a special request -- please read
To all the many great friends of delanceyplace.com,
As you know from our daily emails, I've been an avid reader of books for years. But now I've finally written one. It's called The Next Economic Disaster and it's available for pre-order on Amazon.com. The link is below, and as always, any proceeds we receive will go to a children's literacy project.
I had no intention of writing a book, but through my involvement in the banking industry, I came across data that led me to a very different interpretation of the 2008 Financial Crisis, and a very different view of what needs to be done to repair the economy both in the U.S. and globally. That led to this book. I have worked hard over the last few years to systematically examine the global data, and have involved two groups of economists, one to help me work through my thesis, and a second one to try and punch holes in it.
It is a short book, and that's intentional. And it is definitely a challenge to conventional economic thinking. I hope you will consider ordering the book, and I further hope that it will give you much food for thought on what I consider one of the most important issues of our time.
I've included a very brief selection below.
Thanks and warmest regards,
"Alan Greenspan, who was chairman of the Federal Reserve until 2006 and who presided over much of the runaway increase in mortgage loans that was central to the 2008 crisis, wrote recently in reference to this crisis that 'financial bubbles occur from time to time, and usually with little or no forewarning.'
"Alan Greenspan is wrong.
"It was neither a 'black swan event' nor a crisis in confidence. There was plenty of forewarning -- in fact years' worth. This crisis was predictable, and major financial crises of this type can be seen -- and prevented -- well in advance. ...
"In the aftermath of [the 2008] crisis, most of the debate has been on the subject of government debt -- on 'austerity vs. stimulus.' One side blames government debt for impeding economic growth and thus prescribes a reduction in government spending called 'austerity,' while the other side calls for more government deficit spending as the necessary 'stimulus' for strong economic growth.
"Both sides miss a much more central point.
"The primary issue is not public debt but private debt. It was the runaway growth of private debt -- the total of business and household debt -- coupled with a high overall level of private debt that led to the crisis of 2008. And even today, after modest deleveraging, the level of private debt remains high and impedes stronger economic growth. In 1950, US private debt stood at 55 percent of GDP. In 2014, it stood at 156 percent, almost tripling in two generations.
"Rapid private debt growth also fueled what were viewed as triumphs in their day -- the Roaring Twenties, the Japanese 'economic miracle' of the '80s, and the Asian boom of the '90s -- but each of these were debt-fueled binges that brought these economies to the brink of economic ruin.
"Those crises are the most known, but almost all crises in major countries have been caused by rapid private debt growth coupled with high overall levels of private debt. The reverse is true as well; almost all instances of rapid debt growth coupled with high over-all levels of private debt have led to crises.
"There are two claims you can count on: Booms come from rapid loan growth. And crises come from booms."
|The Next Economic Disaster: Why It's Coming and How to Avoid It|
|University of Pennsylvania Press|
|Copyright 2014 University of Pennsylvania Press|