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on May 10, 2009
Written by Johan van Overtveldt, whose main previous work is The Chicago School. His view of the Chicago School is extremely favorable--essentially apologetic--so it should come as no surprise that his account of the crisis seeks as much as possible to present the Economic Crisis of 2008 in a way that defends the Chicago School's world view.

This is not necessarily a bad thing, and if he'd done a compelling job this review would have given *Bernanke's Test* five stars. However, he makes several errors.

First, his characterization of Keynesianism (p.30) has little to do with actual Keynesianism. It's a case of very crude poisoning of the well. Rather than respect the reader's judgment, Overtveldt simply heaps scorn on it. In view of the fact that there's very little record of successful applications of Chicago School macroeconomic management,(1) I think this is unjustified.

Second, his descriptions of some fairly important topics are poor and/or wrong. For example, his definition of "structured investment vehicles" (SIV) is totally useless.(2) His description of Fannie Mae and Freddie Mac is not blazingly wrong, but it is unhelpful and confusing. In light of the importance of these topics to the subject matter, that is a rather serious flaw.

Third, the writing is poorly organized. Readers interested in the Crisis will no doubt tend to ignore the stylistic flaws, but basically these include totally erratic paragraph structure. Sentences often have a very weak relationship to their neighbors, so that the flow of explanation is choppy.

Having said that, the book is still quite helpful. The use of tables and charts is generally helpful and does convey a good sense of the structural issues that lead to the Crisis. Overtveldt's account is very clearheaded and logical, and this is a big plus.

The essence of his explanation is that the Crisis' origins lie in global imbalances in savings and consumption, and he includes a fairly good explanation of the role of the 1st Q-2008 energy price spike.

Bottom line: a fast, easy to understand account of the current economic mess that seems generally sound; but needs to be supplemented with better background material.
1. The example everyone gives is Chile, 1976-1990 (with the first three years of Pinochet's regime something of a mixed bag). However, the economic performance of the Pinochet regime is actually not very good. See Tyler Cowen's short essay online, "How good was Pinochet for the Chilean economy?" (Marginal Revolution, 20 Dec 2006) for a balanced critique.

2. For a good online explanation of SIV's, see Peter Levine's "Abstract finance: Structured Investment Vehicles and other Tricks" (Rethinking Markets, 8 Jan 2009)
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on June 1, 2009
I didn't detect much in the way of overt bias in this book. The level of writing is perfect for a general audience. I found the coverage of the most recent financial crisis a bit facile, but it may be too early to write a history of the recent crisis since it is still ongoing. There is no sense of moral outrage at the vast and stunning crimes committed by the recent bailouts, and the writing is of insufficient depth or insight to expose and explain these crimes. Nevertheless, I thought that the coverage of the Greenspan era was very well done. Recommended!
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on July 26, 2009
A well balanced analysis of the greatest economic crisis since the Great Depression. It is scary, indeed, how close we were to an economic collapse. Overreaction is not the answer. Tight regulation would stifle innovation and growth. The author basically concludes that experts are still looking for a better way to achieve robust economic growth and maintain stability. And in his final sentence Dr. Overtveldt expresses his opinion that another Great Depression is still a possibility (even with Great Depression expert, Ben Bernanke, in place as chairman of the Fed).
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on May 7, 2015
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