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Fault Lines: How Hidden Fractures Still Threaten the World Economy

4.11  ·  Rating details ·  4,781 ratings  ·  290 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 ...more
Hardcover, 260 pages
Published May 1st 2010 by Princeton University Press
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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.…moreNone at all. Dr Rajan can explain economic concepts to ten year olds in a way they'd understand.(less)

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Joshua
Oct 18, 2010 rated it really liked it
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 rated it really liked it
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
Anushree Rastogi
Jan 31, 2016 rated it it was amazing
Very well articulated, Prof Rajan had not hesitated from making his opinion on most aspects quite clear. Hence the book is not just another case of fiscal and monetary policy levers explained, it takes a stand and from what I see 7 years later in 2017, quite a prophetic stand at that.
Provides for an insight into the paths countries use to develop, asset pricing and the role Central Bank needs to play in asset price regulation and where the government should draw a line when deciding on economic
...more
Lobstergirl
Aug 19, 2011 rated it really liked it
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
Venky
Jul 09, 2016 rated it really liked it  ·  review of another edition
Shelves: economics
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
Dorotea
Dec 15, 2017 rated it liked it
Rajan raises some very good points that are sources of concern - fault lines as he calls them, namely: 1. Income stratification leads to loss of the belief that hard work will payoff
2. Education system (also see stagnating college graduation rates) > more low-income
3. Cheap credit (quick fix)
4. Lack of social safety net (unemployment insurance and health coverage)

I agree with the fundamental message (he financial sector was at the center of the last ciris, but it simply responded to implicit an
...more
Fateh Mann
Aug 26, 2013 rated it it was amazing
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
Abhijeet
Mar 06, 2016 rated it it was amazing
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
Anvesh
Oct 01, 2018 rated it it was amazing
I'm glad to have finished my 31st book for the year 2018 and it turned out to be really insightful one. Having seen so many news about how greed of bankers is blamed for crisis vs ineptitude of government regulations, finally someone who provided a view of systematic fault lines that could cause one more such crisis if not addressed to early.

The explanation of fault lines along with economic lessons in each chapter really makes you think if there is a better topic than macro economics and bette
...more
Anand Iyer
Feb 06, 2019 rated it really liked it
Shelves: finance
Fault Lines provide a flawless albiet a theoretical analysis of Financial Markets, Governments and their interfaces. While issues he raised relèvent, solutions are more academic in nature which he concedes as a platform for initial discussion than a panacea. While some after thoughts of the crises is mired in its myopic observations, others especially views on developing economies and multi national organisations prescient and accurate.
Any aspiring Financial or Economic graduate must have this o
...more
Manish
Jan 01, 2016 rated it it was amazing
One if the best book for understanding recent economic crises and what may be in store for future!!
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
SWAROOP CHOUGULE
Sep 27, 2017 rated it it was amazing
Raghuram Rajan, the rockstar ex-RBI governor was one of the few economists who warned of global financial crisis of 2007-08 before it hit. In Fault lines, Rajan says just like fault lines in tectonic plates run the danger of earthquakes; global economy has some deep fault lines which led to economic crisis in 2007-08, and if not fixed could lead to more devastating crisis. Rajan shows how choices made by bankers, government and homeowners were rational responses to incentives to take on risks br ...more
Samridhi Khurana
May 12, 2017 rated it really liked it
As an economist and exemplary academician, Rajan has looked beyond the convenience of targeting the government and greed of the finance world as the only reasons for the financial crisis of 2007. He hasn't shied away from holding them responsible, but at the same time has provided a more holistic view to explain the global economic meltdown of 2007.
Thoughtful, and beautifully written.
...more
Smit
Jul 25, 2020 rated it really liked it
Surprisingly succinct and insightful. The lessons from crisis seem completely relevant even today. The author does a good job of covering the different factors at play though I feel the socio-political complexities were a little glossed over.
Jayesh
Mar 11, 2020 rated it it was amazing
Shelves: non-fiction
Was good to read right after Goliath: The 100-Year War Between Monopoly Power and Democracy. Gives a somewhat different perspective which seems less one sided. However mostly agrees:

> The fault lines that have led to the global trade imbalances and created today’s Mandevillean world are deep. Moreover, because the imbalances are the result of deeply embedded strategies, change will be painful. It is not just a matter of raising an interest rate here, a tax there, or an exchange rate somewhere el
...more
Kevin Tharayil
Sep 17, 2012 rated it it was amazing
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
Hrishikesh
Nov 19, 2014 rated it liked it
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
Brian
Jan 30, 2012 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.
...more
Jake Meyer
Aug 05, 2016 rated it it was amazing
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
Karthik
Jun 27, 2018 rated it it was amazing  ·  review of another edition
Why should you and I care about the rising economic inequality in the society? In addition to the moral reason, Raghuram Rajan logically argues how economic inequality is one of the root causes of financial crisis and can ultimately make everybody (including you and I) worse off. His argument goes as follows.

When there is rising economic inequality, the poor demand higher standards of living. To politically appease them, the government provides short-term solutions, in this case, easy credit fo
...more
Martin Egeli
Jun 08, 2021 rated it it was amazing
Shelves: read-again, on-kindle
Raghuram Rajan, a previous chief economist from IMF and one who warned about the global financial crisis, writes about how serious flaws in the system are to blame. Crisis will come again, just in a different form. The book was written over 10 years ago, but I find it increasingly relevant for the status quo to understand more about the fault lines still existing in the system.

The book focus on several important and interesting concept, including, but not limited to, credit, income inequality, e
...more
Ashutosh Dwivedi
Aug 01, 2017 rated it it was amazing
Brilliant. Simple yet comprehensive. Rajan writes in simple and easy to understand language relating concepts not just from financial economics but also from development, growth and welfare. He takes turn by turn an opportunity to identify each of the players responsible for the 2008 sub prime crisis and provides an unbiased view of what happened and who was to blame, breaking down each concept and how it flowed through the system to cause the ripple effects that it did.

A must read for all econ
...more
Parag Nawani
Jun 17, 2019 rated it really liked it
Shelves: finance, economics
A nice read to understand the intricacies involved in the 2008 financial crisis in US and some other financial crises across the world. Not only the financial sector is to be blamed, but other critical players contribute towards these crises!
Manognya Deepthi G
Oct 22, 2018 rated it liked it
Unbiased book with a lot of insights. Definitely not an easy read for ones without a strong background in Economics.
Wenshi Gao
Jan 06, 2020 rated it it was amazing
An adequate Education fix a crash derived from joblessness .Read in Blinkist.
Raj Sinha
Sep 05, 2017 rated it it was amazing
A genius is one who can convert the HCF (highest common factor) of anything into its LCM (lowest common multiple), be it economics, pure science, emotions, art form, anything...
Raghuram Rajan, by this definition , is pure genius. So if you are a layman and want to get some understanding about world economics, then read this simple book on a complex subject.
Though a bit outdated (first published almost 7 years ago I think), it still answers and yes it still warns.
In a nutshell there are 5 reaso
...more
Adarsh Appaiah
Mar 01, 2017 rated it it was amazing
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 rated it really liked it
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
Jun 23, 2013 rated it liked it
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
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Raghuram Govind Rajan is a world-class Indian economist who has also served 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 former ...more

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