Monday, July 19, 2010

A Fantastic Overview of the Financial Crisis

A bit long, but wonderfully done

1 comment:

Goldwater's Ghost said...

I was going to write on this one over at the Weekly Standard, linked to by Jonah Goldberg over the weekend:

In short - "The ultimate cause, Rajan convincingly argues, is a widening of economic inequality that American politicians of both parties found politically intolerable, and chose to fix by turning the credit market into an under-the-table welfare state."

A passage that also piqued my interest: "For reasons that are not fully clear, recessions have changed in nature in the last 20 years. Historically, Western economies returned to full employment within a few months of hitting a recession’s trough. Losing a job was a calamity, but a calamity of short duration. Since 1992, however, all recoveries have been “jobless recoveries”—in the 2001 recession, it took more than 38 months for the economy to return to full employment.

And, as Rajan puts it with some understatement, “the United States is singularly unprepared for jobless recoveries.” This is only partly because the United States has a weaker welfare state than other industrialized countries. It is also because the American safety net—in which government provides fewer health and retirement benefits but incentivizes employers to fill the gap—winds up placing all of a person’s eggs in the basket of his job. Lose your job and you lose not only your income but also your (and your children’s) health insurance and possibly (as in several scandalous recent cases) your pension."

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