A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression

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Harvard University Press, 2009 - Business & Economics - 368 pages
5 Reviews

The financial and economic crisis that began in 2008 is the most alarming of our lifetime because of the warp-speed at which it is occurring. How could it have happened, especially after all that we've learned from the Great Depression? Why wasn't it anticipated so that remedial steps could be taken to avoid or mitigate it? What can be done to reverse a slide into a full-blown depression? Why have the responses to date of the government and the economics profession been so lackluster? Richard Posner presents a concise and non-technical examination of this mother of all financial disasters and of the, as yet, stumbling efforts to cope with it. No previous acquaintance on the part of the reader with macroeconomics or the theory of finance is presupposed. This is a book for intelligent generalists that will interest specialists as well.

Among the facts and causes Posner identifies are: excess savings flowing in from Asia and the reckless lowering of interest rates by the Federal Reserve Board; the relation between executive compensation, short-term profit goals, and risky lending; the housing bubble fuelled by low interest rates, aggressive mortgage marketing, and loose regulations; the low savings rate of American people; and the highly leveraged balance sheets of large financial institutions.

Posner analyzes the two basic remedial approaches to the crisis, which correspond to the two theories of the cause of the Great Depression: the monetarist--that the Federal Reserve Board allowed the money supply to shrink, thus failing to prevent a disastrous deflation--and the Keynesian--that the depression was the product of a credit binge in the 1920's, a stock-market crash, and the ensuing downward spiral in economic activity. Posner concludes that the pendulum swung too far and that our financial markets need to be more heavily regulated. Read Richard Posner's blog, and his latest article in The Atlantic.


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LibraryThing Review

User Review  - carterchristian1 - LibraryThing

What is amazing is that now in the 2012 election the issues in this book , writtein in the 2008 election are just as fresh. Foreclosures, the deficit, banks too big to fail....a truly terrific small ... Read full review

LibraryThing Review

User Review  - GregStevens - LibraryThing

Suppose you have an antique sculpture of great value that you want to sell. Everyone agrees that the sculpture has great value, but nobody will buy it because (rightly or wrongly) there is some ... Read full review


The Depression and Its Proximate Causes
The Crisis in Banking
The Underlying Causes
Why a Depression Was Not Anticipated
The Government Responds
A Silver Lining?
What We Are Learning about Capitalism and Government
The Economics Profession Asleep at the Switch
Apportioning Blame
The Way Forward
The Future of Conservatism
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About the author (2009)

Richard A. Posner is Circuit Judge, the United States Court of Appeals for the Seventh Circuit, and a senior lecturer at the University of Chicago Law School .

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