Freefall by Joseph Stiglitz

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Freefall: Free markets and the sinking of the global economy by Joseph Stiglitz (2010) One page Summary Joseph Stiglitz is an American economist and a professor at Columbia University. Dr. Stiglitz is currently the Chair of Columbia University’s Committee on Global Thought. He received his PhD. from the Massachusetts Institute of Technology in 1967. Dr. Stiglitz served as the World Bank’s Senior Vice President for Development Economics and Chief Economist from 1997 to 1999. He was the Chairman of President Clinton’s Council of Economic Advisors before his tenure at World Bank. In 2001, he was awarded the Nobel Prize in Economics for his analysis of markets with asymmetric information and pioneered pivotal concepts such as adverse selection and moral hazard. He also founded a leading economics journal namely The Journal of Economic Perspectives. In 2011, Dr. Stiglitz was named as one of the 100 most influential people in the world in Time. Freefall is a book concentrated at the financial crisis of 2007-2009. It is also a book about a battle of ideas, essentially the ideas that led to failed policies that precipitated the crisis. Nobel laureate, Joseph Stiglitz uncovers the fundamental causes of the crisis and the flawed policies taken by the financial institutions as well as the Federal Reserve in a historical, political and comparative context. The financial system may have exacerbated the collapse but the crisis instead as he argued, originated in an overblown housing market, which pushed the creation of America’s addiction to consumption when it should be saving. He argues about the market imperfections and misaligned incentives that distorted the decisions made by everyone from mortgage originators to credit-rating agencies. He mentions about regulators making the mistaken judgment that markets worked well and no regulations were needed. Under this misjudgment, banks were able to transform risky subprime mortgages into AAA-rated products and encouraged the...
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