House of Debt – How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening...

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Atif Mian Amir Sufi

House of Debt – How They

and You Caused the Great Recession, and How We Can Prevent It from Happening Again

Atif Mian, Amir Sufi, Amir Sufi

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English

Chicago University Press
20 May 2015

Economics & Business; Financial crises & disasters

The Great American Recession resulted in the loss of eight million jobs between 2007 and 2009. More than four million homes were lost to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recession-that the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Atif Mian and Amir Sufi reveal in House of Debt how the Great Recession and Great Depression, as well as the current economic malaise in Europe, were caused by a large run-up in household debt followed by a significantly large drop in household spending.

Though the banking crisis captured the public's attention, Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt. As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. How do we end such a cycle? With a direct attack on debt, say Mian and Sufi. More aggressive debt forgiveness after the crash helps, but as they illustrate, we can be rid of painful bubble-and-bust episodes only if the financial system moves away from its reliance on inflexible debt contracts. As an example, they propose new mortgage contracts that are built on the principle of risk-sharing, a concept that would have prevented the housing bubble from emerging in the first place.

Thoroughly grounded in compelling economic evidence, House of Debt offers convincing answers to some of the most important questions facing the modern economy today: Why do severe recessions happen? Could we have prevented the Great Recession and its consequences? And what actions are needed to prevent such crises going forward?

By: Atif Mian, Amir Sufi, Amir Sufi
Imprint: Chicago University Press
Country of Publication: United States
Dimensions: Height: 227mm, Width: 157mm, Spine: 15mm
Weight: 400g
ISBN: 9780226271651
ISBN 10: 022627165X
Pages: 227
Publication Date: 20 May 2015
Audience: General/trade , Adult education , ELT Advanced , Tertiary & Higher Education
Format: Paperback
Publisher's Status: Active

Atif Mian is the Theodore A. Wells '29 Professor of Economics at Princeton University and director of the Julis-Rabinowitz Center for Public Policy and Finance. Amir Sufi is the Chicago Board of Trade Professor of Finance at the University of Chicago Booth School of Business.

Reviews for House of Debt – How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again

Distills lessons about the crisis from their recent research into one easily digestible package. (Economist) The economists Mian and Sufi are our leading experts on the problems created by debt overhang. (Paul Krugman, New York Review of Books) A concise and powerful account of how the great recession happened and what should be done to avoid another one. (Wall Street Journal) The most important economics book of the year. (Lawrence Summers, Financial Times) Mian and Sufi deserve credit of another kind for detalling how ensnared the American Dream is in this tangled web of debt finance-and how exposed the vast majority of us are to the broader economic consequences. (Atlantic)