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Fault Lines: How Hidden Fractures Still Threaten the World Economy
 
 

Fault Lines: How Hidden Fractures Still Threaten the World Economy [Kindle Edition]

Raghuram G. Rajan
4.3 out of 5 stars  See all reviews (20 customer reviews)

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Product Description

Review

  • Raghuram G. Rajan, Winner of the 2013 Deutsche Bank Prize in Financial Economics, The Center for Financial Studies


  • Winner of the 2010 Business Book of the Year Award, Financial Times and Goldman Sachs


  • Winner of the 2011 Gold Medal in Finance/Investment/Economics, Independent Publisher Book Awards


  • Winner of the 2010 PROSE Award in Economics, American Publishers Awards


  • Winner of the 2010 Gold Medal Book of the Year Award in Business & Economics, ForeWord Reviews


  • Finalist for the 2010 Paul A. Samuelson Award, TIAA-CREF


  • One of strategy+business magazine's Best Business Books of the Year for 2010


  • Best Crisis Book by an Economist and Named one of Bloomberg News's Thirty Business Books of the Year for 2010


  • One of Financial Times's Books of the Year in Business & Economics, Nonfiction Round-Up for 2010


  • Finalist for the 2010 Book of the Year Awards in Business and Economics, ForeWord Reviews


  • Finalist for the 2011 Estoril Global Issues Distinguished Book Prize


"Like geological fault lines, the fissures in the world economic system are more hidden and widespread than many realize, he says. And they are potentially more destructive than other, more obvious culprits, like greedy bankers, sleepy regulators and irresponsible borrowers. Mr. Rajan . . . argues that the actions of these players (and others) unfolded on a larger world stage, that was (and is) subject to the imperatives of political economies. . . . [A] serious and thoughtful book."--New York Times

"In a new book . . . entitled Fault Lines, Rajan argues that the initial causes of the breakdown were stagnant wages and rising inequality. With the purchasing power of many middle-class households lagging behind the cost of living, there was an urgent demand for credit. The financial industry, with encouragement from the government, responded by supplying home-equity loans, subprime mortgages, and auto loans. . . . The side effects of unrestrained credit growth turned out to be devastating--a possibility most economists had failed to consider."--John Cassidy, New Yorker

"The book, published by Princeton University Press, saw off stiff competition from five others on the shortlist, to be chosen as 'the most compelling and enjoyable' business title of 2010. The final intense debate among the seven judges came down to a choice between Fault Lines and Too Big to Fail, Andrew Ross Sorkin's acclaimed minute-by-minute analysis of the collapse of Lehman Brothers. The book identifies the flaws that helped cripple the world financial system, prescribes potential remedies, but also warns that unless policymakers push through painful reforms, the world could be plunged into renewed turmoil."--Financial Times

"The left has figured out who to blame for the financial crisis: Greedy Wall Street bankers, especially at Goldman Sachs. The right has figured it out, too: It was government's fault, especially Fannie Mae and Freddie Mac. Raghuram Rajan of the University of Chicago's Booth School of Business says it's more complicated: Fault lines along the tectonic plates of the global economy pushed big government and big finance to a financial earthquake. To him, this was a Greek tragedy in which traders and bankers, congressmen and subprime borrowers all played their parts until the drama reached the inevitably painful end. (Mr. Rajan plays Cassandra, of course.) But just when you're about to cast him as a University of Chicago free-market stereotype, he surprises by identifying the widening gap between rich and poor as a big cause of the calamity."--David Wessel, Wall Street Journal

"[E]xcellent. . . . [Fault Lines] deserve[s] to be widely read in a time when the tendency to blame everything on catch-all terms like 'globalisation' is gaining ground."--Economist

"[C]onvincing."--Christopher Caldwell, New York Times Magazine

"Fault Lines is a must-read."--Nouriel Roubini, Forbes.com

"What if the financial crash of 2008 was really caused by income inequality? Not greedy bankers, not reckless homeowners, but the ever widening-gulf between the rich and the poor? And what if the lack of social services--like health care--made things much, much worse? This is the startling new theory from Raghuram Rajan. . . . [Fault Lines is] especially fascinating because it mixes free-market Chicago School economics with good-government ideas straight out of Obamaland."--John Richardson, Esquire.com

"A high-powered yet accessible analysis of the financial crisis and its aftermath, Fault Lines was awarded the FT/Goldman Sachs Business Book of the Year. Rajan . . . was one of the few who warned that the crisis was coming and his book fizzes with striking and thought-provoking ideas."--Financial Times (FT Critics Pick 2010)

