I must admit I was a bit impatient when I saw the book being postponed for publishing for February 2010. Not only because “Freefall – America, Free Markets, and the Sinking of the World Economy” by the famous Joseph Stiglitz is a book which promissed to demistify the current prolonged global crisis in a more academic manner (read – with some stone hard economic analysis behind, not the small talk books written usually on the topic). I was expecting it with impatience also because Stiglitz is a non-compromises author – he does not fiddle around the topics, but shoots and moves ahead. And my expetations were actually a bit exceeded.
So, an “Freefall” is an economics book about the recent global crisis and how it spread from US to the rest of the world. I think that besides me, the first one thousand copies were bought by the following characters:
- president Obama and his financial advisors;
- ex- double president Bush, Alan Greenspan and all the economic advisors who accompanied him and
- the bankers who invented lots of arguments to get trillions of dollars in cheap loans from the US government to make even more profits.
And boy, the book is like a time bomb. Stiglitz is not at all playing around the bushes (or the obamas or the banks). He says it from the introduction – the measures taken to steam off the crisis actually deepened it and were against the public interest. Which public interest is often noted as the taxpayer’s interest.
His arguments are quite simple:
- the crisis has been provoked by the banks looking for more lucrative ways to boost their profits, which got into trouble and used the excuses of public interest and being too big to fail to get hte bailout;
- the bailout money should not have been given to the banks, which created the problems and afterwards took advantage of those to make more…. money, of course;
- the measures taken by the two administrations were actually quite inefficient and bought the future in order to (apparently) save the present situation.
The book is quite heavy (literally, in the paperback edition). It explains in a smart and simple way how the banks and the lack of regulations created the mortgage mess we have now in the US and abroand. It also goes on on demonstrating how weak are the banks’ arguments for being saved and how wrong was to give them the bailout money. I liked very much the comparison between the banks and the US car makers – why should banks get zero money interest to choke the economy even further with their monopoly on lending money and why where the car manufacturers treated so harshly, together with the car industry unions? Some of the answers are in the book, some others are simple – because.
“Freefall” it is not only a diagnosis book. Stiglitz does a nice job and proposes some alternative measures for the crisis. And these measures could be very useful for the nowadays Greece, Portugal or Spainfinancial problems. Only if the EU decision makers would consider these measures, definitely. Anyway, “Freefall” is very well documented and written. It shows not only that the crisis was avoidable, but also how not-so-different from other crisis it is. And, above all, “Freefall” demonstrates why pure economic measures will always have to be linked to the politics and to the lobby factors behind. Why? Read the book and you will get it.
All in all, “Freefall” is not just another book about the recent financial crisis. In a sense, it is THE BOOK, since it explains most of the causes, the developments and potential future measures to improve the economic standing of the global economy. And as such, it deserves a place on your shelves, especially if you want to understand the new economic rules of the investing game.