The Age of Austerity
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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.
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Chapter 2: The course of the crisis

Thomas J. Schoenbaum


The first step in getting back on the path to economic growth is to understand how the Global Economic Crisis unfolded since its inception in 2007. Examining the course of the crisis is not just an academic exercise; we must know exactly what happened in order to fix the problems. The economic collapse we have endured is quite different from the many business cycle economic recessions of the post-World War II era. Such recessions are slowdowns caused by over-exuberant economic expansions that stimulate market corrections. In the post-war era, monetary and fiscal policy tools have generally been enough to moderate such slowdowns and economic growth is relatively quick and easy to regain. By contrast, the Global Financial Crisis, as I will call it, was first and foremost a fiscal collapse, the like of which has not happened since the Great Depression of the 1930s. A fiscal collapse is the most serious of all economic difficulties because all business activity depends to some degree upon the essential functioning of fiscal institutions to generate and allocate capital. The fiscal collapse, which began in the United States, thus had a cascading adverse impact on all forms of economic activity, which had a global effect because of the interconnected nature of the world economy.

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