Prescient people saying scary things
Raghuram Rajan, the Chicago economist who famously skunked Alan Greenspan's retirement party by offering a prescient paper arguing that the financial sector has put the world at risk of a major economic crisis, has a new book coming out:
Entitled “Fault Lines,” Rajan argues that the initial causes of the breakdown were stagnant wages and rising inequality. With the purchasing power of many middle-class households lagging behind the cost of living, there was an urgent demand for credit. The financial industry, with encouragement from the government, responded by supplying home-equity loans, subprime mortgages, and auto loans. ... The side effects of unrestrained credit growth turned out to be devastating -- a possibility that most economists had failed to consider.
The subtitle, apparently, is "How hidden fractures still threaten the world economy." Terrific.
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