THE BOOK IS ABOUT THE FINANCIAL COLLAPSE OF THAT HIT THE USA AND GLOBAL ECONOMICS. THE BOOK IS WRITTEN BY. Read "Fault Lines How Hidden Fractures Still Threaten the World Economy (New in Paper)" by Raghuram G. Rajan available from Rakuten Kobo. Sign up today. for millions of books. [PDF] [EPUB] Fault Lines: How Hidden Fractures Still Threaten the World Economy Download Heres the link to Raghuram Rajan's book. you can find free pdf and ebooks in this andriod application. GlobALLPdf. apk.
|Language:||English, Spanish, Dutch|
|ePub File Size:||19.32 MB|
|PDF File Size:||8.80 MB|
|Distribution:||Free* [*Free Regsitration Required]|
Fault Lines is a perceptive, detailed look at where the answers to the questions that Raghuram Rajan was one of the few economists who warned of the global . Editorial Reviews. Review. Fault Lines is a must-read. (Nouriel Roubini Forbes. com) I devoured Raghuram Rajan's Fault Lines: How Hidden Fractures Still Threaten the World Economy in a very short span of time last night. It's brief, well- written. Fault Lines: How Hidden Fractures Still Threaten the World Economy Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. are available for instant access. view Kindle eBook | view Audible audiobook .. Get your Kindle here, or download a FREE Kindle Reading App.
Not in United States? Choose your country's store to see books available for purchase. See if you have enough points for this item. Sign in. 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.
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.
What is Kobo Super Points?
In "Fault Lines," Rajan argues that serious flaws in the economy are also to blame, and warns that Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. 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.
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. Get A Copy. Hardcover , pages. More Details Other Editions 6.
Friend Reviews. To see what your friends thought of this book, please sign up. To ask other readers questions about Fault Lines , please sign up. Any prerequisites? Varun Rajda None at all. Dr Rajan can explain economic concepts to ten year olds in a way they'd understand. See 1 question about Fault Lines…. Lists with This Book. Community Reviews. Showing Rating details. Sort order. Oct 18, Joshua rated it really liked it Shelves: A very nice synopsis of the world economy following the latest financial crisis and directions on where we may be headed.
Some key points I took away: Inefficient jobs are shed and replaced by more efficient technology. Promoting home ownership is a key part of this strategy. View all 3 comments. Feb 24, Jim rated it really liked it Shelves: Rajan does an exceptional job of distilling the factors leading to the financial sector meltdown, linking the actions of government both US and world governments and the private sector, and dispassionately describing the various ways they contributed to the creation and bursting of the bubble.
He also makes some very cogent and disturbing points about the lack of correction and in some cases, exacerbation of the "fault lines' he identifies in the world economy, which threaten to push us Rajan does an exceptional job of distilling the factors leading to the financial sector meltdown, linking the actions of government both US and world governments and the private sector, and dispassionately describing the various ways they contributed to the creation and bursting of the bubble.
He also makes some very cogent and disturbing points about the lack of correction and in some cases, exacerbation of the "fault lines' he identifies in the world economy, which threaten to push us through the entire cycle once again. Having served as Chief Economist of the IMF, his world macroeconomic perspective is broad and very enlightening, as well as impressively non-ideological unless you think viewing the crisis through the lens of economics is inherently ideological, in which case good luck with fixing economic policy.
Rajan's prescriptions are common-sense, but overly broad in some ways.
His discussions of direct monetary, fiscal and trade policies are pretty straightforward, and can be implemented by governments without too much upheaval, but some of the subtler ones are stickier. He talks about improving early education in America, for instance, but without a clear roadmap politically or policy-wise for doing so. That would probably require another book all by itself, but you'd like to see him take more of a stand on how to get from here to there.
Perhaps he doesn't like to do that without subjecting his conclusions to the same level of rigor, which is fair, but it leaves those sections feeling a bit hollow. All in all, though, it's a pretty short and easy, but comprehensive, analysis of the causes of our current economic woes, and how to avoid subjecting ourselves to further wild, cyclical booms and busts. Jan 31, Anushree Rastogi rated it it was amazing.
Very well articulated, Prof Rajan had not hesitated from making his opinion on most aspects quite clear. Hence the book is not just another case of fiscal and monetary policy levers explained, it takes a stand and from what I see 7 years later in , quite a prophetic stand at that.
