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Lost Decades: The Making of America's Debt Crisis and the Long Recoveryby Menzie D Chinn
Synopses & Reviews
Welcome to Argentina: by 2008 the United States had become the biggest international borrower in world history, with almost half of its 6.4 trillion dollar federal debt in foreign hands. The proportion of foreign loans to the size of the economy put the United States in league with Mexico, Pakistan, and other third-world debtor nations. The massive inflow of foreign funds financed the booms in housing prices and consumer spending that fueled the economy until the collapse of late 2008.
The authors explore the political and economic roots of this crisis as well as its long-term effects. They explain the political strategies behind the Bush administration's policy of funding massive deficits with the foreign borrowing that fed the crisis. They see the continuing impact of our huge debt in a slow recovery ahead. Their clear, insightful, and comprehensive account will long be regarded as the standard on the crisis.
"In this important book, which deserves to be widely read and debated, political economists Chinn (The Economic Integration of Greater China) and Frieden (Global Capitalism) argue that the 2007-2009 world financial crisis was made in America, because the U.S. ignored advice about indebtedness that it had given to other countries over the years. The time has now come for Americans to accept the implications of this situation and discuss it with other governments. In Chinn and Frieden's view, it is not debt per se, but what the debt is used for, that is key. They provide historical evidence to support their claim that if debt is invested by the government and private industry to raise profitability, then it is not problematic. This has not been the case in the recent past. Instead debt was used to create a speculative bubble, which led to what the authors call the bankruptcy of the financial system. They make the powerful case that the trillion bail-out of the busted banks has been wasted. Absent a multi-trillion employment and investment program, there are very tough times ahead. (Sept.)" Publishers Weekly Copyright PWxyz, LLC. All rights reserved.
Book News Annotation:
According to political economists Chinn and Frieden, "events of the past several years demonstrate that international finance is too important to be left to international financiers." The authors explain the political and economic roots of the current financial crisis, looking especially at the Bush administration's policies of funding deficits with foreign borrowing. Their analysis starts with the macroeconomic drivers of the crisis and encompasses political pressures and regulatory enablers. The authors put the crisis into a comparative and historical context, drawing parallels and lessons from dozens of similar meltdowns in the past and in other countries. They conclude by making recommendations for reform and international collaboration. Chinn teaches at the University of Wisconsin. Frieden teaches at Harvard University. Annotation ©2011 Book News, Inc., Portland, OR (booknews.com)
Two acclaimed political economists explore the origins and long-term effects of the financial crisis in historical and comparative perspective.
About the Author
Menzie D. Chinn teaches at the University of Wisconsin, Madison, and coauthors the influential blog Econbrowser.Jeffry A. Frieden teaches at Harvard University. He is the author of Global Capitalism: Its Fall and Rise in the Twentieth Century, and the co-author of Lost Decades: The Making of America's Debt Crisis and the Long Recovery.
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