How Today's Global Financial Crisis Happened, and What to Do about It
Princeton University Press
On Sale: August 25, 2008
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The subprime mortgage crisis has already wreaked havoc on
the lives of millions of people and now it threatens to
derail the U.S. economy and economies around the world. In
this trenchant book, best-selling economist Robert Shiller
reveals the origins of this crisis and puts forward bold
measures to solve it. He calls for an aggressive response--a
restructuring of the institutional foundations of the
financial system that will not only allow people once again
to buy and sell homes with confidence, but will create the
conditions for greater prosperity in America and throughout
the deeply interconnected world economy.
Shiller blames the subprime crisis on the irrational
exuberance that drove the economy's two most recent
bubbles--in stocks in the 1990s and in housing between 2000
and 2007. He shows how these bubbles led to the dangerous
overextension of credit now resulting in foreclosures,
bankruptcies, and write-offs, as well as a global credit
crunch. To restore confidence in the markets, Shiller
argues, bailouts are needed in the short run. But he insists
that these bailouts must be targeted at low-income victims
of subprime deals. In the longer term, the subprime solution
will require leaders to revamp the financial framework by
deploying an ambitious package of initiatives to inhibit the
formation of bubbles and limit risks, including better
financial information; simplified legal contracts and
regulations; expanded markets for managing risks; home
equity insurance policies; income-linked home loans; and new
measures to protect consumers against hidden inflationary
This powerful book is essential reading for anyone who wants
to understand how we got into the subprime mess--and how we
can get out.
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