» » Crisis Economics: A Crash Course in the Future of Finance

Download Crisis Economics: A Crash Course in the Future of Finance epub

by Stephen Mihm,L. J. Ganser,Nouriel Roubini

Unabridged CDs, 9 CDs, 11 hours Read by TBA This myth-shattering book reveals the methods Nouriel Roubini used to foretell the current crisis before other economists saw it coming and shows how those methods can help us make sense of the present and prepare for the future.
Download Crisis Economics: A Crash Course in the Future of Finance epub
ISBN: 0142427713
ISBN13: 978-0142427712
Category: Business
Subcategory: Economics
Author: Stephen Mihm,L. J. Ganser,Nouriel Roubini
Language: English
Publisher: Penguin Audio; Unabridged edition (May 13, 2010)
ePUB size: 1768 kb
FB2 size: 1389 kb
Rating: 4.8
Votes: 847
Other Formats: doc mobi mbr lit

Golden freddi
while I must say that I am concerned that this masterpiece was less written by Roubini himself and more written by Mihm, there is no question as to its overall impact as an economic history book. The written style is most undistinguishable from the first few baseline pages through to its logical afterward chapter. I enjoyed the references to economic historians as well as to what might have been their opinion had they themselves lived through our most recent crisis of credit and faith. If you are new to the recent crisis, especially review the easiest read definition of derivatives on pages 198-203. As a student, make certain to denote the 8 pages of SELECT BIBLIOGRAPHY. If you are a hobbyist, look to add vocabulary and theory from such examples as pages 206 (twice), 219, and 253. My most humble of opinion is a full recommendation of this crash course.
Any review of this book would have to start with the intended audience for this book. That audience would definitely not be PhD or MA level economists, graduate students or financial professionals. The book is geared primary to the layman with little in the way of a macroeconomic or financial background. This is not to say that some knowledge of the theories of Keynes, Friedman, Hayek or Schumpeter would be unhelpful (it would provide some good perspective to the reader) but the book provides the necessary relevant background of these where necessary. This is also not to say that the book would be of no or little value to the more knowledgeable, however. Roubini provides many insights and tangents in this book that even they would find interesting.

In a nutshell, the book describes the problems that have caused the current economic and financial crisis (along with historical perspective), the steps that have been taken by various nations (with emphasis on the U.S.), the future dangers underlying those steps and actions that he believes would help mitigate, but by no means eliminate, the problems that have led to the current crisis (and will probably lead to future crisis).

With respect to the causal problems, Roubini discusses seven in-depth. They are moral hazard in the financial system, leverage, regulatory arbitrage, securitization, principal agent risks, loose monetary policy and current account balances. Moral hazard has led to financial institutions taking far too large risks due to an expectation of being bailed out by central banks. Leverage, primarily through the introduction of new financial instruments, has led to a massive expansion in lending vis-à-vis reserve requirements and the monetary base (thus greatly increasing both the volatility of aggregate financial instruments available as well as their quantity in dollar terms). Regulatory arbitrage involves financial institutions minimizing (or altogether avoiding) financial regulations currently in place by, in very sophisticated ways, moving themselves or the relevant financial instruments to spheres those regulatory agencies that either do not have the authority or ability to regulate. Securitization, combined with principal agent risk, has led to two problems. One is that it has permitted banks to off-load their loan portfolios to third parties and hence has eliminated the need to make decent and secure loans to begin with. After all, if the bank does not have to keep the loan on its own books, why would it have to worry about making a good loan to begin with? Related to this, third parties have done a very poor job at due diligence with respect to checking the quality of the loans they purchase... This, in turn, according to Roubini is due to 2 facts. The first is that they do not (in general) plan to hold them long themselves (and hence why worry about the risk inherent in them?). The second is that the rating agencies have done a poor job at rating the quality of these instruments due to conflict-of-interest and the fact that they are quite difficult to rate. These facts, combined with the fact that many players in the financial sector are only rewarded on a short term basis, has insured that far too much risk has been undertaken by the financial sector leading to a huge bubble. Not that these have been the only problems. The fact that many of the world's central banks had loose monetary policies in place too long after the 2000-2001 crash has not helped. Neither has the fact that huge current account deficits (especially in the U.S.) has led to a flood of capital flowing back from lending nations (particularly Asian surplus countries) thus further inflating financial instrument prices. These inflows have also made it much more difficult to control nations' money supplies. For example, when Greenspan tried to raise interest rates to cool down the economy in the mid to late 2000s very large capital inflows into the U.S., to a very large degree, counteraccted his attempts.

Roubini also discusses how the world's central banks have dealt with the crisis. In short, they have pumped a huge amount of liquidity, many times in a very haphazard way, into the banking system to prevent it from collapsing. This, he points out, has not only dramatically increased debt (thus creating a serious inflation risk in the future) but has also caused serious moral and principle agent problems in that financial institutions may, as a result, take more risks in the future than prudent due to expectations of being bailed out the next time around.

Roubini, toward the conclusion of the book, provides steps to mitigate against the current and future crisis. A few (but by no means all) include the need for tighter links in the financial sector between risk and reward (so that risk and return can be better matched as opposed to just passing risk on to third parties or to the future); reduction in rating agency conflict-of-interest by preventing agencies from issuing ratings to issuers of financial instruments (this could, more logically, be done by purchasers); separation of banking functions from investment banking; and more transparency (and standardization of transparency) to make it easier for third parties to better judge the true value of collateralized debt obligations. It would a serious loss to not mount this reforms now, in Roubini's opinion, as they will be almost impossible to enact into law in a non-crisis environment. Even then, although Roubini does not come out and explicitly state it, he seems to imply that he is not optimistic that much of what needs to be done here will implemented.

For financial professions, PhD level Economists and those actively engaged and closely following the markets (i.e., reading Financial Times, Euromoney, Economist on a regular basis) what is mentioned above is not exactly a revelation. Hence the book would be of limited value to such persons albeit Roubini still have many interesting insights that may intrigue this group whether or not they may agree with them (i.e., his belief that gold is currently [as of December 2009, when book was completed] more an overpriced commodity, in a speculative bubble, than an anti-inflationary hedge). For the layman, however, the book is a five star.
I started to read this book expecting to get into a dark, profound and difficult analysis of economic theory...and it was a surprise to find it so clear and easy to follow. Roubini and Mihm delivered a book full of credible and understandable explanations of what really happened. But more...this book is also full of what would be recipes for sound economic policy.
I must also say that after reading this book I am really scared, because if such a bunch of people, that are supposed to know their trade and are expected to act with responsibility can deliver such poor have to be scared..!! But the main thing is that we can not know if this mess was created out of stupidity or out of bad faith...or both...
This is the fourth book I've read in the wake of the 2008 financial crisis, and this one was excellent. After the first two chapters, where the authors lay out their premise and provide a brief intellectual history, the next several chapters read as a stock recital of recent events. However, the book really comes into its own in the second half, when they become future looking. I'll keep this on a bookshelf so that I can reread it (especially the second half) in years to come. Also, this book includes some of the clearest explanations the layperson will ever read of a variety of economic terms and realities, such as the current account deficit, or how the Fed operates in the financial market (both normally and with QE). Highly recommended.