The Age of Austerity

The Age of Austerity

The Global Financial Crisis and the Return to Economic Growth

Thomas J. Schoenbaum

The book begins with a detailed breakdown of the financial crisis and the government response in the United States, with particular focus on the Dodd-Frank Wall Street Reform and Consumer Protection Act. The author then puts forth a basic three-part plan calling for (1) fundamental tax and entitlement reform; (2) massive economic stimulus in the form of public and private investment to modernize the country’s aging infrastructures; and (3) mortgage relief to revitalize the nation’s housing markets. The book concludes with specific policy proposals designed to achieve these goals and return the US economy to a state of full employment and robust economic growth.

Chapter 3: Causes

Thomas J. Schoenbaum

Subjects: economics and finance, economic psychology, financial economics and regulation, law - academic, regulation and governance, politics and public policy, public policy


ProPublica reporter Jesse Eisinger tells the story that one day, when the Financial Crisis Inquiry Commission, which was commissioned by President Obama to determine the cause of the financial crisis, was meeting, he checked with the staff to ask how things were going. “Good news,” he was told, jokingly, “we got the guy who caused it.” Would that this were the case! Like the Great Depression of the 1930s, the Global Financial Crisis has complex and multiple causes. No one cause can be held responsible, rather the crisis was the result of many interacting policies and events, some of which predated the crisis by many years. It is important to understand these causes, because what went wrong must be fixed so that what went wrong does not happen again. What went wrong happened by and large in the United States. In the post-World War II period we have seen many economic crises erupt because of external and international factors—the oil shocks of the 1970s, the Third World Debt Crisis of the 1980s, the Mexican Peso Crisis, the Asian Financial Crisis, and the Russian Financial Crisis of the 1990s. But the Global Financial Crisis, by far the most serious, was made in America. It is most extraordinary that the United States, a bulwark of economic stability in the post-war era, presided over such a global financial meltdown.

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