Provides for an insight into the paths countries use to develop, asset pricing and the role Central Bank needs to play in asset price regulation and where the government should draw a line when deciding on economic Very well articulated, Prof Rajan had not hesitated from making his opinion on most aspects quite clear. Provides for an insight into the paths countries use to develop, asset pricing and the role Central Bank needs to play in asset price regulation and where the government should draw a line when deciding on economic policy.
Aug 19, Lobstergirl rated it really liked it Recommends it for: Esther Fenchel. Economist Raghuram Rajan was one of the prescient ones: Events proved him correct.
Here, he uses a wide-angle lens to examine the causes of the financial crisis, and why we're nowhere near out of danger. A stint as chief economist at the IMF means his perspective is global; understanding growth patterns and rates in de Economist Raghuram Rajan was one of the prescient ones: A stint as chief economist at the IMF means his perspective is global; understanding growth patterns and rates in developing countries, and financial crises such as the Asian meltdown of , help us understand what's happening in the U.
He argues that interest rates were kept very low - credit very loose - in order to help the lower class get a leg up. Since their income had stagnated, and since better education to pull them into the middle and upper classes is a very long-term solution and thus extremely difficult to achieve politically, policymakers helped low-income Americans achieve a higher standard of living by allowing them to buy homes and pull equity out of their homes.
Needless to say, this went on too long, and the real estate bubble was created. Americans overconsumed, took on onerous debt, and thus enabled the countries we were buying from, mainly Germany, Japan, and China, to shortchange their own economies by relying too much on growth from exports. If we had a stronger safety net in the U.
When the Fed, the Treasury, and politicians use stimulus this way during jobless recoveries, whether by keeping interest rates extremely low or passing legislation to pump billions into the economy, it has unintended and damaging consequences: Rajan urges reforms in two areas: In the financial sector, incentives are dangerously aligned with taking on risk. Wall Street assumes that certain institutions will be bailed out if they fail, and they are correct in this. Rajan uses the phrase "too systemic to fail" rather than "too big to fail," because it's not size but interconnectedness that determines when government will step in and rescue.
Government rescues must stop, because they distort the entire financial sector. Financial institutions should know what their risk exposures are, and this information should be made available to the markets on a regular basis; during the financial crisis, many companies had no idea how much risk they had taken on. If this information is widely known, it can be used to prevent institutions from becoming "systemic.
In order to more properly align individual risk-taking with compensation, he proposes holding a significant chunk of a financial company's bonuses in escrow, to be paid out only after it is clear that trading positions have been profitable. He also suggests phasing out bank deposit insurance, since a money-market fund invested in Treasury bills is just as safe as guaranteed bank deposits. Reforming the safety net needs to be another top priority.
Recessions have changed, in that the last few recoveries have been jobless, and our current system of unemployment benefits is inadequate in the face of extended periods of joblessness. Politicians respond to the needs of the unemployed in ad hoc ways, and as we've seen recently, they have held benefit extensions hostage to the passage of other, unrelated legislation.
Rajan suggests that we tie benefits to a formula which would take into account the extent of overall job losses, "the proportion of jobs created to jobs lost, and the time elapsed since the recession began.
I enjoyed Fault Lines. I found it highly readable. There are some areas where, although clearly informed, Rajan seems a little out of his element the discussion of healthcare, perhaps.
He also is overly wedded to the notion that Fannie and Freddie and the affordable housing mandate are to blame for most of the mortgage crisis: The Hidden History of the Financial Crisis , Fannie and Freddie raced to get involved in subprime mortgages because they feared being left behind by their private sector competition. Dec 15, Dorotea rated it liked it. Rajan raises some very good points that are sources of concern - fault lines as he calls them, namely: Income stratification leads to loss of the belief that hard work will payoff 2.
Cheap credit quick fix 4. Lack of social safety net unemployment insurance and health coverage I agree with the fundamental message he financial sector was at the center of the last ciris, but it simply responded to implicit Rajan raises some very good points that are sources of concern - fault lines as he calls them, namely: Lack of social safety net unemployment insurance and health coverage I agree with the fundamental message he financial sector was at the center of the last ciris, but it simply responded to implicit and explicit incentives that the system created, therefore we must look for deeper causes in the system.
Mar 06, Abhijeet rated it it was amazing. Great reading which covers events outside the US as well highlights the hidden faultlines in the global economy.
