Books to Get You Thinking

As the world continues to reel from the financial crisis of 2008, we are now receiving even more sobering news and the distinct possibility of a double dip recession that conjures up memories of the 1930’s. The United States has experienced a sluggish recovery since 2009; in the coming years, it anticipates tightening spending levels and challenging prospects for generating new jobs and growth. Consumer demand is sagging under the burden of high consumer debt levels, particularly in the aftermath of the housing crisis and an unemployment rate that has climbed to over 9%. As the situation worsens, the private sector has little incentive to invest in new jobs. In the meantime, higher oil prices and supply disruptions following the Japanese Tsunami have only added to the current economic woes. The news from Europe is equally grim with Greece, Ireland, Portugal, Spain and Italy facing their own rapidly escalating debt and deficit issues. The US dollar may find itself sliding from its dominant role as the historic backbone of the world’s financial system. This week’s picks examine the ramifications of the current high levels of public debt, slow output growth, and high unemployment on the future of the global economic and financial system.

This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff
In this groundbreaking work the authors provide a historical perspective to the economic storm that is currently engulfing the entire world. Using comprehensive statistical data from sixty six different countries, the authors study different types of financial crisis that have occurred in the past : sovereign crisis where the government defaults on its debt obligations , banking crisis where banks suffer huge investment losses that make them insolvent and a currency crisis where the value of a country’s currency plunges down despite government intervention. The importance of the work lies in the lessons that can be drawn from past experience both in terms of what can be done to prevent financial crisis as well as policy measures that would help a country recover from the crisis. In the final analysis the authors find excessive debt accumulation, both private and public in the absence of financial controls as a trigger that could unleash a financial meltdown.

Endgame: The End of the Debt Supercycle and How It Changes Everything by John Mauldin and Jonathan Tepper

The book is unique in the detailed global perspective it offers readers. John Maudlin a prominent authority on financial matters provides a lucid analysis of the current economic and financial crisis threatening countries around the world including the United States, the European and Eastern European nations, Australia and Japan. The book analyzes economic growth patterns and policy frameworks in different economies that over time have led to excessively high levels of consumer overspending and unsustainable levels of public debt owed by governments. Against this backdrop the authors skillfully demonstrate the hard choices facing nations today - to avoid the looming threat of a world recession in the face of all time high levels of sovereign debt, it is of critical importance to implement strategic fiscal and monetary policies that would check the deficit while promoting higher growth and employment levels.

The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis by Joseph Stiglitz

Joseph Stiglitz, Nobel Prize winner and Professor at Columbia headed an international committee of twenty leading experts appointed by the United Nations in 2008 to study the nature of the global economic crisis in depth, focusing on the underlying factors that have led to high unemployment, depressed levels of consumer demand and volatile financial markets all over the world. The Report examines global trends and growing problems in manufacturing, natural resources and energy consumption, explaining how these are interconnected with the economic crisis. The Stiglitz Report is an invaluable document that provides a framework for future economic policy and includes both short term measures that address the current crisis, as well as deeper transformative changes that focus on setting up a new system of financial regulations and institutions. By operating at a global level, such measures would effectively coordinate national economic policies of all countries and promote an efficiently operating global financial system.

Exorbitant Privilege: the Rise and Fall of the Dollar and the Future of the International Monetary System by Barry Eichengreen

The author provides a fascinating analysis of the international monetary system through a well researched historical account of the role of the dollar as an international reserve currency and the forces that may undermine its strength in the coming years. Over the larger part of the 20th century the dollar has been widely held by banks and governments all over the world. Its strength has largely rested on the economic strength of the United States during a period marked by a consistently strong growth of production. However the current scenario is one where countries like China, India and other emerging economies experiencing much higher economic growth rates are beginning to dominate the global landscape. Historical evidence suggests that the outcome for the dollar largely rests on whether the United States is able to implement sound economic and fiscal policies that spur economic growth, reduce unemployment, and in the long run effectively tackle the current public debt crisis.


- Nita Mathur

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