"What caused the crisis? . . . There is an embarrassment of causes--especially embarrassing when you recall how few people saw where they might lead. Raghuram Rajan . . . was one of the few to sound an alarm before 2007. That gives his novel and sometimes surprising thesis added authority. He argues in his excellent new book that the roots of the calamity go wider and deeper still."--Clive Crook, Financial Times

"A thought-provoking new book. . . . [Rajan's] voice is worth listening to."--Martin Wolf, Financial Times

"Few people were able to foresee the recent economic downturn. Raghuram Rajan . . . was one of them. This makes his new book, Fault Lines, worthy of consideration amidst the rampant speculation about the causes of the financial crisis. . . . Fault Lines is valuable primarily for its clear explanation of unintended economic consequences from well-meaning government intervention."--Washington Times

"Rajan's writing is clear and direct."--James Pressley, Bloomberg News

"Former IMF chief economist Raghuram G. Rajan . . . in his new book, Fault Lines, brings together and explains the diverse failings that contributed to the crisis--the fault lines, as he puts it, that were exposed by the events of the past several years. Rajan then puts forward broad policy recommendations to ward off a future problem. . . . Rajan's book takes a comprehensive look at what got us into the crisis and offers an intriguing approach to avoiding another one."--Phillip Swagel, Finance & Development

"I devoured Raghuram Rajan's Fault Lines: How Hidden Fractures Still Threaten the World Economy in a very short span of time last night. It's brief, well-written, and extremely interesting. I would definitely recommend adding it to your financial crisis reading list."--Matthew Yglesias, Yglesias blog

"Rajan is worth reading not just because he was correct when few were but also because his writing is clear as a bell, even to nonspecialists."--Christopher Caldwell, Weekly Standard

"The proposed global reforms that [Rajan] lists in Fault Lines run the gamut from the prosaic to grandiose. Along with revamping Wall Street's pay system, he offers innovative ideas on building capital buffers into the global credit system, obviating much of the need for bailouts of companies deemed too big or too enmeshed in the financial system to fail."--Barron's

"Economists who can challenge their peers while remaining accessible to the general reader are rare, but Rajan belongs to this elite group. No short summary can do justice to this well-written, insightful, and nuanced study."--Choice

"In 2007, then-chief IMF economist Raghuram G. Rajan delivered a stark warning to the world's top bankers: financial markets were headed for doom. They laughed it off. In the wake of the collapse that followed, Rajan has written a new book, Fault Lines: How Hidden Fractures Still Threaten the World Economy, that warns the system is doomed to repeat its mistakes. Like many defenders of the market, Rajan urges us not to demonize the bankers. But it's this fiscal conservative's focus on inequality that makes him stand out from the pack. The growing wage gap, he argues, is a hidden driver of financial instability, putting constant pressure on politicians to enact short-term fixes."--Toronto Star

"The critics are wrong: Raghuram Rajan's analysis of the global financial crisis remains highly relevant and deserves to be widely read. . . . The breadth of Rajan's explanatory framework--which is presented cogently and concisely within 230 pages of text--marks this book apart from many others that tackle the same themes."--Mark Hannam, Prospect

"Dozens of experts have explored the reasons behind the ongoing global economic turmoil, and Raghuram Rajan provides his own elegant and thoughtful analysis in Fault Lines."--BizEd

"With Fault Lines, Rajan has made an original diagnosis of the credit crisis, one that goes much further than those of greedy bankers or wasteful mortgage giants such as Fannie Mae and Freddie Mac."--Christophe De Rijcke, De Tijd (translated from the Dutch by K.C.L.)

"A book that should be the default choice of discerning finance professionals when they enter the store the next time."--D. Murali, Business Line

"Rajan's Fault Lines is . . . expansive and policy-focused and clearly destined to become a must-read on any list of books on the recent global crisis."--Jahangir Aziz, Business Standard

"Insightful, educative and incredibly gripping, if you want just one book to understand the ongoing global financial crisis and the way forward, Fault Lines it is."--Gautam Chikermane, Hindustan Times

"Best Crisis Book by an Economist (2010)."--James Pressley, Bloomberg News

"Fault Lines has a strong claim to be the economics book that best caught the spirit of 2010. Raghuram Rajan's receipt of the Financial Times and Goldman Sachs annual business book award only confirmed his book's widespread popularity. It is not hard to see why so many people liked it. Fault Lines eschews hyperbole for a lucid and balanced account of the crisis."--Fund Strategy

"Rajan . . . comes up with original and important long-term remedies. . . . Rajan's book is a bold enterprise in three ways: firstly it aims to explain the US financial crisis by looking at deep, decade-long fractures in economies and societies; secondly it suggests well-known but radical solutions that few dare put forward; and finally it supplies innovative answers to practical questions. . . . [T]he book will please any reader looking for an inquiry into the deepest causes of the recession and a consistent account of government's errors of omission and commission."--Natacha Postel-Vinay, British Politics and Policy

"[Fault Lines]'s great strength is that it is a clearly written work of political economy, accessible to readers who do not have a PhD in economics or finance. Its objective is not to point fingers at the guilty, and it comes to some surprising conclusions."--Stewart Fleming, European Voice

Product Description

Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. Now, as the world struggles to recover, it's tempting to blame what happened on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed.

