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Misunderstanding Financial Crises: Why We Don't See Them Coming

2017-12-23 来源:读书人网 
Prior to the financial crisis of 2007-2008, economists thought that no such crisis could or would ev
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Misunderstanding Financial Crises: Why We Don't See Them Coming

Prior to the financial crisis of 2007-2008, economists thought that no such crisis could or would ever happen again in the United States, that financial events of such magnitude were a thing of the distant past. In fact, observers of that distant past―the period from the half century prior to the Civil War up to the passage of deposit insurance during the Great Depression, which was marked by repeated financial crises―note that while legislation immediately after crises reacted to their effects, economists and policymakers continually failed to grasp the true lessons to be learned.

Gary Gorton, considered by many to be the authority on the financial crisis of our time, holds that economists fundamentally misunderstand financial crises―what they are, why they occur, and why there were none in the U.S. between 1934 and 2007. In Misunderstanding Financial Crises, he illustrates that financial crises are inherent to the production of bank debt, which is used to conduct transactions, and that unless the government designs intelligent regulation, crises will continue. Economists, he writes, looked from a certain point of view and missed everything that was important: the evolution of capital markets and the banking system, the existence of new financial instruments, and the size of certain money markets like the sale and repurchase market. Delving into how such a massive intellectual failure could have happened, Gorton offers a back-to-basics elucidation of financial crises, and shows how they are not rare, idiosyncratic, unfortunate events caused by a coincidence of unconnected factors. By looking back to the "Quiet Period " from 1934 to 2007 when there were no systemic crises, and to the "Panic of 2007-2008, " he brings together such issues as bank debt and liquidity, credit booms and manias, and moral hazard and too-big-too-fail, to illustrate the costs of bank failure and the true causes of financial crises. He argues that the successful regulation that prevented crises did not adequately keep pace with innovation in the financial sector, due in large part to economists' misunderstandings. He then looks forward to offer both a better way for economists to conceive of markets, as well as a description of the regulation necessary to address the historical threat of financial crises.

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Gorton makes four very important points:

(1) Financial crises always arise when the public (individuals or businesses) lose faith in bank debt. According to Gorton, creating debt is the main business of banls. It is this debt that enables our economy to function. Unfortunately, in times of rapid expansion, banks create debt too quickly and so become fragile.

(2) Financial crises are always characterized by bank runs. These can be very visible, e.g. depositors lining up to get their money back. Or they can be invisible, e.g. lenders in the shadow banking system, who typically lend for a day or so at a time, refusing to roll over the loans to suspect banks. It follows that the real problem is not banks that are under-capitalized, but banks that are illiquid, i.e. they don't have enough cash on hand to meet demands. (They could have lots of illiquid assets, but so what?)

(3) The banking sector is so essential to the economy that governments will not let it go under. In this sense, banks have been "too big to fail" for at least two centuries. The tool used by the government evolves over time -- suspensions of withdrawals and "bank holidays" in the nineteenth and early twentieth centuries, the Fed as lender of last resort and deposit insurance in the twentieth century, bailouts via purchase of toxic assets in the twenty-first. Each time the popular reaction is fury: Populists wanted to hang the bankers a hundred and fifty years ago, a hundred years ago, etc.

(4) Both fortunately and unfortunately, financial innovations allow banks to create new forms of bank debt to satisfy the growing demand for such debt. Asset-backed securities and CDOs are just the latest in a long line, e.g. checking accounts, credit cards, and so on. Government is usually one or two steps behind. Indeed, with the disappearance of the physical queue of depositors clamoring to be paid, the government now has difficulty recognizing when a bank run occurs, and tends to intervene too late.

Gorton's solution is more regulation. That may be controversial, but Gorton's case is very well argued. He examines in detail financial crises over the past two hundred years (although he limits himself almost exclusively to the U.S.). The lessons he draws lead him to the above conclusions, plus a number of other insights.

Unfortunately, as with his previous book, Slapped by the Invisible Hand, this book is very badly written and could use a strong editor or even a rewrite. It is repetitious in many places, the author jumps around a bit, and may sentences are just plain awkward. When he quotes at length a nineteenth-century author, that comes as a relief. For this reason, I'm giving it four stars instead of the five that the content richly deserves.

This book is a masterpiece in placing the Global Financial Crisis in the context of previous crises and explaining how the crisis came about and, most importantly, why economists and policy analysts failed to predict it. Very compelling. On the downside, the build up to the final most interesting chapters takes a lot of perseverance to work through the detailed explanations of previous banking crises, with quite a lot of apparent repetition. Extremely well worth reading to fully understand why almost everyone failed to predict or even understand that the crisis could happen in the modern U.S. economy

This could have been a terrific book. What it needs is the firm hand of a good editor. Unfortunately, the first half of it reads like a collection of lecture notes loosely stitched together. Sadly, the main points are repeated over and over, and the flow of the text is interrupted with extremely lengthy quotes that often add rather little to the point being made. Many should have been footnotes, rather than part of the text.

I initially found the book difficult to read, not because of the content, but because of the poor writing style and organization. Fortunately, as the author nears the end of the book both style and organization improve markedly

That aside, what the author has to say is very important, highly relevant to understanding the financial crisis, and highly pertinent to rethinking the central questions that economics should be tackling. Sadly, too many academic economics are more concerning with impressing their academic colleagues with their mathematical prowess, displayed in papers and books that address theoretical questions with little practical relevance, but that are highly publishable, especially when reviewed by disciplinary colleagues with the same proclivities.

So I give the book three stars for style, and 5 for content. Average: four stars.

I'm usually not so critical, but the author missed a real opportunity for excellence. Here's my advice: read the first half rapidly, so as not to get bogged down, and be sure to get to the end. It is worth it.

This is a great and challenging book. The observations about bank-like asset-liability mixtures are particularly important. So is his historical review of recessions and financial crises and how they fit together.
As someone who also writes in the field, I do not agree with all of Prof. Gorton's conclusions. But Prof. Gorton writes so well and so interestingly that I recommend this book to anyone interested in the subject.

This is a great book written by one of a select group of people who understand the shadow banking system, if you know what that is, it's a great wonkish read. Might be a bit of an uphill struggle if you're not intereted in the inner workings of the global banking/finance system. But the author really does know what he's talking about.

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(作者:Gary B. Gorton 编辑:kind887)