“Crisis Economics” Reviewed by NYTimes and Bloomberg
From the NYTimes:
He was known as “Dr. Doom” — a perennial pessimist in the often sunny world that is the dismal science of economics. And in 2008 his predictions of disaster — delivered two years earlier — came stunningly, frighteningly true, as the entire global financial system teetered on the brink of the abyss. Cassandra had belatedly become a much-celebrated prophet.
In a September 2006 talk before the International Monetary Fund, Nouriel Roubini presciently warned that a “U.S. housing bust” would spark a recession in America and a “global hard landing”: homeowners would default on mortgages, trillions of dollars of mortgage-backed securities would unravel, financial institutions would totter, and a fiscal tsunami would threaten the world.
Now, in his new book, “Crisis Economics” (written with the journalist and history professor Stephen Mihm, who has written for The New York Times Magazine), Mr. Roubini, a professor of economics at New York University’s Stern School of Business, uses his gifts as a teacher to give the lay reader a succinct, lucid and compelling account of the causes and consequences of the great meltdown of 2008.
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From Bloomberg:
Nouriel Roubini has a modest proposal for deflating Wall Street’s bubble-prone bankers.
Break up Goldman Sachs Group Inc., he says. Consider banning collateralized debt obligations. And why not compensate traders with slices of their own exotic securities instead of with cash or shares?
These prescriptions crop up in “Crisis Economics,” a rigorous yet highly readable look at why booms and busts occur and how to keep them from wreaking havoc on the real economy.
Roubini is usually remembered as “Dr. Doom.” He’s the New York University professor who predicted in 2006 that the U.S. would soon suffer a once-in-a-lifetime housing bust and deep recession. What’s less appreciated is that he based his forecast on years of studying booms and busts. His conclusion: Financial crises are hardwired into capitalism.
“Far from being the exception, crises are the norm,” he says in this book, written with journalist Stephen Mihm. To prove the point, they open with a brisk history of crises, from currency debasements in 12th-century Europe to the collapse of Lehman Brothers Holdings Inc.
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