Rajan shows how the individual choices that collectively brought about the economic meltdown--made by bankers, government officials, and ordinary homeowners--were rational responses to a flawed global financial order in which the incentives to take on risk are incredibly out of step with the dangers those risks pose. He traces the deepening fault lines in a world overly dependent on the indebted American consumer to power global economic growth and stave off global downturns. He exposes a system where America's growing inequality and thin social safety net create tremendous political pressure to encourage easy credit and keep job creation robust, no matter what the consequences to the economy's long-term health; and where the U.S. financial sector, with its skewed incentives, is the critical but unstable link between an overstimulated America and an underconsuming world.

In Fault Lines, Rajan demonstrates how unequal access to education and health care in the United States puts us all in deeper financial peril, even as the economic choices of countries like Germany, Japan, and China place an undue burden on America to get its policies right. He outlines the hard choices we need to make to ensure a more stable world economy and restore lasting prosperity.


Product details

  • Format: Kindle Edition
  • File Size: 534 KB
  • Print Length: 283 pages
  • Page Numbers Source ISBN: 0691152632
  • Publisher: Princeton University Press (8 Aug 2011)
  • Sold by: Amazon Media EU S. r.l.
  • Language: English
  • ASIN: B005CQAJD0
  • Text-to-Speech: Enabled
  • X-Ray:
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (20 customer reviews)
  • Amazon Bestsellers Rank: #126,007 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Most Helpful Customer Reviews
33 of 34 people found the following review helpful
5.0 out of 5 stars Highly recommended 5 Oct 2010
By Paul Bowes TOP 500 REVIEWER
Format:Hardcover
'Fault Lines' is an analysis of the recent financial crisis and its implications for the future of the global financial system and, more broadly, of global capitalism. It is written by an economist who was one of the few, and one of the earliest and most prominent, to warn of coming disaster.

Rajan, who is currently an academic, is also the former chief economist of the IMF. He is an unusual writer: pro-capitalist but clear-sighted about the need for effective regulation; writing from an American perspective, but with a deep understanding of different types of national economy and their needs and proclivities at different stages of their development.

The result is an outstanding book. Rajan writes with a clarity truly rare among academics, so that readers who lack a professional or academic background in finance or economics may finds themselves grasping the issues firmly for the first time. Each chapter concludes with a summary, so that even readers pressed for time may follow the outline of the argument.

In essence, Rajan argues that the 'fault lines' within our national and global economies that produced the crisis still exist, and unless acknowledged and tackled threaten a repeat of that crisis. Avoiding the temptation to blame the bankers - though he is unsparing in his condemnation of their groupthink and the indifference of some to the social consequences of their actions - Rajan rejects the idea that any 'quick fix' is available and diagnoses deeper, structural causes that must be addressed over the coming decades. I found his analysis convincing and his suggestions for future action humane and sensible.

There have been many books published since 2008 that have described - often in considerable detail - the evolution of the banking crisis.
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31 of 33 people found the following review helpful
By JPM
Format:Hardcover
I found this book a highly stimulating read. It represents possibly the most thought-provoking contribution in the aftermath of the crisis that started in 2007 and that yet engulfs us. Let me first summarize some of the most salient points it makes, then talk about its strengths, and finally, why everyone should read it.

The epilogue of the book summarizes the book best - "The crisis has resulted from a confusion about the appropriate roles of the government and the market. We need to find the right balance again, and I am hopeful we will." The book presents two important government distortions - the push for universal home ownership in the United States and the push for export-led growth in some countries such as Germany and China that have left to massive "global imbalances", with some countries such
as the United States, the United Kingdom and Spain persistently being in deficits and borrowing from the surplus, exporting nations. While pursuit for home ownership affordability and growth are nothing to complain about per se, the book makes sharp observations that they are occurring at the expense of something more, or as, important. In the United States, the book argues, there has been a growing income inequality, which combined with a relatively feeble safety net for the poor, has created pressure on politicians to bridge the inequality. Instead of improving the competitiveness of labor force in a global market with changing mix of industries and required skills, governments have adopted the option "let them eat credit" (Chapter One's title). The presence of government-sponsored agencies in the United States enabled exercising such an option readily through a push for priority lending to the low-income households (sub-prime mortgages).
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19 of 20 people found the following review helpful
5.0 out of 5 stars explains the root of the problem 27 Jun 2010
Format:Hardcover
This book explains how the economic problems we are facing evolved, an easy to understand explanation that is non technical.

