoid recurrences. Sadly they are not easy or palatable situations, and its all to easy for all three groups to ignore taking hard steps to reign in economic growth during robust growth periods. And that’s the problem. Societies are predicated on growth and expansion. We detest the idea of tamping down economic growth as it is so contrarian, yet that’s what essential. Thankfully Roubini and Mihm make economics and finance relatable and easy to understand, yet without dumbing it down significantly. As academics both write with a flair and élan uncommon in economics, yet they certainly do tend to get readers to despair at times. Their solutions seem reasonable; one can only hope that policy makers, executives, and politicians would not only read this but find the will to actually do what is necessary to prevent the next crisis. (Read Ian Bremmer interview to Nouriel Roubini )