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nual rubini crisis economics a crash course in the future of Finance in a crisis economics a crash course in the future of Finance nuriel rubini delves into the recurring patterns of financial crisis throughout history including the Great Recession of 2008 and 2009 rubini argues that these crises have common factors easy credit Reckless leveraging negligent regulation Central bankers and politicians asleep at the wheel and financial Innovation the book examines the economic principles Behind These crises and offers a critical perspective on the limitations of the efficient markets hypothesis and the importance of understanding the theory of Crisis economics crises are inevitable despite the Orthodox view that markets are efficient and logical Financial meltdowns are not unique events this summary explores how crises are inevitable in an Ever riskier Financial world and how the 2008 to 2009 Great Recession was just one more event in a long Continuum of financial collapses if you think that the 2008 to 2009 great session was unique you might want to reconsider that notion throughout history there have been numerous Financial meltdowns that have striking similarities to the one we experienced in the last decade such as the south sea bubble of 1720 and the crash of 1825 the Great Depression the 1980s US savings and loan debacle and the Japanese lost decade of the 1990s one common denominator in financial crisis is easy credit that leads to Reckless leveraging by consumers in investors and business owners negligent regulators and enabling politicians add to the speculative excess while Financial Innovation provides more ways to invest in The Craze of the moment to make matters worse the more interconnected nature of global markets contributes to the spread of the contagion for years economists have honed the idea that free markets work and the efficient markets hypothesis contending that the free market always values assets accurately however the 2008 to 2009 Great Recession exposed the Folly of the notion that the markets are always right if Market participants behave rationally then why did the rapid runup and sudden crash in the value of US homes or of shares in Leman Brothers happen some major economists rejected the perfect markets idea and believe that Financial Market crises are inevitable crises are part of capitalism and crises waned before waxing a new a period of calm m even precede worse outbreaks of panic and disorder before the Great Depression Financial calamities and Bank runs were common followed by Decades of stability in US markets the 2008 to 2009 recession a 19th century Panic moving at 21st Century speed surprised investors since risk seemingly had disappeared from financial markets but in retrospect the warning signs were apparent real estate had become overvalued and Banks were overleveraged investment Banks leverage ratio soared Panic set in with astonishing speed when the bubble burst and Banks stopped taking giddy risks hoarding cash and creating a liquidity trap that hampered economic growth the Federal Reserve transforming from lender of Last Resort to investor of Last Resort cut interest rates to nearly zero the fed's balance sheet ballooned from $900 billion in 2007 to $2.3 trillion in 2009 as it took ownership of assets ranging from Fanny M Freddy Max debts to Home Loans car loans and credit card debt as the US government began to play an outsized role the ideas of British economist John Maynard KES returned to prominence and the government embarked on a new round of Keynesian stimulus some of the stimulus was wise but some were misguided the government injected Capital into Banks and aggressive response that created good news and bad news to The Good the United States averted an allout Financial collapse to the bad the rescue was costly in conclusion crises are inevitable in an Ever riskier Financial world and the 2008 to 2009 Great Recession was just one more event in a long Continuum of financial collapses despite the Orthodoxy that free markets work Financial Market crises are inevitable Reg Regulators lawmakers and policy makers can only do their best to mitigate the impact of the crisis on the broader economy how to prevent future financial crisis this book summary argues that government intervention in Market activities exacerbates Financial crises it suggests solutions to prevent future crises including reinforcing compensation standards standardizing esoteric Securities Banning exotic Securities like cdos reforming the business model of ratings agencies breaking up large Banks and Reviving glass deall act Additionally the book suggests that the FED should not bail out investors and that China is poised to take over the US's position as the world's largest economy rubini crisis economics poses necessary questions about the validity of traditional free market theories and encourages readers to adopt realistic pers perspectives on the Dynamics of economic crisis the book concludes with suggested reforms aimed at preventing future Financial meltdowns including reigning in excessive compensation standardizing esoteric Securities reforming rating agencies toughening regulations and breaking up large Banks rubini also anticipates the rise of China as the world's largest economy taking over from the US overall crisis economics is an enlightening read that urges readers to recognize and learn from the patterns of historical financial crisis in order to build more stable economic systems in the future
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