An essential account of the historic subprime mortgage crisis, from
the Nobel Prize-winning economist and bestselling author of Irrational
Exuberance
The subprime mortgage crisis has already wreaked havoc on the lives of
millions of people and now it threatens to derail the U.S. economy and
economies around the world. In this trenchant book, best-selling
economist Robert Shiller reveals the origins of this crisis and puts
forward bold measures to solve it. He calls for an aggressive
response--a restructuring of the institutional foundations of the
financial system that will not only allow people once again to buy and
sell homes with confidence, but will create the conditions for greater
prosperity in America and throughout the deeply interconnected world
economy.
Shiller blames the subprime crisis on the irrational exuberance that
drove the economy's two most recent bubbles--in stocks in the 1990s and
in housing between 2000 and 2007. He shows how these bubbles led to the
dangerous overextension of credit now resulting in foreclosures,
bankruptcies, and write-offs, as well as a global credit crunch. To
restore confidence in the markets, Shiller argues, bailouts are needed
in the short run. But he insists that these bailouts must be targeted at
low-income victims of subprime deals. In the longer term, the subprime
solution will require leaders to revamp the financial framework by
deploying an ambitious package of initiatives to inhibit the formation
of bubbles and limit risks, including better financial information;
simplified legal contracts and regulations; expanded markets for
managing risks; home equity insurance policies; income-linked home
loans; and new measures to protect consumers against hidden inflationary
effects.
This powerful book is essential reading for anyone who wants to
understand how we got into the subprime mess--and how we can get out.