Cash transfers to the poor are proposed and land acquisition issues as an impediment to growth are currently highlighted given this was written years ago. The aside on India personally was of great interest to me but even the piece on China was quit Great reading which covers events outside the US as well highlights the hidden faultlines in the global economy.
The aside on India personally was of great interest to me but even the piece on China was quite informative. The book is as centrist a solution as can be proposed by an academic and is commendable given it was written when the US had plumbed to the depths of the crisis. Aug 26, Fateh Mann rated it it was amazing. India's new RBI chief has a lot of expectations on his shoulders, and this book shows why. His analysis is holistic, comprehensive, convincing and rational.
He traces the roots of the crisis to at least 40 to 50 years before, and takes it from there on. For a person who hasn't actually studied economics, it will prove to be a terribly difficult read because 1 in terms of writing style, he's not exactly a Rushdie and 2 For the prevalence of many complex terms. This book isn't for the casual rea India's new RBI chief has a lot of expectations on his shoulders, and this book shows why. This book isn't for the casual reader, but persist and you will be rewarded with a rich knowledge of the crisis, coming from a man with incredible pedigree In the year , the annual Jackson Hole Conference - a prestigious event where there is an assorted convergence of highly reputed bankers, economists and financial journalists - was supposed to be a swansong bash celebrating the achievements of the Federal Reserve Board Chairman, Alan Greenspan.
Speaker after speaker showered adulation and sang praises of the man who stymied all efforts to regulate the spawning of esoteric financial instruments and who also ironically coined the now legendary In the year , the annual Jackson Hole Conference - a prestigious event where there is an assorted convergence of highly reputed bankers, economists and financial journalists - was supposed to be a swansong bash celebrating the achievements of the Federal Reserve Board Chairman, Alan Greenspan.
Speaker after speaker showered adulation and sang praises of the man who stymied all efforts to regulate the spawning of esoteric financial instruments and who also ironically coined the now legendary epithet, "irrational exuberance".
However an economist who was also the chief advisor to the International Monetary Fund "IMF" , proved to be the canary in the coal mine pouring cold water over the warm sentiments of the participants at the conference. Raghuram Rajan presented a paper which boldly cautioned the optimists that the global economy was sitting at the cusp of a disastrous recession. As expected Rajan was roundly criticized and scorn was heaped over his analysis. In , the world plunged into an abyss of economic crisis, the last of which was experienced in the year The Cassandra from the IMF was proved to be the prophet - albeit of doom.
In this book, Rajan delves deep into what he terms to be "faultlines" rupturing the fragile financial and economic fabric of the world. Overheated economies banking on producer bias, monetary policies deliberately keeping interest rates at ridiculously low levels with an intent to creating stimulus, predatory lending policies followed by avaricious bankers and mortgage brokers, a revolving door policy which ensures that there is no clear lines between those signing off billion dollar bailouts and recipients of such largesse, are a few telling factors which Rajan identifies as causing a clear and present danger to global economies.
Rajan does not merely identify the current and probable ailments. After diagosing the disorders with precision, he also goes on to prescribe remedial measures. Appropriate levels of financial regulation, more recognition to risk managers instead of for traders, diversification of credit and a rational and measured access to credit targeting the low income group borrowers are some of the primary ameliorating mechanisms suggested by Rajan.
In addition to economic prescriptions, Rajan also holds forth on social aspects such as improving the access to and quality of education, keeping in check poverty and race based discrimination and adult education. Following the epilogue is a fascinating chapter on the future prospects of and for India as it marches onward with great determination towards being not only an economic behemoth but also a socioeconomic superpower having an indispensable influence over the global economy and world markets.
Oct 01, Anvesh rated it it was amazing. I'm glad to have finished my 31st book for the year and it turned out to be really insightful one. Having seen so many news about how greed of bankers is blamed for crisis vs ineptitude of government regulations, finally someone who provided a view of systematic fault lines that could cause one more such crisis if not addressed to early.
The explanation of fault lines along with economic lessons in each chapter really makes you think if there is a better topic than macro economics and bette I'm glad to have finished my 31st book for the year and it turned out to be really insightful one. The explanation of fault lines along with economic lessons in each chapter really makes you think if there is a better topic than macro economics and better teach than RR. Jan 01, Manish rated it it was amazing.
