Misunderstanding Financial Crises, Gary B. Gorton
Misunderstanding Financial Crises, Gary B. Gorton
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Misunderstanding Financial Crises
Why We Don't See Them Coming

Author: Gary B. Gorton

Narrator: Michael Butler Murray

Unabridged: 8 hr 4 min

Format: Digital Audiobook Download

Publisher: Tantor Media

Published: 01/29/2019


Synopsis

Before 2007, economists thought that financial crises would never happen again in the United States, that such upheavals were a thing of the past. Gary B. Gorton, a prominent expert on financial crises, argues that economists fundamentally misunderstand what they are, why they occur, and why there were none in the U.S. from 1934 to 2007.

Misunderstanding Financial Crises offers a back-to-basics overview of financial crises, and shows that they are not rare, idiosyncratic events caused by a perfect storm of unconnected factors. Instead, Gorton shows how financial crises are, indeed, inherent to our financial system. Economists, Gorton 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. Comparing the so-called "Quiet Period" of 1934 to 2007, when there were no systemic crises, to the "Panic of 2007–2008," Gorton ties together key issues like bank debt and liquidity, credit booms and manias, moral hazard, and too-big-too-fail—all to illustrate the true causes of financial collapse. He argues that the successful regulation that prevented crises since 1934 did not adequately keep pace with innovation in the financial sector, due in part to the misunderstandings of economists, who assured regulators that all was well. Gorton also looks forward to offer both a better way for economists to think about markets and a description of the regulation necessary to address the future threat of financial disaster.

About Gary B. Gorton

Gary B. Gorton is the Frederick Frank Class of 1954 Professor of Finance at the Yale School of Management. He is the author of Slapped by the Invisible Hand: The Panic of 2007.


Reviews

Goodreads review by Frank on September 20, 2013

This is a interesting but ultimately frustrating book, one that betrays the author's unimpeachable confidence in his own theories but also his sloppy research and writing style. The book emerged out of earlier work Gorton had done including his famous speech at the Federal Reserve, "Slapped by the In......more

Goodreads review by Peter on February 13, 2015

The topic of financial crisis, causes and consequences, has received considerable attention over the years, almost entirely from economists with an historical perspective—until recently, the mathematically oriented economics profession has behaved as if no such things happen. Outstanding examples of......more

Goodreads review by Eugene on July 22, 2024

Is This An Overview? Financial crises are inherent in a market system. Financial crises occurred before and after a centralized currency, before and after the development of a central bank. Each crisis has different characteristics, but a common structural cause. Financial crises occur when people an......more

Goodreads review by todd on January 10, 2013

This is a fine perspective on a longstanding problem: “What causes financial panics and why aren’t economists better at predicting them?” The broadest conclusion about causes rests at the feet of leverage and excesses in the banking sector. This breaks little new ground relative to Kindleberger, but......more

Goodreads review by Frans on January 27, 2016

Gary Gorton's book on financial crisis gives in little more than 200 pages an excellent and digestible overview of financial crisis, primarily as they manifested themselves in the US from the 19th century until today. Similarly to Reinhart and Rogoff's story of sovereign crisis, Gorton shows that th......more