My Review Of 'The Shifts And The Shocks'

by: Joseph Oppenheim Investing

4 out of 5 stars..

This is an in depth economic look into the financial crash of 2008, how it happened and prognoses into how such a crisis can be avoided by several different improvement approaches to financial systems, here and around the world.

The author, Martin Wolf and the book, come with lots of superlatives from noted economists. I also agree it is a worthwhile read.

In general, he sees the crash as inevitable. Plus, he thinks although there were ways to minimize its aftereffects, it is too late to avoid a future catastrophe.

He is basically a Keynesian, and thinks the initial stimulus should have been larger, but it and the Fed did avoid an immediate depression, but without further fiscal help, the recovery was/is doomed for a full recovery.

Of the ways to structure a banking system to minimize risk is higher capital ratios, as much as 100%, with at least 10%, but because of animal spirits, risk is too much rewarded to have safer ratios.

Here are some of the points raised in the book:

1. The Fed's quantitative easing (QE) is generally hated by the GOP, but it is right out of the book of traditional GOP, Milton Friedman style, monetarist control of money.

2. The author credits Hyman Minsky for best understanding this kind of situation, in fact all capitalism/stability, destabilizes, and governments must always respond when inevitable crises happen.

3. Starting over 30 years ago, the trend in market-based economies led to more income inequality around the world, which brings about serious financial problems.

4. When the 2008 crash hit, US employment participation plunged about 3%, while Germany's rose about 6%. Note, that our economy is stronger. The reasonable conclusion, based on facts about profits, is major US corporations became more productive and Germany's less.

5. The Eurozone is handling the crisis poorly, with so many individual nations concerned more about themselves, than for what is best overall. It is exporting recessionary stuff.

6. The author relates to what happened in the late 90s - crisis in the emerging nations, especially in Asia. So far, they have handled this crisis better.

Overall, it is a book I recommend even for those who may not agree with all of the book, since the author covers so many bases.