Lost Decades: The Making of America's Debt Crisis and the Long Recovery

W. W. Norton & Company
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A clear, authoritative guide to the crisis of 2008, its continuing repercussions, and the needed reforms ahead.

The U.S. economy lost the first decade of the twenty-first century to an ill-conceived boom and subsequent bust. It is in danger of losing another decade to the stagnation of an incomplete recovery. How did this happen? Read this lucid explanation of the origins and long-term effects of the recent financial crisis, drawn in historical and comparative perspective by two leading political economists.

By 2008 the United States had become the biggest international borrower in world history, with more than two-thirds of its $6 trillion federal debt in foreign hands. The proportion of foreign loans to the size of the economy put the United States in league with Mexico, Indonesia, and other third-world debtor nations. The massive inflow of foreign funds financed the booms in housing prices and consumer spending that fueled the economy until the collapse of late 2008. This was the most serious international economic crisis since the Great Depression of the 1930s.

Menzie Chinn and Jeffry Frieden explain the political and economic roots of this crisis as well as its long-term effects. They explore the political strategies behind the Bush administration’s policy of funding massive deficits with foreign borrowing. They show that the crisis was foreseen by many and was avoidable through appropriate policy measures. They examine the continuing impact of our huge debt on the continuing slow recovery from the recession. Lost Decades will long be regarded as the standard account of the crisis and its aftermath.

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About the author

Menzie D. Chinn teaches at the University of Wisconsin, Madison, and coauthors the influential blog Econbrowser.

Jeffry A. Frieden is Professor of Government at Harvard University. He specializes in the politics of international monetary and financial relations. Frieden is the author of Currency Politics: The Political Economy of Exchange Rate Politics and (with Menzie Chinn) of Lost Decades: The Making of America’s Debt Crisis and the Long Recovery. His previous books include Global Capitalism: Its Fall and Rise in the Twentieth Century; Debt, Development, and Democracy: Modern Political Economy and Latin America, 1965–1985; and Banking on the World: The Politics of American International Finance. He is also the co-author or co-editor of many other books on related topics. His articles on the politics of international economic issues have appeared in a wide variety of scholarly and general interest publications.

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Additional Information

Publisher
W. W. Norton & Company
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Published on
Sep 19, 2011
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Pages
304
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ISBN
9780393080506
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Language
English
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Genres
Business & Economics / Economic History
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Content Protection
This content is DRM protected.
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The exchange rate is the most important price in any economy, since it affects all other prices. Exchange rates are set, either directly or indirectly, by government policy. Exchange rates are also central to the global economy, for they profoundly influence all international economic activity. Despite the critical role of exchange rate policy, there are few definitive explanations of why governments choose the currency policies they do. Filled with in-depth cases and examples, Currency Politics presents a comprehensive analysis of the politics surrounding exchange rates.

Identifying the motivations for currency policy preferences on the part of industries seeking to influence politicians, Jeffry Frieden shows how each industry's characteristics—including its exposure to currency risk and the price effects of exchange rate movements—determine those preferences. Frieden evaluates the accuracy of his theoretical arguments in a variety of historical and geographical settings: he looks at the politics of the gold standard, particularly in the United States, and he examines the political economy of European monetary integration. He also analyzes the politics of Latin American currency policy over the past forty years, and focuses on the daunting currency crises that have frequently debilitated Latin American nations, including Mexico, Argentina, and Brazil.

With an ambitious mix of narrative and statistical investigation, Currency Politics clarifies the political and economic determinants of exchange rate policies.

Brilliant and engagingly written, Why Nations Fail answers the question that has stumped the experts for centuries: Why are some nations rich and others poor, divided by wealth and poverty, health and sickness, food and famine?

Is it culture, the weather, geography? Perhaps ignorance of what the right policies are?

Simply, no. None of these factors is either definitive or destiny. Otherwise, how to explain why Botswana has become one of the fastest growing countries in the world, while other African nations, such as Zimbabwe, the Congo, and Sierra Leone, are mired in poverty and violence?

Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities.

The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Sadly, the people of the north have endured decades of famine, political repression, and very different economic institutions—with no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.

Based on fifteen years of original research Acemoglu and Robinson marshall extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa to build a new theory of political economy with great relevance for the big questions of today, including:

- China has built an authoritarian growth machine. Will it continue to grow at such high speed and overwhelm the West?

- Are America’s best days behind it? Are we moving from a virtuous circle in which efforts by elites to aggrandize power are resisted to a vicious one that enriches and empowers a small minority?

- What is the most effective way to help move billions of people from the rut of poverty to prosperity? More philanthropy from the wealthy nations of the West? Or learning the hard-won lessons of Acemoglu and Robinson’s breakthrough ideas on the interplay between inclusive political and economic institutions?

Why Nations Fail will change the way you look at—and understand—the world. 
This volume presents a panoramic picture of the many national and international trends and developments, factors, customs, and events that have characterised banking in the Mediterranean area over the past two centuries. During this period banking in the Mediterranean evolved distinct characteristics, several going well beyond the restricted realities of colonial relations. The range of issues covered by the book is extensive and includes both national banking evolution and pan-regional topics. The chapters touch upon various aspects of Iberian, Italian, French, Greek, Maltese, Moroccan, and Ottoman banking history, focusing particularly on issues relating to central banking, numismatics, archival recording, and pan-Mediterranean economic dynamics. The history of certain specific institutions is also considered, including the Imperial Ottoman Bank, The Ionian Bank, The Banque d'Etat du Maroc, and others. Bringing together papers by leading banking and finance historians which were first presented at the European Association for Banking History conference held in Malta in June 2007, this volume offers an invaluable insight towards a wider and more detailed understanding of the roles of banking and finance in Mediterranean economic history. Seen in a context of what has hitherto been something of a historical vacuum in terms of the coverage of much writing on European banking and financial history, and the importance given to the Mediterranean region's banking history in its own right, this is an innovative book that both contributes towards our knowledge the subject, and establishes a pattern for further work in this important area of European economic history.
Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned.

Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts--as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur.


An important book that will affect policy discussions for a long time to come, This Time Is Different exposes centuries of financial missteps.

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