One if the best book for understanding recent economic crises and what may be in store for future!! Dec 12, Justin Tapp rated it liked it Shelves: This is one of the books on the financial crisis that is ostensibly worth reading due to the CV of the author-- former IMF Chief Economist, later in charge of Indian monetary policy as Governor of the Reserve Bank of India.
Read Fault Lines: How Hidden Fractures Still Threaten the World Econo…
Writing this in late , perhaps PM Modi's botched reforms show how much Rajan was missed in opting to return to academia than return as Governor for a second term. Rajan has international gravitas and has thought about poverty and development in multiple ways. I would probably have enjoyed Saving Capitalism from the Capitalists more, but this book was available and I trust it contains similar criticisms and policy prescriptions.
For a list of a few I would recommend with this, see below or my Financial Crisis bookshelf on Goodreads.
Rajan is famous for showing up at the Federal Reserve's Jackson Hole retreat in and warning of the CDO time bomb that no one wanted to hear about; it was ticking while everyone just wanted to praise Maestro Greenspan out the door. Rajan is apparently unwilling just to rest on that career highlight for credibility, he seems to have to throw some bones to the liberal establishment in an effort to be taken seriously while he adopts some critiques of the US government that have been rejected by left-leaning economists.
As a result this book pivots from the financial crisis to education and health care reform, sometimes using examples from India as prescriptive and ignoring the various nuances of programs like Medicaid across 50 separate states. He adds little to reform proposals made by others and closes with vague but wide-sweeping policy prescriptions and new spending programs while somehow ignoring the massive risk the US faces in its long-term debt position vis-a-vis Medicare, not to mention trillions in unfunded pension liabilities.
Rajan is interested in identifying systemic fault lines. This is difficult to do in practice, just read a Nassim Taleb book-- even if you identify it you cannot be assured of diversifying it away.
You might reduce volatility in the short run, but make the fat-tail risk larger. The biggest fault line is that the goals of capitalism and democratic politics do not align. Rajan explains the housing bubble as a response to "insecurity" of middle-class wage stagnation.
People envy the upper incomes getting richer and compensate by saving less and borrowing more. One way to quence the insecurity is to buy a house. Housing demand aligns with the goals of politicians-- to increase private wealth, property values and local tax revenue , create jobs for lower and middle class voters construction , demonstrate "development" and so forth.
There is also the belief espoused by every President in the last years of the "ownership society," when people own rather than rent they take better care of their property and society is better off. Hence, the government likes to find ways to encourage home-building, such as subsidizing low-interest loans and making mortgage interest tax-deductible. See Ferguson's Ascent of Money for a more complete take on this history in the US in the 20th century. Rajan begins his blame with the s in privatizing Fannie Mae and Freddie Mac, and the ss deregulation of thrifts.
While privatized, there was still an "implicit guarantee" on Fannie and Freddie's debts, particularly in the eyes of foreign creditors. I once heard a talk by St. Louis Fed President Jim Bullard about the anxious days of the crisis when Bernanke was dealing with such creditors and quite angry. While Paul Krugman and others on the Left wanted to basically absolve Fannie and Freddie from guilt, Rajan rightly holds them and their political enablers accountable. While Rajan blames the Bush administration for further pushing home ownership, he neglects that Mankiw and others tried to deal with the implicit guarantee problem.
The Clinton Administration pushed to dramatically decrease the downpayment required for an FHA loan, and the Bush Administration further accelerated this. From , zip codes with lower incomes saw the most dramatic increase in housing investment. This is politically feasible until the buyer can't make payments, the adjustable interest rates go up, etc. Chapter Two examines the export-led growth model for which Yergin and Stanislaw's Commanding Heights is an excellent history and reference.
Rajan critiques the "Washington Consensus" of limited government intervention in the economy to stimulate private-sector growth through exporting to the developed world Stiglitz's Globalization and Its Discontents is another helpful book here.
Rajan writes that while an export-led model allows for growth and innovation even in a command economy, export-led economies find it difficult to switch to the service sector after they have matured ie: Japan is one example of this phenomenon, having built an export-led model of exporting vehicles and electronics, and now being dependent on other countries' stimulating their own economies in order for Japan to grow again.
This is a major fault line for the world economy. Rajan discusses the Chinese model as well, noting that China's one-child policy boosted its savings rate because the social safety net of parents relying on children can't be present with such a policy. Hence, capital flows to the US and boosts the value of the dollar and helps stimulate Chinese exports. The US' "jobless recovery" of the s, which the Fed responded to with low interest rates, may also have been affected by China's refusal to revalue the yuan during that period.
