Fault Lines How Hidden Fractures Still Threaten The World Economy

Raghuram G Rajan



Raghuram G. Rajan was one of a handful of economists who foresaw the massive fi nancial crisis that hit the world in 2008. In Fault Lines, Rajan makes a case for looking beyond the shortsighted blame-game that targets only greedy bankers. There are serious fl aws in the global economy, he writes, and an even more debilitating crisis awaits us if those faults are not addressed right now.

Rajan demonstrates how the individual choices-made by bankers, government offi cials and ordinary homeowners-that collectively brought about the economic meltdown were rational responses to a defective global fi nancial order: specifi cally, a mismatch between the incentives and the dangers involved in taking on risks. He traces the deepening fault lines in a world overly dependent on the indebted American consumer to power economic growth and stave off global downturns.

In Fault Lines, Rajan outlines the hard choices that all nations must make to ensure greater stability and lasting prosperity. Importantly, he examines how the Indian development experience differs from that of other fast-growing economies. Despite India's recent successes, he argues that the country must act decisively to maintain its people-oriented growth. This unique development path, he contends, will be a compelling role model-a triumph of rapid growth in a fl ourishing democracy.

What will you learn from this book

  1. Income Inequality: Rajan examines how growing income inequality contributes to economic instability, creating fault lines between different socio-economic groups.

  2. Financial Sector Risks: The book delves into the risks within the financial sector, highlighting how complex financial instruments and practices can lead to systemic crises.

  3. Political Fragmentation: Rajan discusses how political fragmentation and polarization can exacerbate economic challenges, hindering effective policy responses.

  4. Globalization's Impact: He explores the impacts of globalization, showing how it can both benefit and disrupt economies, often exacerbating fault lines between different nations and regions.

  5. Inadequate Regulations: The book addresses the shortcomings in regulatory frameworks, arguing that weak or ineffective regulations can contribute to financial instability.

  6. Debt and Leverage: Rajan examines the dangers of excessive debt and leverage within economies, which can lead to vulnerabilities and crises, particularly during economic downturns.

  7. Housing Market Dynamics: The housing market's role in financial crises is discussed, emphasizing how housing bubbles and subsequent collapses can trigger wider economic turmoil.

  8. Policy Responses: Rajan offers insights into potential policy responses and reforms needed to address these fault lines and mitigate the risks they pose to the global economy.

  9. Social Fragmentation: He also highlights how social fragmentation, divisions, and lack of inclusivity can create economic fault lines, hindering overall economic stability.

  10. Long-Term Solutions: The book emphasizes the need for long-term structural changes and policy reforms to address these fault lines and build a more resilient and stable global economy.

Language English
ISBN-10 978-81-7223-973-2
ISBN-13 978-8172239732
No of pages 274
Font Size Medium
Book Publisher Collins
Published Date 26 Jul 2014

About Author

Author : Raghuram G Rajan

5 Books

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