The Best Book (Yet) on the Global Meltdown

It's the Christmas season. And that has me thinking again about the global financial crisis, the subject of several earlier posts (just click on the chapter 3 tag here or at the bottom of this post).

The links there might not be entirely obvious, but there are two good reasons why this is a good time to dwell on financial globalization. First, Chapter 3 of my book is about lessons from the Christmas season for global finance, where I feature the 2007-2008 crisis as a case study. Second, the holiday season allows for more time to catch up on reading, and I've just had time to review Nouriel Roubini and Stephen Mihm's Crisis Economics: A Crash Course in the Future of Finance.

In a series of three posts in July and early August, I reviewed five other books that diagnose the crisis and explain it to readers. All of them were worth reading. Compared to these, however, I think Roubini's book is the best analysis, combining well-researched rigor with clear writing. It's a serious tome of 300 pages, and it certainly lacks the humor of John Lancaster's I.O.U. and the storytelling of Michael Lewis' Big Short or David Faber's And Then the Roof Caved In.

But it makes up for these deficits with helpful historical analogies drawn from previous financial crises and with sharply realistic prose devoid of ideology or wishful thinking. Other than a little chest-thumping at the beginning (crediting Roubini with predicting the crisis well before it began), the book rebuts the presumption that our current financial crisis was completely unexpected or unique. Instead, the authors argue, what happened from 2006 to late 2008 was entirely predictable; indeed, Roubini himself predicted much of what followed.

They argue in Chapter 2 that the crisis nicely fits Hyman Minsky's model of financial crises--a model made famous in Charles Kindleberger's Manias, Panics, and Crashes. Like Joseph Schumpeter and other Austrian economists, Minsky believed that booms and busts were a recurrent reality of the financial sector in global capitalism. This time was no different.

The authors spend five chapters in the middle of the book describing the long-term structural causes, the string of bank failures from 2006 to 2008, the spread of the crisis globally, the Fed's response, and the responses of the Bush Administration and Congress.

But a real strength of the book, which goes beyond its predecessors, lies in its final third, where the authors lay out a program of reforms and policies that could help prevent another nasty meltdown. As their subtitle suggests, they want to offer some guidance on the "future of finance." It's doubtful that we'll be able to predict the future in detail, but these two have given us a good grasp of what just happened, along with some thoughts on how to prevent it from happening again (or at least contain the damage). With the benefit of a little more time, they've given us insight that earlier books couldn't offer.

Right now I'm thinking that this will be the text of choice for covering global finance in my international political economy course next fall--unless a reader out there discovers a text that might be better. If you do find a better book, please let me know.

When Time Slows Down

Third in a series (first post on Christmas)

It's the week between Christmas and New Year's Day, a time when many (though not all) Americans can lay around the house guilt-free. You get a chance to pause and spend time with family or friends. And much of the time you are feasting, eating all kinds of goodies in between large meals and festive parties. Time slows down during these holidays.

Like Thanksgiving Day, Christmas Day is one of the only society-wide feast days in the United States. Feast days are those that break from the normal 24/7/365 work world of Western consumer society. Even fast food chains and gas stations close on Thanksgiving Day and December 25. There are no other days where this would fly. But on these days we understand and make an exception.

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Over the break, I've been reading several of the books that I mentioned in my last post. Among them, Colin Beavan in No Impact Man talks about eating dinners with his grandparents who were both extremely frugal and extraordinarily attentive to the natural world around them.

 They insisted I climb back up the stairs to the bathroom to turn the light of if if I'd left it on. They taught me to take only what food I would eat and never to throw trash on the ground. They wore sweaters and kept the heat down low (p. 36).

They also took their time eating dinner, waiting until after sunset to start. After dinner,

when my grandmother washed the dishes, I would stand beside her and we'd look out the window together at the New England stone wall in her backyard. Chipmunks had burrowed there. "That's the father," my grandmother would say. "Those are the babies." The birds would come. A red-winged blackbird, Grannie would tell me. A goldfinch (p. 42).

Looking back, he thinks that gratitude connects their frugality and their attentiveness toward Creation:

My grandparents' no-waste rules seemed pointless when I was young. You should this. You shouldn't that. And for the sake of . . . what? Piety? Sanctimony? But something about their intention not to waste and their emphasis on cultivating gratitude--Depression-era thoughts or not--seems connected to making time to watch the sunset and the chipmunks (p. 43).

The slower time of a feast season like Christmas brings us closer to the fullness of time--kairos time--where we can appreciate more deeply the gifts of God's Son and God's Creation given for us and for our salvation. Thanksgiving is the general posture of the entire twelve days of the Christmas season.
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Today, December 28, is the Feast of Commemoration of the Holy Innocents, which reminds us of how those gifts are not to be taken for granted. When Herod's soldiers slaughtered the young children of Bethlehem (see Matthew 2:13-18), they created a stark reminder in the Christian calendar that our gratitude for the gifts of God necessarily involves concern for others. The Episcopal Collect for this day makes this link explicit:

We remember this day, O God, the slaughter of the holy innocents of Bethlehem by the order of King Herod. Receive, we beseech thee, into the arms of thy mercy all innocent victims; and by thy great might frustrate the designs of evil tyrants and establish thy rule of justice, love, and peace; through Jesus Christ our Lord, who liveth and reigneth with thee, in the unity of the Holy Spirit, one God, for ever and ever. Amen

This emphasis--mercy for innocent victims, justice for the oppressors--builds on the Advent theme of the Kingdom. Even as we celebrate during this season the good gifts we have received, we long for the day when there will be no more injustice, when God's Kingdom will reign here on earth.