More Books to get you Thinking

We are now in the eighteenth month of what has been generally accepted as a recession. Not since the thirties have we seen an economic crisis of such severe proportions. There are some signs that the economy may be approaching its lowest point, but we have a long and bumpy road ahead to recovery. I’m adding some more titles to the ones I highlighted last time to help you demystify the complexities underlying the economic turmoil surrounding us. In the three books I’ve selected this time, the authors adopt very different analytical frameworks to address the fundamentals of the crisis and the suggested road to recovery.

In his book titled, Credit Crisis of 2008 and What it Means, George Soros, a prominent figure in the financial world, analyzes the theoretical underpinnings of the current economic downturn in terms of the institutional framework within which economic growth has been driven over the last decade: this was done largely through credit expansion by banks. Soros traces the beginnings of the current crisis to the era of falling interest rates over the past years that generated cheap funds, excessive lending by banks, leveraged buyouts and the housing bubble that finally culminated in the collapse of the mortgage and financial markets. Soros makes a compelling argument for a new paradigm of economic analysis that does not rely on perfect knowledge and self-correcting markets.

In the book The Subprime Solution: How Today's Global Financial Crisis Happened and What to do About It, a professor of economics at Yale and bestselling author, Robert Shiller analyzes the origins of the economic crisis and attributes it to the irrational public enthusiasm for housing investments. He postulates that a similar irrational exuberance about investments resulted in the stock market bubble that burst in the 1990s, after which credit extended to dangerously high levels and eventually led to foreclosures and bankruptcies everywhere. As a solution, Shiller advocates the use of bailouts to subprime victims with lower income and wage levels. He also stresses the importance of tightening and revamping the existing financial infrastructure system to prevent the kind of excesses that have led to the current economic meltdown.

Mark Zandi is the chief economist and the co-founder of the Moody’s website. In his new book, Financial Shock: a 360° Look at The Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis, Zandi provides a detailed and lucid analysis of the diverse forces that contributed to the collapse of the financial markets, ranging from high levels of liquidity and reckless lending to the psychology of homeownership. What is unique about this book is its step-by-step account of the crisis as it unfurled over eighteen months - especially useful for readers less familiar with how the crisis evolved. The author explains the complex financial instruments that were used to cloak the increasingly risky mortgage underwriting that occurred. The most valuable parts of this book are the inferences the author presents for future policy makers, investors and homeowners to prevent similar economic catastrophes from occurring in the future.
There are many more exciting titles on our shelves, so be sure to check back for more books to get you thinking!
-Nita Mathur


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