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The Shifts and the Shocks: What We've Learned--and Have Still to Learn--from the Financial Crisis

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    Available in PDF - DJVU Format | The Shifts and the Shocks: What We've Learned--and Have Still to Learn--from the Financial Crisis.pdf | Language: ENGLISH
    Martin Wolf(Author)

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Title: The Shifts and the Shocks( What We've Learned--And Have Still to Learn--From the Financial Crisis) <>Binding: Hardcover <>Author: MartinWolf <>Publisher: PenguinPress

Title: The Shifts and the Shocks( What We've Learned--And Have Still to Learn--From the Financial Crisis) Binding: Hardcover Author: MartinWolf Publisher: PenguinPress

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Book details

  • PDF | 496 pages
  • Martin Wolf(Author)
  • Penguin Press (September 11, 2014)
  • English
  • 8
  • Politics & Social Sciences

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Review Text

  • By Serge J. Van Steenkiste on September 27, 2014

    In his newest book, Martin Wolf relentlessly explores the ins and outs of the financial and economic crisis which began in 2007-2008.Mr. Wolf first reviews the shocks that have humbled many high-income countries, whose subdued performance stands in sharp contrast with the strong showing of many emerging and developing economies in the aftermath of that crisis.1. A credit crash that has forced many households and businesses to stop spending consistently more than their incomes.2. A reconfiguration of entire sectors of activity such as construction and finance in many high-income countries.3. The higher cautiousness of chastised financial institutions in a changing regulatory environment.4. The specter of deflation, or at least, consistently falling inflation rates in many high-income countries, especially in the Eurozone.5. The vicious circle behind the weakening of the “animal spirits” of businesses in the same economies.The author then clearly articulates the shifts that have led to the fragility of the world economy:1. No living memory of the large financial and economic busts of the distant past, which bred complacency among the economic, financial, intellectual, and political elites of the West before 2007-2008.2. No clear understanding of the ramifications associated with the evolution of the financial system, i.e., liberalization, globalization, innovation, leverage, and incentives, among the same elites.Subsequently, Mr. Wolf reviews what has been done to make the financial system more resilient than it was before the above-mentioned crisis. The author is clearly not impressed with the post-crisis central-bank orthodoxy as it is embraced in the high-income countries of North America and Europe. He dubbed it the new orthodoxy, i.e. inflation targeting, macroprudential policy, the strengthening of the role of central banks as lenders of last resort, and the orderly resolution of troubled institutions. Mr. Wolf is especially critical of the sheer complexity of the regulatory structure that will probably be dead on arrival in the recurrence of a major financial and economic crisis. Unsurprisingly, the author pleads for a significant increase in the capital requirements of banks as a key improvement to the new orthodoxy.Finally, Mr. Wolf makes the case for radical reform. Radical reform does not include liquidationism light as practiced within the Eurozone under the influence of Germany. Fiscal austerity, asymmetric adjustment of competitiveness, and limited assistance with recapitalization of banks in crisis-hit countries will probably not turn around the fortunes of these countries that are operating in less auspicious external circumstances that those that benefited Germany previously.The author mentions as examples of radical reform the creation of a global currency to replace the national currencies currently used as anchors of the system, or a partial break-up of the open world economy. Mr. Wolf makes himself no illusion about the feasibility of these radical reforms. It will depend on 1) what sort of recovery emerges and 2) how much risk societies will be prepared to tolerate.In summary, the author calls for a reassessment of the merits of the new orthodoxy which will probably fail too many economies in dealing successfully with the recurrence of a major financial and economic crisis.

  • By Alexander Finch on October 30, 2014

    Martin Wolf has a problem with Germany. His book is full of bank bashing and German bashing. They are easy targets so why not take a free kick and win some popularity. He is a greater wordsmith than Alan Greenspan. So what did I learn? The financial world is still fragile, the next crash will be bigger, in Europe the crisis is not over, it's a balance of payments problem, weak demand etc. etc. Wolf tells you very precisely how imprecise the world is. Not sure if that really helps? But then he comes up with simple but brilliant conclusions, for example, Europe can blame Germany and the U.S. can blame the banks.In Wolf's Conclusion Chapter (page 341) he writes that Europe, under German influence, has sought to introduce Liquidationism but only on crisis-hit countries which has imposed huge costs on the peoples of some member countries. On page 177 he writes "The problem, in brief, is Germany". On page 337 "In accordance with the views of Germany, the reformed Eurozone is designed as a system for imposing discipline upon wayward countries: it is a 'discipline union'.....In essence, then, member countries are free to do precisely as they are told". Lack of discipline is what got these countries into trouble in the first place, so to argue against discipline does not seem very clever to me.On page 339 Wolf writes "the cost would be borne by the hapless taxpayers of the crisis-hit countries". BUT THESE CRISIS-HIT COUNTRIES WERE NEVER TAXPAYERS. In 1994 I spent a week on the Island of Santorini Greece. The economy on this island was booming already back then, new hotels were being built, restaurants were busy, and they were expecting a huge influx of Russian tourists after the fall of Communism. One restaurant had a queue of customers at the door each night. One night I said to the owner, you need a bigger restaurant, why don't you expand? He told me without hesitation, no one pays taxes in Greece, it's 90% cash, he doesn't know what to do with all the money he is already making, why would he need a bigger restaurant? Wolf argues that the Germans knew about this problem yet kept lending money, so it's just as much their fault, yet they should now keep lending money because to get out of so much debt you need more debt (page 273). That may be true but nowhere in the book does he explain how to change these peoples' character. Have you ever done business with them Mr. Wolf? My family bought a business in Sydney, managed by some Greeks. You have no idea how callus and dishonest they were. My family suffered for over a year. What goes around comes around. I have little sympathy. And to speak of these countries being in a depression is a beat-up, simply scaremongering, to make Germans look bad.It's a culture problem, and yes, if they don't like discipline they should leave the union. Many Greeks and southern Italians have already moved here to Australia over the last 50 years, and they are thriving here. They should all come to Australia! Not much discipline here to worry about and maybe the Germans could even pay for the flight over......? Would the US consider taking some as well?? Detroit has many empty houses, maybe the unemployed Greeks, Italians and Spanish might move to Detroit to get away from their depression? Even if you paid them, I don't think they would go. Maybe the Germans are not so bad after all?

  • By Guest on October 22, 2015

    Martin Wolf is a genius in his field, most negative publicity comes in the form of his controversial and subjective writing form. I came in with this mindset and loved the book. The book itself is a combination of facts as well as his own personal opinion on certain subject matters, a format that I found to be quite effective. He begins with an all-encompassing review of the determinants of the financial crisis and the Eurozone Crisis, and then delves into a number of interesting policy implications as well how the wold will recover from such a catastrophic event.His rather blunt writing style is something I have always enjoyed, he does not dance around the facts but instead throws them in the readers face. I had the fortune of attending two of his lectures in Oxford regarding his book and he speaks in the same manner in which he writes. He allows for a gradual increase in complexity when it comes to presenting the determinants of the multiple crises.Although a daunting task at first, this book provides one of the most comprehensive review of the financial crisis and Eurozone crisis. He looks into future implications (e.g. the viability of Anglo-Saxon Capitalism) which I found extremely interesting. A must read in my opinion.

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