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I came away smarter, and enjoyed the process to boot. While the explanations of Mexico, Asia, and Argentina were educational, his account of the failure of Bear, Lehman, AIG, Fannie and Freddie, and even (to some degree) the Bush administration read like thriller fiction. I have been a fan of Paul Krugman's articles for the New York Times for some time now, this is the first book of his that I have read. I wasn't disappointed.Krugman's commentary on the events of the last 18 months made the book.
Krugman talks about the opportunity for USA to superate cyclic crisis.He asks himself if the economic question depends only by the law of supply and domand or something happens for the financial policy.The auctor is one of better economists in the world and he prefers an idea to the other utilizing a big quantity of informations.He is ready to tell us most important questions, from the international strategies to the housewife choices.His capacity to read the minimal aspects in the market is equivalent to his influence in mass media.
As such, being so wrong is evidence that economists as a whole do not fully understand the limitations of their field and have not internalized historic events, despite any claims of expertise in that exact area (Bernanke claims to be an expert on the Great Depression), and lastly economists can get caught up in bubbles just as much as anyone else. My main complaints are Krugan's sermonizing tone, overall lack of depth, and inconsistency in criticizing economics. His tone was that of an all-knowing economist who can't speak freely for the common man would not understand him, therefore he must dumb it down for us. For now, I've set the book aside and will return to it sometime in the future in hopes of seeing the book in a more positive light.
Krugman discredits top economists without differentiating himself from that group. Perhaps I would have liked it more if I had lesser or no expectations upon picking it up or if the first few pages were cut. Also, as is apparent from my review, the first few pages put me off as well. Overall, his tone coupled with my high expectations (after hearing Krigman many times of NPR) may have influenced my review more than anything else.
Also, the first paragraph of chapter 1, in my opinion, somewhat discredits economics and the prestigious Nobel prize in economics, which Krugman has attached to his name so frequently. That question wasn't answered and perhaps played an important role in my disliking of the book.The last 1/8th of the book is actually about the recent crisis, which is more interesting. It seems thrown together and unedited to be honest. Why should we listen now.
As two highly regarded economists at the top in their field, it's fair to assume they're probably representative of the majority of the field. As a result, I thought the book lacked depth and jumped around from topic to topic too much. He writes that in 2003 Robert Lucas, who won the Nobel Memorial Prize in Economics, gave a speech in which he declared it was time for macroeconomics to move on as the "central problem of depression-prevention has been solved, for all practical purposes." A page later he also says that Ben Bernanke (no Fed chairman) gave a speech in 2004 along similar lines.
-- and these instruments were not only largely unregulated but also not FDIC insured. Throughout this book Krugman describes the wild gyrations of boom-and-bust cycles, in the Latin American currency markets (1994-1996), in Asian foreign exchanges (1997-1998), the dot-com bubble (1998-2000), the housing bubble (2001-2008).
Although Krugman does not come out and explicitly state this, it's evident that high-stakes gambling has turned world economic markets into unreliable, irrational, unpredictable and hugely-dangerous free-for-alls. What each of these roller coaster rides has in common is the multiplier effect, and consequent injection of instability, caused by unfettered speculators.
Although written initially in 1999, "The Return of Depression Economics" has been substantially re-written to take into account developments between 1999 and the new publication date ten years later. The failure stemmed from institutions outside the domain of the Federal Reserve, so the Fed has been essentially powerless to restart the system.The solution seems clear to the reader, if not to Congress.
Reinstatement of 1932's Glass-Steagall Act, and a brick wall between private speculators (commodity, currency and asset) and publicly-guaranteed financial instruments, must be the top priority to stabilize the financial markets.Wall Street's playboys must be prevented from gaming the system for personal gain. Much has changed in that decade.Krugman describes his conclusion late in the book, which I have not read elsewhere but it makes perfect sense: the collapse of the credit markets in 2008 was almost entirely due to the catastrophic failure of the so-called "shadow banking system" -- the commercial paper market (the CDOs, the auction-rate and subprime mortgage-backed securities, etc).
That is why extraordinary efforts by the Fed to right the system -- unprecedentedly low Fed interbank rates, $700 billion in bailout funds, the closure or public takeover of many many banks -- has had so little effect.
I think that he could have given a significantly more in-depth analysis that would have offered greater insight into the mistakes that help to facilitate these events. Krugman's clear writing style and format is one of this book's strengths; its brevity is its most pronounced weakness. Written for the macroeconomic novice, you will be able to follow the major concepts of this book without difficulty. A well-written summary of the major financial swings of the last 20 years. Krugman briefly covers the economic dynamics of the Asian and Latin American crises in the 90s and uses them to set up a description of the 2008 financial crisis here in the US.
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