Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis by John B. Taylor


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(Hardcover - New)

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  • Pub. Date: February 2009
  • 92pp
  • Sales Rank: 1,486,785
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    • Pub. Date: February 2009
    • Publisher:Hoover Institution Press
    • Format: Hardcover, 92pp
    • Sales Rank: 1,486,785


    Throughout history, financial crises have always been caused by excesses—frequently monetary excesses—which lead to a boom and an inevitable bust. In our current crisis it was a housing boom and bust that in turn led to financial turmoil in the United States and other countries. How did everything deteriorate so suddenly and dramatically? In Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis, Hoover fellow and Stanford economist John B. Taylor offers empirical research to explain what caused the current financial crisis, what prolonged it, and what worsened it dramatically more than a year after it began. The author tells how unusually easy monetary policy helped set the crisis in motion, as interest rates at the Federal Reserve and several other central banks deviated from historical regularities. He explains monetary interaction with the subprime mortgage problem, showing how the use of these mortgages, especially the adjustable-rate variety, led to excessive risk taking. In the United States this was encouraged by government programs designed to promote home ownership, a worthwhile goal but overdone in retrospect. Looking ahead, the author suggests a set of principles to follow to prevent misguided actions and interventions in the future.

    If Milton Friedman and I had written as persuasive an analysis as this, one year—rather than 30 years—after the Great Depression began, the United States might have had a typical recession rather than the greatest downturn in history.

    - Anna Schwartz, author, with Milton Friedman, of The Great Contraction, 1929-1933

    Big problems confront us, and responses of immense size are on the table. We desperately need a solid and fact-based analysis so that we get the prescription right. John Taylor provides just that. A must-read for everyone involved.

    - George Shultz, former secretary of Treasury, State, and Labor and Budget Director

    This short volume does a masterful job of tracking the stunning financial market and macroeconomic events of 2007 and 2008, and it provides an organizing framework that will enable the specialist and novice alike to examine these events in a coherent setting.

    - James Poterba, Mitsui Professor of Economics at MIT and President and CEO of the National Bureau of Economic Research

    John Taylor is one of the very few who points out the errors that the Federal Reserve made during this difficult period and also shows how they could avoid them. Members of Congress should read this book instead of looking for scapegoats in the wrong places.

    - Allan Meltzer, author of The History of the Federal Reserve

    …cogent, thorough and compelling…Taylor sums up his argument in his subtitle: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis. Take a moment to absorb that. Although we're told every day that the crisis arose from failures in the free markets—that it represents a crisis of capitalism itself—an eminent economist has now stepped forward to say, in effect, "Nonsense." The markets didn't fail, Taylor argues, the government did.

    - Peter Robinson, What Caused the Crisis?

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    John B. Taylor is the George P. Shultz Senior Fellow in Economics at the Hoover Institution and the Mary and Robert Raymond Professor of Economics at Stanford University. He was previously the director of the Stanford Institute for Economic Policy Research and was founding director of Stanford's Introductory Economics Center. He has a long and distinguished record of public service. Among other roles, he served as a member of the President’s Council of Economic Advisors from 1989 to 1991 and as Under Secretary of the Treasury for International Affairs from 2001 to 2005. He is currently a member of the California Governor's Council of Economic Advisors.

    Customer Reviews

    Explains why the 2008 recession has lingeredby Jazzlover

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    August 23, 2013: John Taylor should be the next Chairman of the Federal Reserve, as he is most experienced and accomplished working economist in the world today. Dr. Taylor won't be selected, because he is an actual economist in the mold of Friedman, Hayek, Mises and Sowell. In other words, Taylor operates in the real world, rather than in Barack Obama's ideologically constructed fantasy universe, where political gain trumps sound economic policies every time. In this brief, but effectively reasoned book Dr. Taylor dissects and reveals the failed policies that have prolonged what should have been a temporary, cyclical recession into the recovery that continues to produce no jobs, no real growth and more government regulation and bureaucracy.

    Short and to the pointby pontiac_98072

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    May 26, 2010: The book is short, not very expensive, and not filled with a bunch of obtuse models. Dr. Taylor describes why he thinks short-term rates jumped up in the fall of 2008. Instead of taking a more numerical route, he spends time describing what can be learned from comparing different interest rates. Those are things you don't run into very often in technical journal articles.

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