Surprisingly, Rajan never mentions the role of the collapse of Bretton Woods under Nixon in the capital imbalance problem. The US "closing the gold window" on the balance of payments made the US dollar the default reserve currency of the world and boosted it to a seemingly permanently strong status relative to other countries, which helped start the export-led model in the first place, as well as America's penchant to borrow to fund its deficits.
These are not easily reversible. Rajan also seems to ignore the effects lifting of capital controls during the same time period. As a result of these things, which Rajan does not spell out clearly, the Federal Reserve's monetary policy is exported to the rest of the world. Rajan blames the Fed for "blowing up the housing bubble" without spelling out the history clearly. In examining Fed policy, Rajan critiques the "Greenspan put," and the willfull ignorance of rapidly increasing asset prices at the end of the Greenspan era.
Rajan essentially makes contradictory statements about the Fed's ability to identify and limit asset bubbles. He blames the Fed for not deflating the housing bubble while acknowledging the problems of such a policy change.
He writes the Fed should have triple mandate of looking at asset prices and risk as well as inflation and unemployment.
Many economists have written on the difficulty of such a policy. The Fed ignored the effects of strengthening the Community Reinvestment Act that was pushing banks into loans in communities where they would most likely be defaulted on. Congress basically absolved the CRA, as did Ben Bernanke, but conservative economists and politicians have tended to agree with Rajan. He doesn't just blame the Fed, he examines why so many banks kept risky assets on their books, buying into their own fantasies see The Big Short for how different arms of banks took sometimes opposing trading positions.
The main problem was that the risk was not properly priced into the assets. Credit default swaps were undervalued and houses were overvalued. Rajan also explores the problem of "too big to fail" and systemic risk. Does the financial sector allocate capital efficiently? No, not if assets are mispriced due to the undervaluing of risk. He proposes the common-sense solution of ending government subsidies to financial institutions anad implicit guarantees.
Given that little has been done to reduce the subsidization of housing in the US and institutions like the FHA still take very low downpayments and banks were allowed to get even bigger, even common sense solutions run into political realities and cognitive dissonance.
Nevermind the "cycle-proof regulations" that Rajan proposes. Beyond government subsidies, Rajan encourages actions in the private sector as well. We have to find ways to eliminate the temptation of bankers to take on "tail risk. Rajan wants corporate boards to have members with more financial expertise. He also wants standardization of assets to make them easily comparable and easy to see what's inside.
He calls for breaking the problem of "cognitive capture" of regulators and policymakers. He wants to end "too big to fail" and prohibit mergers and somehow measure intertwined exposures to measure the real systemic risk of institutions. Perhaps thinking from an IMF standpoint, he proposes a limited "systemic bailout fund. But, how big should such a fund need to be and wouldn't it be tempting for Congress to tap into it for bailing out, say, an auto industry or defense contractor?
Rajan doesn't give many details. All of these proposals have been echoed by economists and politicians on the Left and Right since , but little has been done. Whatever little Dodd-Frank did to increase regulations of the financial sector, President-elect Trump publicly put immediate repeal into his platform. Sadly, he would rather the Federal Reserve pursue the more complex triple mandate and makes no mention of the idea of a Nominal GDP target which is disappointing to me a market monetarist whor reads Scott Sumner and David Beckworth.
Instead, he goes on a longer rant with little to do with economic or monetary policy and sounds like he's running for public office with a bunch of vague policy prescriptions: We need to "work on things that work.
We need universal preschool and subsidies for nutrition education and free lunch. We need to reduce unequal access to education to attain human capital. Universal health care and other health care reforms that look a lot like the Affordable Care Act. We need to examine a value added tax and a carbon tax to reduce the deficit without mentioning how much wider the deficit would be with his other policy proposals.
At the same time we need to reduce the deficit, we need to increase household savings.
There's not much call for sacrifice here. I could go on. Rajan closes by explaining IMF policy and the various debates and controversies that surround it. He advocates customized policy and not "one size fits all," "Washington Consensus"-style policies. He encourages multilateral cooperation, which always conflicts with the local politics of sovereignty, but multilateral agencies like the UN, IMF, World Bank "should be given the benefit of the doubt.
