USA TODAY: ….Just how did we get into this mess and what’s our best path out of it? In prose that is intelligent yet accessible to non-experts, authors Menzie Chinn, professor of public affairs and economics at the University of Wisconsin, and Jeffry Frieden, professor of government at Harvard University, tackle these questions in their new book, Lost Decades: The Making of America’s Debt Crisis and the Long Recovery.
In Lost Decades, we learn how the financial crisis was spawned by years of artificially low interest rates, buttressed by massive lending from abroad, which encouraged an unprecedented spree of debt-financed consumption. We learn how lawmakers disarmed the financial regulators, allowing the proliferation of highly complex, unsupervised and interconnected financial instruments, which enabled firms to increase profits by taking on riskier assets. We learn how some of those firms failed when one highly dubious assumption — that housing prices would continue their unabated rise — proved false.
We also learn — despite the multitude of systemic forces that nearly led us to financial Armageddon — that the crisis was not inevitable. Though it is impossible to exonerate the big financial players whose actions brought the economy to the brink, ultimately those firms and the bankers they employed, say the authors, were playing with the cards the government had dealt them through measures that enabled a foreign borrowing binge and encouraged the taking of inordinate financial risks… (more)
