Bob Selden's Reviews > The Return of Depression Economics and the Crisis of 2008

The Return of Depression Economics and the Crisis of 2008 by Paul Krugman
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Aug 18, 2009

it was amazing

In “The Return Of Depression Economics”, Paul Krugman sets out to explain why the current world financial crisis has occurred. He uses the Great Depression of the 1930s plus an extensive review of the Asian crisis of the 90s (which he suggests was a dress rehearsal for today’s dilemma) to explain what has gone wrong and most importantly, why.

Krugman is a Nobel Prize Winner in Economics. This alone should be enough to get anyone’s interest in a book on this topic. However, it is Krugman’s down to earth writing style and simple explanation of seemingly complex situations, that made the book a winner for me. In fact, it is the first book on economics that I have read cover-to-cover! That’s high praise indeed.

The book was first published in 1999, hence the emphasis on the Asian crisis. This proved to be an indicator of what was to come, but as Krugman points out, nobody learned from it. This latest edition, written in late 2008, now looks at the reasons behind the current financial meltdown.

Of particular interest to me, was Krugman’s description of the “shadow banking system” demonstrating how institutions such as Hedge Funds and even insurance companies (read AIG) have come to be seen as de facto banks – gaining all the benefits (e.g. government support) of the “official” banks without their legislative oversight. Their success in turn led to even further deregulation of the banks as they found the need to compete with the shadow banks.

If you’ve been baffled by some of the terms, such as CDS and CDO thrown around by the so called financial experts, then this book will fill a gap for you. Highly recommended for anyone who wants to have a better understanding of how our financial markets work and in particular, what’s caused today’s problems.
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06/02/2016 marked as: read

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