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Fault Lines: How Hidden Fractures Still Threaten the World Economy

4.07  ·  Rating Details ·  3,277 Ratings  ·  196 Reviews
Raghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. Now, as the world struggles to recover, it's tempting to blame what happened on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a ...more
ebook, 280 pages
Published August 8th 2011 by Princeton University Press (first published May 4th 2010)
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Varun Rajda None at all. Dr Rajan can explain economic concepts to ten year olds in a way they'd understand.
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Joshua
Oct 18, 2010 Joshua rated it really liked it  ·  review of another edition
Shelves: finance
A very nice synopsis of the world economy following the latest financial crisis and directions on where we may be headed.
Some key points I took away:

*Three Major "Fault" lines where tensions create the possibility of future crises:
1) Domestic Political Stresses (need to deal with growing inequality)
2) Trade imbalances (America has been the economic engine by over consuming the rest of the world's output; the developing world needs to consume some of its own output)
3) Different types of financia
...more
Jim
Feb 24, 2011 Jim rated it really liked it  ·  review of another edition
Rajan does an exceptional job of distilling the factors leading to the 2008 financial sector meltdown, linking the actions of government (both US and world governments) and the private sector, and dispassionately describing the various ways they contributed to the creation and bursting of the bubble. He also makes some very cogent and disturbing points about the lack of correction (and in some cases, exacerbation) of the "fault lines' he identifies in the world economy, which threaten to push us ...more
Lobstergirl
Aug 19, 2011 Lobstergirl rated it really liked it  ·  review of another edition
Recommends it for: Esther Fenchel
Economist Raghuram Rajan was one of the prescient ones: at a central bankers' conference (honoring Alan Greenspan no less) in 2005, he delivered a paper asking "Has Financial Development Made the World Riskier?" His answer was yes. Events proved him correct.

Here, he uses a wide-angle lens to examine the causes of the 2008 financial crisis, and why we're nowhere near out of danger. A stint as chief economist at the IMF means his perspective is global; understanding growth patterns and rates in de
...more
Fateh Mann
Aug 26, 2013 Fateh Mann rated it it was amazing  ·  review of another edition
India's new RBI chief has a lot of expectations on his shoulders, and this book shows why. His analysis is holistic, comprehensive, convincing and rational. He traces the roots of the crisis to at least 40 to 50 years before, and takes it from there on. For a person who hasn't actually studied economics, it will prove to be a terribly difficult read because 1) in terms of writing style, he's not exactly a Rushdie and 2) For the prevalence of many complex terms. This book isn't for the casual rea ...more
Venky
Jul 09, 2016 Venky rated it really liked it  ·  review of another edition
Shelves: bibliocase
In the year 2005, the annual Jackson Hole Conference - a prestigious event where there is an assorted convergence of highly reputed bankers, economists and financial journalists - was supposed to be a swansong bash celebrating the achievements of the Federal Reserve Board Chairman, Alan Greenspan. Speaker after speaker showered adulation and sang praises of the man who stymied all efforts to regulate the spawning of esoteric financial instruments and who also ironically coined the now legendary ...more
Abhijeet
Mar 06, 2016 Abhijeet rated it it was amazing  ·  review of another edition
Great reading which covers events outside the US as well highlights the hidden faultlines in the global economy. This could be described as Rajan's pitch for the CEA/RBI guv role given the wide ranging problems highlighted and solutions proposed. Cash transfers to the poor are proposed and land acquisition issues as an impediment to growth are currently highlighted given this was written 5-6 years ago. The aside on India personally was of great interest to me but even the piece on China was quit ...more
Manish
Jan 01, 2016 Manish rated it it was amazing  ·  review of another edition
One if the best book for understanding recent economic crises and what may be in store for future!!
Kevin Tharayil
Sep 17, 2012 Kevin Tharayil rated it it was amazing  ·  review of another edition
Shelves: library
In 2005, the author, at an elite economists gathering honoring the then Fed Reserve governor, Alan Greenspan, made the point that financial development had made the world riskier. He met with scorn and as the documentary 'Inside Job' showed, accusations of being a luddite!

This book written in the aftermath of the subprime crisis is a call to understand that until the root of the problems - The Fault Lines that exist are not addressed, any recovery from the economic mess will be short lived. The
...more
Brian
Jan 30, 2012 Brian rated it really liked it  ·  review of another edition
Shelves: grbpp, on-kindle
(4.0) Good review of US/global economy in 1990s and 2000s, including financial crisis

Some of this was thought provoking (please respond to my notes and highlights!). Don't have the energy (now, at least) to attempt a summary.
Jake Meyer
Aug 05, 2016 Jake Meyer rated it it was amazing  ·  review of another edition
In 2010 Raghuram Rajan set out to explain how structural instabilities in the global financial system led to the largest crisis in recent memory. With Fault Lines: How Hidden Fractures Still Threaten the World Economy he succeeded.