If he really thought about all the systemic risks out there, and how we're ignoring them unfunded pensions, climate change, the growth of nationalism, etc. He somewhat addresses this in the epilogue, but not satisfactorily. Three stars out of five. He has succeeded in identifying several global financial fault lines but also ignored or not seen others. The Commanding Heights by Yergin and Stanislaw. Raghuram Rajan, the rockstar ex-RBI governor was one of the few economists who warned of global financial crisis of before it hit.
In Fault lines, Rajan says just like fault lines in tectonic plates run the danger of earthquakes; global economy has some deep fault lines which led to economic crisis in , and if not fixed could lead to more devastating crisis. Rajan shows how choices made by bankers, government and homeowners were rational responses to incentives to take on risks br Raghuram Rajan, the rockstar ex-RBI governor was one of the few economists who warned of global financial crisis of before it hit.
Rajan shows how choices made by bankers, government and homeowners were rational responses to incentives to take on risks brought about the financial meltdown.
In all, he suggests, to make the global financial order robust some hard choices need to be made by getting the policies right, and focusing on long term prosperity over short term gains.
Feb 06, Anand Iyer rated it really liked it Shelves: Fault Lines provide a flawless albiet a theoretical analysis of Financial Markets, Governments and their interfaces.
While some after thoughts of the crises is mired in its myopic observations, others especially views on developing economies and multi national organisations prescient and accurate. Any aspiring Financial or Economic graduate must have this o Fault Lines provide a flawless albiet a theoretical analysis of Financial Markets, Governments and their interfaces. Any aspiring Financial or Economic graduate must have this on their must-read shelf! May 12, Samridhi Khurana rated it really liked it.
As an economist and exemplary academician, Rajan has looked beyond the convenience of targeting the government and greed of the finance world as the only reasons for the financial crisis of He hasn't shied away from holding them responsible, but at the same time has provided a more holistic view to explain the global economic meltdown of Thoughtful, and beautifully written.
View 1 comment. Sep 17, Kevin Tharayil rated it it was amazing Shelves: In , the author, at an elite economists gathering honoring the then Fed Reserve governor, Alan Greenspan, made the point that financial development had made the world riskier. He met with scorn and as the documentary 'Inside Job' showed, accusations of being a luddite!
This book written in the aftermath of the subprime crisis is a call to understand that until the root of the problems - The Fault Lines that exist are not addressed, any recovery from the economic mess will be short lived.
The In , the author, at an elite economists gathering honoring the then Fed Reserve governor, Alan Greenspan, made the point that financial development had made the world riskier. The easy scapegoats bankers, capitalism, greed and fear aside, the push for housing credit by the political class without revisiting the monetary policy acted as enablers for the entire system to justify winning incentives by scoring the maximum points.
The debt fissures due to trade imbalances only add burden over and above the private transfer of debt to the tax payers. A very well thought out and clear read which is a must to try and understand the core issues leading to financial crises and suggestions on how to deal with them.
Don't have the energy now, at least to attempt a summary. Aug 05, Jake Meyer rated it it was amazing. In Raghuram Rajan set out to explain how structural instabilities in the global financial system led to the largest crisis in recent memory. With Fault Lines: Rajan knocks it out of the park. By using simple yet illustrative anecdotes and explanations carefully chosen to illustrate the given phenomenon! Maligned at the time by many policymakers and academics, his speech proved prescient, and is now outlined for a broader audience to understand after the fact what he saw before.
Further, it illuminates how these factors are still generating risk in the financial sector today. With policymakers still too focused on basic factors such as unemployment and inflation in economic policy — instead of financial factors that exhibit highly dynamic and critical behavior — we are applying the wrong tools to the wrong target. This is exacerbated by the continued institutional misalignment of incentives in markets and political systems. Tying the present and past versions of these problems into a compelling narrative, Rajan explains how the same weaknesses culminating in the crisis of may strike again — then outlines both a set of fixes, and the roadblocks we should expect in their implementation.
Rajan proposes the interaction of an eclectic cocktail of factors ranging from economics and political science to psychology and education when constructing his explanation. The first of these is a credit expansion generated by the combination of inequality and short-term political incentives, while the rest of the book discusses factors that grew this expansion into vast imbalances then the largest crisis in recent memory.
Inequality has risen for decades. Accelerating technological development increased the need for high productivity workers above the capacity of an inadequate educational system to supply them, all while markets expanded due to Globalization.
