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Fault Lines: How Hidden Fractures Still Threaten the World Economy

4.05  ·  Rating Details  ·  2,826 Ratings  ·  170 Reviews
Winner of 2010 FT Goldman Sachs Business Book of the Year Award

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 se

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Published May 24th 2010 by Princeton University Press (first published May 4th 2010)
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Nov 03, 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
Apr 04, 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
Sep 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
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
Sep 17, 2012 Kevin 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
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
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
Jan 10, 2016 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.
Jan 17, 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!!
Aug 26, 2015 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
Apr 29, 2015 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
Anil Swarup
Apr 21, 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
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
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
Oct 02, 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
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
Aug 24, 2015 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
Abhishek Singh
Sep 17, 2013 Abhishek Singh rated it it was amazing  ·  review of another edition
Rajan, dude!
You are the man!
You are the man!
I'm your biggest fan; not since you became Indian Governor but the first time I saw the documentary 'Inside Job'
For the uninitiated, he's the former IMF chief economist who did some kicka** things in his research paper at incentive structure that predicted 2008 US sub prime financial crisis. The author is flamboyant and audacious in pointing at the deficiencies of our current economic system and how its rigged for the benefit of a chosen few. Yet his a
Sanjeev Kotnala
Sep 15, 2012 Sanjeev Kotnala rated it really liked it  ·  review of another edition
FAULT LINES by Raghuram G Rajan
You don’t review a much reviewed and acclaimed book if the subject is not your area of expertise. More so when the author who has just taken over as the CHEIF ECONOMIC ADVISOR of your country and could very well be a Governor of Reserve Bank of India one day. And more so you are full 2 year behind others in reading the book- that has been authored by your batch mate. It’s different that you are not in touch and in last 25 years have only met twice.

more http://rivr.
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
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'
Prateek Gupta
Rajan was the chief economist at IMF from 2003-07 and one of the few people who saw the crash coming and presented a controversial paper at a celebration honouring Alan Greenspan in 2005. (Very bold given that Greenspan was about to retire and Rajan was basically questioning the core policies of his tenure & predicting a crash due to these policies). Since then he has been hailed globally for his accurate predictions about the state of our financial markets.

In my opinion, this is perhaps th
Dec 29, 2015 Álvaro 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
Aug 23, 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
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
Vipin Kumar
Jan 10, 2015 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
Sep 16, 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
Prashanthini Mande
Jan 10, 2015 Prashanthini Mande rated it really liked it  ·  review of another edition
Recommended to Prashanthini by: Archana Sivassubramanian
The crisis

The global recession that hit in 2008 happened as a result of the "risky" housing loans provided by the US Government to their poor. The house prices rose, the lenders defaulted and the investors around the world who'd bought the Mortgage-backed securities suffered. Some blamed the government, some blamed the financial institutions, and some blamed the poor.

The idea of poor people being able to afford houses was well intentioned. But why did it fail and who was to be blamed?

Fault line
Aditya Prasad
Jan 26, 2014 Aditya Prasad rated it it was amazing  ·  review of another edition
Being an amateur reader in financial economics, I read a couple of books on investment strategies, how to put the world economy back on the bull, affects of capitalism-good/bad etc. But I must say, this is one of it's kind. The author, the youngest one to become a chief economist at IMF and many other credentials to his CV, had put his experience at the IMF, American Financial Sector and teaching experience at Booth School into this book. He underlines some dangerous contemporary trade/financial ...more
Jul 04, 2012 Eric rated it really liked it  ·  review of another edition
Rajan goes to great lengths to maintain a non-partisan tone while describing what he calls "fault lines." These fault lines are problems inherent in economic systems, both global and national (with emphasis on the United States), that contribute to the magnitude and frequency of economic catastrophes like the credit crisis of 2008. This is an easy read for an armchair economist (someone like myself, who has had no Economics classes and doesn't know any of the jargon) despite being a scholarly wo ...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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