Mr Rajan seems to not have an axe to grind, and it is easy to follow his step by step analysis.

Probably the best book to buy to see how the mess we are in started and it does offer hope of how they may be resolved.
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5 of 5 people found the following review helpful
4.0 out of 5 stars Good but expected more 24 Dec 2010
By TOVH
Format:Hardcover
Given Rajan's pre-eminence and the stellar reviews, I must admit I expected a bit more. A good book, but breaks little new ground.

First, the good points. The writing is clear and accessible to non-economists. It starts and ends particularly well. Unlike a lot of commentary, the book is not a tirade against bankers, politicians or regulators and highlights the nuances of the debate around certain issues. For example, limiting financial innovation or banning prop trading will not prevent future crises. The most original idea (or fault line) is the link between inequality and the US credit binge - politicians motivated a credit boom to compensate lower income earners for a lack of opportunity. The author highlights clearly how well-intentioned government intervention to promote housing for low earners contributed significantly to the subprime boom/bust. This is probably the book's greatest contribution. The disparity in educational opportunities and the vicious cycle of poverty are points well made. That a weak US social safety net means recessions are intolerable and justify aggressive policy activism is also an interesting angle. The role of individuals following incentives created by the system (rather than just motivated by pure greed) is also well highlighted. The analysis and discussion of China is very good.

The book, however, adds little to the global imbalances debate, nor adds much in terms of ideas for fixing financial regulation (I agree with another reviewer - bit of a laundry list here). The analysis of Germany and Japan seems glib and incomplete (e.g. what about demographics?). At times it seems that Rajan wants policy intervention so that every country practically runs a balanced current account - is that necessarily good economics?
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Most Recent Customer Reviews
4.0 out of 5 stars Interesting book
A good way to learn and understand the crisis. I like the book and the way the author is writing.
Published 3 months ago by Stephanie Thyssen
5.0 out of 5 stars Wonderful book
Those who are in finance field I strongly recommend them to read this book once. Those who are not in finanace field I suggest them to read it to gain good knowledge about current... Read more
Published 5 months ago by Nirav Mehta
4.0 out of 5 stars a bit faulty
Wiser reviewers have reviewed this book and come to widely different conclusions, mostly about Rajan's recommendations to fix the fault lines. Read more
Published 6 months ago by James-philip Harries
5.0 out of 5 stars Preventing the next recession by understanding the one of 2008
The author is particularly qualified to hold an opinion about what should be done to prevent the next recession. Read more
Published on 14 April 2012 by laurens van den muyzenberg
4.0 out of 5 stars An economics degree in your pocket
The IMF's former chief economist won the FT's book prize with this book (readable enough for me to buy a copy for my non-economist wife). His argument runs as follows. Read more
Published on 15 Jan 2012 by George Norris
5.0 out of 5 stars An insightful take on the real and fundamental causes behind the...
This book is the among the few which go beyond the micro details of how the current crises took place and delves into the underlying major causes which have been around for... Read more
Published on 8 Jan 2012 by ashish727
3.0 out of 5 stars Well-written book with neutral, astute, long-term analysis but greatly...
Raghuram Rajan has an impeccable writing style that will encourage you to read his book in its entirety. For that I am, as always, grateful. Read more
Published on 17 Jun 2011 by Sascha
5.0 out of 5 stars Many aspects of the Financial Crash Considered.
A birds eye view of the world economy with particular focus on America and its impact on the world economy.
With suggestions on what to do next.
Published on 15 Jun 2011 by Mr. Stephen J. Bird
3.0 out of 5 stars A mixture of shrewd analysis and reactionary politics
Raghuram Rajan, formerly chief economist at the International Monetary Fund, now Professor of Finance at the University of Chicago Booth School of Business, has written an... Read more
Published on 10 Jun 2011 by William Podmore
5.0 out of 5 stars Making Sense Of The Mess We've Found Ourselves In
Fault Lines is a beautiful book that delves into some of the more egregious macro-economic and societal issues that helped define the current economic crisis: the US government's... Read more
Published on 27 May 2011 by demola
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Popular Highlights

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&quote;
And so America's failings in education and, more generally, the growing anxiety of its citizenry about access to opportunity have led in indirect ways to unsustainable household debt, which is at the center of this crisis. &quote;
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The gap between the growing technological demand for skilled workers and the lagging supply because of deficiencies in the quantity and quality of education is just one, albeit perhaps the most important, reason for growing inequality. &quote;
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Excessive rural credit was one of the important causes of bank failure during the Great Depression. &quote;
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