It’s easy to write a partisan manifesto outlining a left or right wing perspective of “what happened” in 2008 someone with no background in economics can understand and enjoy. It’s far trickier to write a balanced and accurate analysis for other economists. It’s compar
...more
Álvaro da Luz
Dec 29, 2015 Álvaro da Luz rated it it was amazing  ·  review of another edition
Começo pela palavra que melhor define o livro: Espetacular. A obra de Raghuram Rajam, ou Raghu para os íntimos que nem eu (porque tietagem é assim, você se sente íntimo de alguém que nem sabe da sua existência) é o melhor trabalho que já li sobre as causas que levaram o mundo a grave crise financeira e a recessão no bloco desenvolvido. De todos que li nenhum conseguiu ser tão abrangente quanto o livro do Raghu.

Ele, diferentemente dos outros, vislumbra o sistema financeiro apenas como um instrume
...more
Adarsh Appaiah
Mar 01, 2017 Adarsh Appaiah rated it it was amazing  ·  review of another edition
One of the better books explaining the crisis and how the fault-lines that caused the crisis are still existent. This book beautifully ties up the various inter-linkages amongst Government, financial sector, regulators and investors. Worth reading
Bart
Sep 19, 2011 Bart rated it really liked it  ·  review of another edition
This is a gently persuasive book by a reasonable and well-informed intellectual. It is a commentary on the times that such a thing as this would be remarkable.

Raghuram Rajan's writing in Fault Lines is most persuasive as he addresses the events that led to Sept. 18, 2008 - specifically the race in the financial sector to attain "systemic risk" status, so as to tout government intervention in tacit sales pitches to investors. His recommendations for regulatory reform are excellent. His recommenda
...more
Adrian Lee
This book tries to examine the underlying tensions, trade-offs, and interdependencies that have characterised the recent financial crisis in a holistic manner, and by and large the author has succeeded. Its strength lies in its astute awareness of how the crisis was writ large by US social inequality and the lack of a safety net following the dot-com bust and its associated jobless recovery, which prompted the government to intervene by increasing access to credit as a panacea to inflate asset p ...more
Shivam Dixit
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

As he quotes Adam Smith, we all know today's world economy is based on self interest(capitalism). It might be of a country, a state or an individual. In order to avoid extremism what we face today is the managed capitalism.

One of the most brilliant minds of the world, Raghuram Rajan appraises in his book the major causes of 2008 crisis. He debunks people'
...more
Prashanth
Jul 06, 2014 Prashanth rated it it was amazing  ·  review of another edition
Only one word for it- fantastic! If you have the time to read only one book on the financial crisis of 2008, then there cannot be a stronger candidate. Dr. Rajan's systematic dissection of the roles each of the stakeholders involved (mortgage agents, banks, the Fed,the US government) played throws stark light not only on the inadequacies of the then extant conditions in the financial markets but also on their genesis and gestation.The point that the crisis did not unfold overnight but had its or ...more
Akhil
Apr 27, 2014 Akhil rated it really liked it  ·  review of another edition
Financial Crisis of 2007-08, in a way, is a case study to understand the underlying factors behind almost all major economic crisis - a cocktail of political motive and over-investment financed by debt. Dr. Raghuram Rajan (RR) unfolds a story, connecting the dots from Asian Banking Crisis, explaining what economies/nations do wrong by following a myopic view.

RR does not blame any one institution or country for creating the "fault lines", but emphasizes on the fact that to ensure that these faul
...more
Swhirsch
Mar 01, 2015 Swhirsch rated it really liked it  ·  review of another edition
Sober compelling analysis of the 2008 financial meltdown and the hope for the future

There are no portrayals of ego driven maniacal financiers blindly chasing the carrot as the cliffs rapidly consume their landscape. But we've read and witnessed enough of that, and the sad fact that the very same people will most likely still drive off into the sunset with tanned bodies and full bank accounts. This book takes a higher ground and attempts to provide some guidance toward an economic future that is
...more
Justin Tapp
This is one of the books on the 2007 financial crisis that is ostensibly worth reading due to the CV of the author-- former IMF Chief Economist, later in charge of Indian monetary policy as Governor of the Reserve Bank of India. (Writing this in late 2016, perhaps PM Modi's botched reforms show how much Rajan was missed in opting to return to academia than return as Governor for a second term). Rajan has international gravitas and has thought about poverty and development in multiple ways. I wou ...more
Vipin Kumar
Dec 13, 2014 Vipin Kumar rated it really liked it  ·  review of another edition
It was a tough read.

