Crisis: Cause, Containment and Cure
By Thomas F. Huertas


Publisher:   Palgrave Macmillan
Number Of Pages:   208
Publication Date:   2010-06-15
ISBN-10 / ASIN:   0230236189
ISBN-13 / EAN:   9780230236189


Product Description:



The current crisis is emerging as the most severe downturn since the Great Depression. This book examines its cause, the efforts to contain the crisis and proposes a cure that will limit the risk that such crises could recur in the future.


Introduction

In 2009, for the first time in over fifty years, world output declined.  At the start of the year economic output was declining at a rate faster than that experienced in the Great Depression. Even though this slide was arrested, the decline in output in the world’s advanced industrial economies in 2009 was nearly 4% (IMF 2009a). In round numbers the fall in output amounted to over $4 trillion.
During the crisis that started in August 2007 and persisted into 2009, asset values also plummeted. For the first time in a generation, housing prices fell. Stock prices crashed. Bond prices declined sharply. Overall, the fall in household assets in the United States alone amounted to over $12 trillion.1 Savings have been ravaged, and pensions are at risk.  Unemployment rose and will continue to rise. By June 2009 over 20 million people had lost their jobs as a result of the crisis. They have not all been bankers. Auto assembly workers, barkeepers, carpenters, delivery boys, editors, farmers, graphic designers, hotel workers and innumerable other occupations have all suffered. Forecasts made in mid-2009 predicted unemployment in 2010 to be above 10% of the labour force in most industrial countries (IMF 2009b).  To prevent these bad events from becoming even worse, central banks and governments around the world resorted to unprecedented stimulus measures. Central banks have slashed interest rates practically to zero, and governments ran budget deficits on a scale not seen since World War II. In the United States and the United Kingdom budget deficits in 2009 exceeded 10% of GDP and in the Eurozone they were about 6% of GDP, double the level permitted under the Maastricht Treaty (IMF 2009b).[...]


Contents

Part I Cause
1 Rational Exuberance
2 Too Much of a Good Thing
Part II Containment
3 Conditional Containment
4 Moving towards Meltdown
5 Unconditional Containment
Part III Cure
6 Better Macroeconomic Policy
7 Better Resolution
8 Better Deposit Guarantee Schemes
9 Better Regulation
10 Better Supervision