Too Big to Regulate: “Engineering the Financial Crisis” a review by Jonathan Finegold Catalán

Here is a great review of a book which I consider to be the most inciteful of all of the books I have read on this topic by my friend Jonathan Finegold Catalán.  The book takes a position which is contrary to the MSM and left wing blather of ‘under regulation’ and being too nice and complacent to the abuses of  greedy wall street banksters, and also avoids embracing the overly simplistic idea that  free markets, left alone, always produce optimal results. Instead the authors conclude that “hey, the global economy is a very complex beast and people make mistkes…even when their decisions flow from relatively rational proceses.

I would have liked to see this short (150 pages) book spend more time discussing the role of the non commercial banks (like Countrywide and AIG). People with a limited knowledge base on the subject of bank regulation may find it to be pretty dry reading and will most certainly fail to appreciate the issues raised in this book. Suffice it to say that these guys get to the heart of what caused the financial crisis better than anyone else. Why is it important for us to understand the real causes of this crisis:

“because once one recognizes that ” deregulated ” capitalist finance did not cause the crisis, but rather that regulatory ignorance and ideology, apparantly transmitted to the regulators by modern democracy‘s most trusted academic experts, may have caused it, one has to wonder whether modern democracy has a potentially fatal flaw: the mistakes that may flow from the cognitive limitations of modern democracy’s all-too -human decision makers”. (p.153)

That said …..Here is Jonathan’s review (Cross-posted over at the Mises blog.)

TOO BIG TO REGULATE

“The Ludwig von Mises Institute of Canada re-publishes my review of Jeffrey Friedman’s and Wladimir Kraus’ Engineering the Financial Crisis.  I call the book “undoubtedly one of the best books written yet on the causes of the Great Recession” — simply stated, there are few scholars who have done the amount of historical research Friedman and Kraus committed themselves to (that being said, much of the book’s thesis, admittedly, is based on a number of journal articles published in a special 2009 issue on the financial crisis in the Critical Review journal).

The authors may not consider themselves “Austrian,” or at least may not necessarily sympathize with the entire corpus of Austrian theory, but Engineering the Financial Crisis is extremely compatible with the broader Austrian theory of intertemporal discoordination (malinvestment).  The authors also borrow from and develop a particularly Austrian insight: radical uncertainty. Both Friedman and Kraus vehemently believe that, generally speaking, bankers had no idea that their assets would collapse, and thus discard the possibility that the financial crisis was caused by malintentioned financiers.

READ THE REST OF IT AND MANY OF HIS OTHER GREAT INSIGHTS HERE AT HIS BLOG

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8 comments
  1. RRStubbs said:

    critical thought – Your insight exhibits your intelligence, your writing however needs a review for spelling errors. I hate to see people with your level of intelligence discredit their work with speed spelling. Between the first and second edition of the book, Barack Obama and the Enemies Within I discovered and documented 6,000 plus errors. Even today I find an errors so I am probably overly sensitive to this issue.

    • LOL I completely agree. Often times I write then post and never proof read …add punctuation or edit. New Years resolution …start proof reading, editing and spell checking! Please be confidant that any misspelled words are nothing more than typos and I can easily and accurately write my blog in 5 different languages (French, German, Russian, Swiss German and English) without a problem. Here is to 2012! Thanks Ron Elizabeth

  2. shawn corrigan said:

    good one, i have spent 35 years in the business of building and finance. i did projects in the redline areas of portland. based on this review i would guess this book is correct. political control and government meddling are usually the reasons for failure. the freemarket is the best system. i have argued this point relentlessly. i hope this book can help people see this as the socialism /communistic style have a powerful hold . ron paul is the guy i hope can bring us back the free market.

  3. Very intreresting post. It was very useful. I was looking exaxtly for this. Thank you for your effort. I hope you will write more such useful posts.

  4. Very intreresting post. It was very relavant. I was looking exaxtly for this. Thank you for your effort. I hope you will write more such interesting posts.

  5. place said:

    Very intreresting post. It was very useful. I was looking exaxtly for this. Thank you for your effort. I hope you will write more such useful posts.

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