I had gone with expectation of discovering new fault lines across the world economies but what I read were the fault lines in United States of America's economy / social structure / politics. There are other countries as well Governor! Finally, him being a governer of India, I was excited to know his thoughts about the fault lines existing our country's financial / economic system but there was no new insight ( except where he talks about the land reform bill ). There are no
...more
Anil Swarup
Apr 20, 2014 Anil Swarup rated it really liked it  ·  review of another edition
Rajan provides a flawless diagnosis of the financial crisis that shook the American economy and the contagion that rocked the world. Unlike many analysts who indulge only in a theoretical analyses, he suggests a strategy to prevent such a crisis in the future. His prescription appears plausible, "doable". Most of the book relates to the USA. However, there seem to be very little of his prescription happening on the ground. Even the universal health insurance seems to be foundering.
The analyses
...more
Harshita
Honestly I have never read a book on economy! At least not as pleasure reading. But when a friend recommended this book to me I thought I would try it out. I bought the audible version coz I wanted to experience how it is if someone else reads a book to me (I have never been comfortable with this in the past but audible narration was surprisingly good and well paced!)

Dr Raghuram Rajan, now the governor of the Reserve Bank of India, starts his book with the recent global financial crisis and expl
...more
Sanjeev
Apr 28, 2015 Sanjeev rated it it was amazing  ·  review of another edition
Shelves: 2015
It took me a long time to read this book. Not being much into economics, it was not an easy read for me. Nevertheless, the book was a great read. Primarily, it made me look at the world around me through an economist’s lens.

Rajan takes us through the various reasons that led to the economic downturn of 2008. He has described these ‘fault lines’ very lucidly and explains each one of them in some detail. Some of it is commonsense and others have their base in economic theory. Although I struggled
...more
E
Oct 10, 2010 E rated it it was amazing  ·  review of another edition
Provocative economic analysis

Dismissing the 2008 recession as an inevitable free market setback might seem simple, but economist Raghuram G. Rajan doesn't take the easy path. He makes a compelling case that the weak links in the global economy remain both visible and fixable. In a provocative analysis unhindered by ideological boundaries, Rajan argues against such government interventions as propping up the U.S. housing market. Yet he urges Americans to create a more generous safety net for unem
...more
Rakesh
Aug 09, 2013 Rakesh rated it it was amazing  ·  review of another edition
Shelves: economics
Rajan in this book did an amazing job explaining in intricate detail about the state of today's macroeconomics in the world. One of the main objective of this book is to take a holistic view of the world and pin point the reason for the current economic crisis.

He takes the reader through a full circle, from the markets taking excessive risk, government policies encouraging easy credit, low interest rates making the Banker complacent in taking those risks, which in turn only makes the economy les
...more
Hrishikesh
Good study, but not the best commentary on global economic structure that I have come across. For instance, Ruchir Sharma was much better.

Dr. Rajan, in my opinion, focuses far too much on the Financial sector. Thereby, his entire arguments - although accurate and well-defined - are localized essentially around the US and Western Europe. Therefore, the book becomes more of a commentary on "post-2008 fault lines" rather than the larger super-set of global fault lines.

Having said this, interesting
...more
Shekhar Verma
Mr Rajan has done a wonderful job in pointing out the economic fault lines which threaten the global economy. In my opinion not only his assessment of factors underlying the crisis is spot on but also his narration is extremely simple and hence easily comprehensible. The part where Mr Rajan has some what fallen short is where he suggests the ways of correcting the problems. He himself has admitted that the complexity of global issues that the world today faces isbso severe that there is no silve ...more
Govind Chandrasekhar
I've been an admirer of Raghuram Rajan, governor of the RBI, for a while now, having heard several of his speeches and talk shows. About time I picked up one of his books. Fault Lines is an elaborate discussion of the forces that have characterized booms and busts in the world economy over the last few decades. Unlike many discussions of the sub-prime crisis of 2008, this book doesn't devolve into a myopic examination of the conditions just preceding the crisis. The author establishes links the ...more
Shubhang
While the book does talk about the hidden fractures and I think it is only after the 2008 crisis that this book became consequential that it otherwise would have been (Also landing the author the top job at RBI). The book is erudite, halfway between a reference course book and a enjoyable non fictional read, which leaves you where it is, at the middle. You can better appreciate the book after a dash in economics that goes beyond newspapers and data points. How the hidden fractures can be bought ...more
AJ
Feb 11, 2011 AJ rated it liked it  ·  review of another edition
Rajan gives an adequate explanation of inequality, excessive risk, and the financial debacle. But a portion of his central argument is that the financial collapse was attributed, in part, to the mandated lending by the Community Reinvestment Act (CRA) and the subsequent actions of Fannie Mae and Freddie Mac. The numbers simply do not add up: the government-sponsored-enterprises and their affordable housing subsidies out performed any other sector in the residential mortgages. And by a large marg ...more
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Raghuram Govind Rajan is a world-class Indian economist who has been appointed as the twenty-third Governor of the Reserve Bank of India. He also serves as Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. Rajan is also a visiting professor for the World Bank, Federal Reserve Board, and Swedish Parliamentary Commission. He for ...more
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“And more than the quality of its institutions, what distinguishes a developed country from a developing one is the degree of consensus in its politics, and thus its ability to take actions to secure a better future despite short-term pain.” 6 likes
“Not taking risks one doesn't understand is often the best form of risk management.” 6 likes
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