The subprime solution : how today's global financial crisis happened, and what to do about it

An essential account of the historic subprime mortgage crisis, from the Nobel Prizewinning economist and bestselling author of Irrational Exuberance The subprime mortgage crisis has already wreaked havoc on the lives of millions of people and now it threatens to derail the U.S. economy and economies around the world. In this trenchant book, best-selling economist Robert Shiller reveals the origins of this crisis and puts forward bold measures to solve it. He calls for an aggressive responsea restructuring of the institutional foundations of the financial system that will not only allow people once again to buy and sell homes with confidence, but will create the conditions for greater prosperity in America and throughout the deeply interconnected world economy. Shiller blames the subprime crisis on the irrational exuberance that drove the economy's two most recent bubblesin stocks in the 1990s and in housing between 2000 and 2007. He shows how these bubbles led to the dangerous overextension of credit now resulting in foreclosures, bankruptcies, and write-offs, as well as a global credit crunch. To restore confidence in the markets, Shiller argues, bailouts are needed in the short run. But he insists that these bailouts must be targeted at low-income victims of subprime deals. In the longer term, the subprime solution will require leaders to revamp the financial framework by deploying an ambitious package of initiatives to inhibit the formation of bubbles and limit risks, including better financial information; simplified legal contracts and regulations; expanded markets for managing risks; home equity insurance policies; income-linked home loans; and new measures to protect consumers against hidden inflationary effects. This powerful book is essential reading for anyone who wants to understand how we got into the subprime messand how we can get out.

robert Shiller Is Two For Two In Predicting And Identifying Bubbles That Will Burst. This Book Is A Must Read For Anyone Predicting Future Bubbles Or Charting The Course Of Recovery From Our Current Difficulties.--lawrence H. Summers, Harvard University

the Subprime Crisis Has Visited Ruin On Thousands Of Americans, And It Threatens The Health Of The Global Economy. In This Timely And Fascinating Book, Robert Shiller, An Expert On Irrational Behavior In Financial Markets, Conducts A Postmortem. How Could So Many Smart People Have Been So Wrong? Shiller Concludes That Unchecked Financial Innovation Works Poorly In Asset Markets, And He Describes The Institutions Needed To Prevent Future Bubbles.--gregory Clark, Author Of a Farewell To Alms

reading This Exciting Book Is Like Watching A Skilled Surgeon At Work. The Diagnosis Of The Subprime Mortgage Mess Is Biting In Its Intensity--the Best I Have Seen--and Encompasses The Human Tragedy As Well As The Economic And Financial Crisis. The Recommended Therapy Develops Logically From Shiller's Analysis And Is Unique In Concept As Well As Powerful In Application. The Crystal-clear Writing Style Makes His Manifesto A Pleasure To Read.--peter L. Bernstein, Author Of capital Ideas: The Improbable Origins Of Modern Wall Street And capital Ideas Evolving

robert Shiller Is A Visionary.--nassim Nicholas Taleb, Author Of the Black Swan: The Impact Of The Highly Improbable

rigorous, Innovative, And Accessible, the Subprime Solution Is A Wonderful Book That Will Appeal To A Wide Audience. Robert Shiller Is Uniquely Qualified To Analyze The Recent Unprecedented Problems In The Mortgage And Housing Markets, And The Way They Have Spilled Over Into The Wider Credit Markets. He Has Again Proven His Ability To Communicate Complex Ideas And Evidence About Financial Markets.--diane Coyle, Author Of the Soulful Science

the Register - Tim Worstall

robert Shiller's Got An Argument That Will Make Some Peoples' Heads Explode In His New Book The Subprime Solution--we Need More Speculation In The Housing Market. . . . I Said Above That This Solution Will Make Some Peoples' Heads Explode, That The Solution To An Excess Of Speculation Is To Create A Market In Yet More Speculation. Yet In This Case Ti Is Indeed True, This Is A Valid Solution.

Mend It, Don’t End It......Page 15 Lessons from the Last Big Housing Crisis......Page 17 Band-Aids for a Burst Bubble: Today’s Response......Page 21 Framing Institutional Reform for the Future......Page 23 From Subprime Blues to Financial Democracy......Page 25 A Road Map of This Book......Page 28 Revealing History......Page 30 Diversity of Price Paths......Page 32 A Contagion of Ideas......Page 36 Other “Causes” of the Bubble......Page 41 Disarray and Financial Freeze-Up......Page 45 Changes in the Thinking That Creates Bubbles......Page 46 Understanding Public Thinking during the Recent Bubble......Page 52 The Forecastability of Housing Prices......Page 53 Construction of New Homes—Outside the Glamour Cities......Page 58 Urban Patriotism and Parochialism......Page 59 Construction Costs: Myth and Reality......Page 60 Massive Urban Planning......Page 64 Short-Run and Long-Run Responses......Page 67 Why Some Bailouts Are Necessary Now......Page 74 A New Home Owners’ Loan Corporation......Page 84 Getting the Short-Run Solutions Right......Page 86 It’s the Technology......Page 91 A New Information Infrastructure......Page 94 Comprehensive Financial Advice......Page 96 A New Financial Watchdog......Page 100 Default-Option Financial Planning......Page 101 Improved Financial Disclosure......Page 104 Improved Financial Databases......Page 106 A New System of Economic Units of Measurement......Page 108 New Markets for Real Estate......Page 114 Other New Markets......Page 118 New Retail Risk-Management Institutions......Page 119 Continuous-Workout Mortgages......Page 120 Home Equity Insurance......Page 123 Livelihood Insurance......Page 125 Risk Management versus Risk Avoidance......Page 127 What If? The Combined Effect of the Elements of a Long-Term Solution......Page 128 The subprime mortgage crisis has already wreaked havoc on the lives of millions of people and now it threatens to derail the U.S. economy and economies around the world. In this trenchant book, best-selling economist Robert Shiller reveals the origins of this crisis and puts forward bold measures to solve it. He calls for an aggressive response - a restructuring of the institutional foundations of the financial system that will not only allow people once again to buy and sell homes with confidence, but will create the conditions for greater prosperity in America and throughout the deeply interconnected world economy. Shiller blames the subprime crisis on the irrational exuberance that drove the economy's two most recent bubbles - in stocks in the 1990s and in housing between 2000 and 2007. He shows how these bubbles led to the dangerous overextension of credit now resulting in foreclosures, bankruptcies, and write-offs, as well as a global credit crunch. To restore confidence in the markets, Shiller argues, bailouts are needed in the short run. But he insists that these bailouts must be targeted at low-income victims of subprime deals. In the longer term, the subprime solution will require leaders to revamp the financial framework by deploying an ambitious package of initiatives to inhibit the formation of bubbles and limit risks, including better financial information; simplified legal contracts and regulations; expanded markets for managing risks; home equity insurance policies; income-linked home loans; and new measures to protect consumers against hidden inflationary effects. This powerful book is essential reading for anyone who wants to understand how we got into the subprime mess - and how we can get out The subprime mortgage crisis of 2007-2008 has already wreaked havoc on the lives of millions and threatens to derail the U.S. economy and economies around the world. Here, economist Robert Shiller reveals the origins of this crisis and puts forward bold measures to solve it. He calls for an aggressive response--a restructuring of the institutional foundations of the financial system that will not only allow people once again to buy and sell homes with confidence, but will create the conditions for greater prosperity in America and throughout the deeply interconnected world economy.--From publisher description Understanding the problem, offering a solution The housing market in historical perspective Bubble trouble The real estate myth The short-term solution: a messy bailout The long-term solution: democratizing finance Epilogue.