04/01/2021
For the month of January, we have “Fault Lines: How Hidden Fractures Still Threaten the World Economy” by economist and former governor of RBI, Raghuram Rajan.
Rajan was one of the few economists who identified and warned against the 2008 subprime mortgage crisis and housing bubble before it hit the world. He makes bold yet substantiated claims about how the collective efforts of the lenders, debtors, and the government lead to the economic meltdown of 2008. He is bold to analyze the root problem expanding over decades: jobless recoveries from recessions and growing wage inequalities, combined with the lack of a robust social security network, lead to an overarching sense of anxiety amongst the workers. Politicians resorted to quick fixes such as easy credit to boost spending which culminated in a bubble.
However, make no mistake. Rajan is not merely a nihilistic critic waiting to pass the blame and shout “I said so”. Rajan dispassionately gives a series of simple yet phenomenally practical solutions to identify and prevent such crises before they happen: unemployment and health benefits rather than easy credit to deal with recessions, ensuring market players tail the risks they take, and stopping the government from bailing out risk-takers if the risks fail.
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