Freefall

The book I read to research this post was Freefall by Joseph Stiglitz which is a very good book which I borrowed from the library. If I had a complaint about this book it is that it's more about the USA although a lot of it applies to the UK. This author who is also an economist won the nobel prize. This book is about what happened to the economy around 2009 & how it rocked peoples confidence in the global market. Many people thought there was no way a big bank would go bankrupt which of course happened to Lehman Brothers. It does say the US government wouldn't have averted the recession had they bailed them out. They were a result rather than a cause as it puts it. A lot of the problem was George W Bush & his policies, he made tax cuts which only partially helped the economy. Apparently a lot of economists predicted there would be a crash. One of the main causes of the crash was banks were offering cheap inflation linked mortgages. Of course they were only cheap while interest rates were low. A lot of the trouble could have been averted by the banks demanding higher downpayments & selling more fixed rate mortgages. One potential solution to the problem is the government offering low interest loans to people who default mortgages in effect buying the mortgage. The government can get low interest loans easily & can make low interest loans to the banks so why not do it to the consumers. A final comment I want to make is in Europe including Britain we have seen the government bailing out banks. In a lot of cases we have seen the banks still failing to make a profit & the bosses have big payouts which lets face it if they are such good bosses why are the government bailing them out. In the book he describes this as biting the hand that feeds them.