Krugman, Wells: The Slump Goes On: Why? [View All]

[Jim__]

Paul Krugman and Robin Wells review 3 books for the NYRB:

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram G. Rajan

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm


The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession
by Richard C. Koo

As part of the review, they also talk about the origins of the 2008 financial crisis:

In what follows, we’ll provide a relatively brief discussion of a much-belabored but still controversial subject: the origins of the 2008 crisis. We’ll then turn to the ongoing policy debates about the response to the crisis and its aftermath. Not to keep readers in suspense: we believe that the relative absence of proposals to deal with mass unemployment is a case of “self-induced paralysis”—a phrase that Federal Reserve Chairman Ben Bernanke used a decade ago, when he was a researcher criticizing policymakers from the outside. There is room for action, both monetary and fiscal. But politicians, government officials, and economists alike have suffered a failure of nerve—a failure for which millions of workers will pay a heavy price.


Call it the great North Atlantic real estate bubble: in the first decade of the third millennium, prices of both housing and commercial real estate soared in parts of Europe and North America. From 1997 to 2007, housing prices rose 175 percent in the United States, 180 percent in Spain, 210 percent in Britain, and 240 percent in Ireland.

Why did real estate prices rise so much, in so many places? Broadly speaking, there are four popular explanations (which aren’t mutually exclusive): the low interest rate policy of the Federal Reserve after the 2001 recession; the “global savings glut”; financial innovations that disguised risk; and government programs that created moral hazard.

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Note the full article is currently available. I'm not sure if the NYRB leaves it available.