The U.S. Economic Crisis: Root Causes and the Road to Recovery
Many attribute the beginning of the financial crisis to the collapse of the housing market. While the housing bust indeed plays an important role, particularly in the health and stability of the banking sector, the real problem is deeper. The fluctuations observed across real estate markets over the last decade or so simply reflect sizable macroeconomic imbalances. It is the nature of these imbalances that we must fully appreciate to better understand the crisis and to potentially forecast plausible scenarios going forward.
The authors explain the role of macroeconomic imbalances—namely excessive consumption by government and households—in the current economic crisis and discuss the tough policy choices necessary to restore the nation to long-term prosperity.