This led to an outsized portion of gains from growth to be accrued to these skilled workers at the upper end of the income distribution. Credit issuance was forced up and risk evaluations were forced down in a myopic attempt at placating the poor, distorting financial activity enough a tipping point was passed - tilting this initial expansion into a bubble, which fed on itself until large enough to tank the global financial sector.
International Trade and Financial flows — and therefore their role in the crisis - cannot be looked at in isolation. As developing countries became a larger part of the global economy, their export-led model required increased industrial country spending while generating excessive savings.
The U. They found U. This insatiable appetite for safe U. Lowered risk brings inflows. Increased asset values and credit issuance often lowers risk evaluations through increased liquidity. Then lowered risk brings more inflows, and the cycle continues until it collapses. This initial distortion may not have occurred were it not for idiosyncrasies within the U.
Given the U. With the safety-net too weak to handle long-term unemployment unlike European economies the U. A heavily stimulative monetary and fiscal response pushed interest rates down and deficits up. When financial markets have large credit growth or asset appreciation present throughout this time , the resultant demand alone can encourage more risk-taking — begetting more credit growth, asset housing appreciation, and risk-taking that perpetuate the cycle.
When outside factors such as large stimulus further increase demand, the vicious cycle accelerates. Enabled X-Ray: Not Enabled. Customers who viewed this item also viewed. Fault Lines: Review and Analysis of Raghuram G. Rajan's Book. Capitol Reader. The Rise and Fall of Nations: Ruchir Sharma.
Follow the Author
Easy Money: Vivek Kaul. Economic History. Is this helpful? Thank you for your feedback. Share your thoughts with other customers. Write a product review. Customer images. See all customer images. Read reviews that mention raghuram rajan fault lines must read financial system wall street financial crisis long term world economy housing bubble saving capitalism excellent book piece of work global economy east asian highly recommended great insight well written rbi governor must take brilliant book.
Top Reviews Most recent Top Reviews. There was a problem filtering reviews right now. Please try again later. Rajan, for writing this book. Paperback Verified Purchase. Rajan, for writing this book', were the only words that resonated inside me when I was reading the last chapter of this book. This book is perfect to ignite the mind of how the economics and game theory including international and domestic political scenarios play out in the real world. This is a must-read book for all the students of social sciences, and especially economics, not because this gives new theoretical ideas of how economies work, but because any knowledge and powerful persons without the right direction do more harm than imaginable, and this book put the most influential ones in the courtroom - economics and us, the common people.
This book is worth to be made a must-read book before awarding Bachelor or Master degree in Economics. Thanks to Amazon for the speedy delivery. Those who are a part of Economy, please read this book. Don't miss it. Notify amazon that the book value shown in website was Rs. But the actual value of the hardcopy that I received was Rs. Just to inform you this difference I have observed.
Anyway, value is nothing by comparing with the great information obtained from this book. Any way Thank you. Student of economics or otherwise. Kindle Edition Verified Purchase. There are a few books that everyone whether a student of a subject or not should read For economics there are two The ascent of money by Naill Ferguson and the fault lines by Dr. Highly recommended. Such a well written book on the reasons for the Global Financial Crisis Rajan goes into the depths of the crisis and offers deep insights into how the structure of the system was at fault Really excellent book Wanted to know about Dr.
RAJAN's perspective towards the recession which earned him worldwide fame, like what made him foresee the situation and his side of story during the entire period. Found it interesting, obviously, and would recommend it for someone looking for a book with the same quest. A book which I will never forget. Awesome boom. Everyone should read it. Every penny I spend on it is worth it. After reading this your bview towards the world will change. Every chapter you read will bring an excitement like what happen what will happen if this comes where future lies.
A book worth every penny, if you are really keen on economics, capitalism and how markets, economies and how people tend to behave One person found this helpful. This book wasn't just about the crisis, it give a good picture at the global economic past present and future from the eyes of a very knowledgeable academic. Loved reading it.
Had a great time and learnt so much from it. Must read if you like macro economics. See all reviews. Would you like to see more reviews about this item? Go to Amazon. Back to top. Get to Know Us. Word Wise: Enhanced Typesetting: Page Flip: Not Enabled Word Wise: Enabled Screen Reader: Supported Enhanced Typesetting: Enabled Average Customer Review: Audible Download Audio Books. DPReview Digital Photography. Shopbop Designer Fashion Brands.