22 of 23 people found the following review helpful
5.0 out of 5 stars
Excellent insight into the conditions that created the current financial crisis, 30 Sept. 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.