Crisis Economics by Nouriel Roubini and Stephen Mihm
When I picked this book at a local library few weeks ago, I didn’t know the book would demystify myths the way it has done.The book reveals the experiments Nouriel Roubini used to foretell the economic crisis that continue to engulf the world economies since 2008.Nouriel Roubini is a professor of economics at NYU’s Stern School of Business and the founder and chairman of Roubini Global Economics. He is well known for his correct prognostications leading up to the great recession although he has his doubters on that. In Crisis Economics, Roubini in partnership with professor Stephen Mihm discusses the ongoing financial crisis, providing context and assessing the risks and opportunities that policymakers now face.The first sections of the book offers the reader an overview of the progression of economic thought and political events that led up to the recession. Their thesis for this section is that economic crises are common and predictable, despite what many would have you believe. They move beyond theory to include a significant number of historical examples like Thailand, Mexico, Argentina as a support for their argument.The authors also focuses on the major events and the policy responses, along with the theoretical basis for these policies. Unlike other commentators who tend to discuss the policy response as a whole, either as a failure or success, Roubini and Mihm avoid this binary distinction by assessing each policy individually, it motivations and results.He credits himself how before other economists saw it coming and shows how his methods could help make sense of the current and future situations. Roubini is well known global economist who upped his profession and financial industry by prophesizing economic crisis before anyone else. Robin has spent couple of decades conducting research around the world, where he learned how both probable and predictable the world is. In 2007, Roubini was nicknamed Dr Doom for the then “doomy forecasts” that didn’t take more than a calendar to come true.
The book predictions about the dangers to the Eurozone has turned out to be true, just as the book authors appeared to suggest when they wrote the book three years ago.Fully armed with historical analysis and global economics, Roubini has forced politicians, policy makers, investors, and market watchers to face a long ignored truth that our financial sectors are inherently fragile and prone to crumbling. Roubini was one of the voices in the economics profession who identified the US housing market as one of numerous asset bubbles across the West world and made an effort to warn that all finance was in danger, how investment banks would be wiped out, and the world would face a recession equal to Great Depression of 1930s.Many trashed him and branded him an amateur. Today, his critics knows they were the “true amateurs”.
Nouriel Roubini and Stephen Mihm, have shown in this book that financial cataclysms are as old and as ubiquitous as capitalism itself. The last two decades alone have witnessed comparable crises in countries as diverse as Brazil, Pakistan, Argentina, Mexico etc. Bringing lessons of earlier episodes to bear on our present predicament, Roubini and Mihm clearly shows how we can recognize and grapple with instability of the global financial system as well as understand pressure points.One of the most fascinating stuff about the book, the authors have extensively considered statistics, theories, and to an extent mathematical models with the skepticism.According to Roubini, economists and investors have realized how they can’t afford to consider crises as mere part of financial history. A vital and timeless book, that proved calamities are predictable and preventable albeit with right diagnosis. In the final chapters, the authors write about the future and assess the choices that regulators now face. Authors present a clear recommendation utilizing both monetary and fiscal policy, while recognizing the potential political difficulties.Also, they take a pragmatic approach that is easily understandable and follows logically from their contextual discussion in the first section.The reader is left with a better understanding of what factors contribute to economic crises and how policymakers can avoid them. For readers unable to comprehend about the ongoing economic crisis, this book offers a level of both clarity and depth. Anyone interested in understanding how we got into this situation, and if you love facts like me, buy the book. It’s worth every coin.