The first section of The Road from Ruin, a guide to U.S. financial reform measures, is an overview of financial panics and investment bubbles from ancient Roman times to the present, with analyses of why some interventions succeeded while others failed miserably.
The Road to Ruin concludes that government action must be effective, bold, and quick, in order to stop downward economic spirals (this week’s market numbers seem to reflect lower confidence in governments’ ability to deal with the financial crisis).
Taking on large deficits to restore liquidity and restrictions on credit has been governments’ habit for at least two thousand years. But doing it right is “easier said than done,” according to author Matthew Bishop:
“…after the 2008 crisis began, fearing the speed and depth of the recession, governments in many countries increased public expenditures as never before.
There was thus much debate about what the policy of stimulus would do to the credibility of various countries in the capital markets. Would investors be willing to finance ballooning government deficits?
…the longer governments wait to act decisively, the more uncertainty and pessimism builds up among consumers and investors that can delay a recovery.
Pingback: Glendale, California's Sunroom Desk Editor Reads The Road from Ruin in DC as Financial Reform Legislation Is Finalized