Gone bust.

AuthorRothschild, Matthew
PositionPlunder and Blunder: The Rise and Fall of the Bubble Economy - The Great Financial Crisis: Causes and Consequences - The Return of Depression Economics and the Crisis of 2008 - Book review

Plunder and Blunder: The Rise and Fall of the Bubble Economy

By Dean Baker

PoliPointPress. 170 pages. $15.95.

The Great Financial Crisis: Causes and Consequences

By John Bellamy Foster and Fred Magdoff

Monthly Review Press. 140 pages. $12.95.

The Return of Depression Economics and the Crisis of 2008

By Paul Krugman

W. W. Norton. 191 pages. $24.95.

A ll around us lies economic chaos. Unemployment exceeds 8 percent, and may be headed for double digits. Home foreclosures stand at record heights. Banks are insolvent. The auto industry has collapsed. Over the past year and a half, the stock market has lost tremendous value. The "D" word, "depression," which not so long ago seemed relegated to the history books, suddenly has reappeared as a real possibility.

Just as meteorologists are especially necessary during tornados and hurricanes, economists are especially necessary during recessions. And it's not a bad idea to listen to those who first warned us of the storm now that the sirens are wailing.

Leftwing economists saw this one coming when almost no one else did.

Perhaps the loudest Cassandra of them all was Dean Baker, the co-director of the Center for Economic and Policy Research, who for years told anyone within earshot that the housing bubble was going to burst.

In his new and highly readable book, Plunder and Blunder , Baker argues that the current crisis was the direct result of bad policymaking. "The tragic part of this story is how preventable it was," he says. "There's nothing natural or inevitable about financial bubbles. They aren't like hurricanes or earthquakes. In fact, the stock and housing market bubbles of the last decade are largely the culmination of very human policy choices."

[ILLUSTRATION OMITTED]

Baker starts with the Reagan Administration, noting its "deregulation of financial and other markets" and its "upward redistribution of income," as well as its assault on organized labor. With real wages declining, families had to increasingly rely on debt.

He then devotes a lot of attention to the policies of the Clinton Administration, and of Federal Reserve Board Chairman Alan Greenspan, which were "fueling a stock bubble." Once the bubble burst, Baker argues, "the country hitched its wagon to the next financial bubble"--housing.

The two were connected in a couple of ways, he says. Before the stock market fell in 2001, investors had begun to use their inflated stocks to buy houses, which sent prices up. And once the stock...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT