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Binding: Hardcover
Dewey Decimal Number: 332.722
EAN: 9780691139296
ISBN: 0691139296
Label: Princeton University Press
Manufacturer: Princeton University Press
Number Of Items: 1
Number Of Pages: 208
Publication Date: August 24, 2008
Publisher: Princeton University Press
Sales Rank: 4279
Studio: Princeton University Press
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Product Description:
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 effects.
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.
Customer Reviews
Average Rating: 
Rating:  - The Tragicomedy of Finance
Karl Marx, who burned many a late-night candle in the study of historical dynamics, once said "'Hegel remarks somewhere that all great world-historic facts and personages appear twice. He forgot to add: The first time as tragedy, the second time as farce." That may have been true a couple of centuries ago, but a more current assessment might be "No matter how much you have learned from history, and however well you have corrected your historical faults, there are plenty more new, and equally treacherous, mistakes to be made in the future." The current financial crisis seems to bear this out.
Keynesian aggregate demand management appeared to have died in the stagflation of the 1980's, not because its "rational expectations" critics had a better theory (I think rational expectations theory is just a sick joke), but because of the basic correctness of Milton Friedman's insight that legislative counter-cyclical policy is just too slow to deal with the business cycle. Now, it appears we are all Keynesians (indeed, Republicans have been especially Keynesian in the years since Reagan's historic climb to power), and government is moving at virtually lightning speed to prevent the normal operation of the business cycle. Richard Nixon was wrong when he said, "We are all Keynesians now," but now, almost forty years later, it appears to be true. Who would ever have expected this turn of events?
Where are the infamous "rational expectations" theorists now? Doubtless they are holed up ... Read More
Rating: - The Title is Opposite the Message
This book has a depressing view of our current economic crisis. A good read for anyone that is too cheerful.
The parallel he makes between the trust lost by promising everyone could own a home to the repartiation payments after WW I is a bit of a stretch.
Good book though.
Rating: - Mostly Blather
Shiller blames the subprime crisis on the irrational exuberance that drove the 1990s stock bubble and the 2000-2007 housing bubble. Restoring confidence will require bailouts targeted at low-income victims of subprime deals. Longer-term solutions will require inhibiting the formation of bubbles and limit risk - better financial information, simplified legal contracts and regulations, home-equity insurance, income-linked home loans, and new measures to protect consumers against hidden inflationary effects.
Mortgage originators, planning to sell off the mortgages to securitizers, stopped worrying about repayment risk, and sometimes enticed the naive, with poor credit histories, to borrow in the subprime market. High home prices generated a glut on the market and prices declined at an accelerating rate. Meanwhile, mortgage rates began to reset after initial "teaser" periods ended, and defaults surged.
The lowest price homes have shown the greatest price increases (and subsequent falls), probably due to their linkage to subprime loans. Ratings agencies were not about to cut ratings on securitized mortgage products based on theories that the increases could not continue, that prices might fall.
There's some good material in the "The Subprime Solution" - however, most of the pages are taken up in an obvious "explanation" of why everyone jumped on the bubble bandwagon.
Rating:  - subprime book
This book is light on new data(a couple of graphs) and heavy on theoretical solutions,many only peripherally related to the present crisis. There is no discussion of resource depletion. The idea of insuring home equity and life income underestimate the cost of administration and fraud. It is a quick easy read,a few interesting ideas such as teaching kids to think in inflation units.
Rating: - Would you trust this man?
Trusting any Santa Claus of high finance in the midst of such massive failures of a bubble-prone financial system seems suicidal.
Shiller ends on a characteristic utopian-ideologue note: "Imagine our society equipped with a well-established information infrastructure that reached out to all its members, derivative markets for both owner-occupied and commercial real estate, well developed retail products, like continuous-workout mortgages, home equity insurance, and livelihood insurance, that facilitate management for individuals; and default options that naturally lead people to use risk-management devices intelligently.
"Our society could look forward to nothing less than more stable markets and, in turn, a more rational economy. We would eventually find ourselves forgetting that the kind of massive financial instability infecting our everyday lives is even a potential problem. Modern finance, applied democratically, can relegate these problems to history just as modern medicine, applied widely, has left us forgetting that epidemics of yellow fever and diphtheria ever raged among us."
I say, just stick with reading the ever-more shocking revelations of a good newspaper. Common sense answers applied with determination is the crying need. But such an approach doesn't follow the play book of new economy thinking and ideology that has got us into so much trouble for over a decade. Shiller still swims with that current, follows that herd. In the face of the real ... Read More
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