The Subprime Solution: How Today's Global Financial Crisis Happened, And What To Do About It

摘要

Ever since 2007, we started to hear about the crisis of Northern Rock Building Society in the UK, then the collapse of Lehman Brothers in the USA and so on. During the past year, every day when we turned on the television or read the newspaper, we would always hear terms such as "subprime crisis" or "credit crunch". They might be ranked as the most frequently used terms of the year. In considering the wide spread of this financial crisis, there is one simple question that every layman to expert would like to ask "What on earth has gone wrong?" We know that ever since the 1950s, financial economists have developed sophisticated financial models to quantify and manage investment risks. These models are covered in any financial textbooks, and taught in almost all finance and investment related programmes. So in theory, financial practitioners should have been well trained in these models and should have known how to make appropriate investment decisions. So why did this credit crunch occur and why was it on such a large scale? Bearing these questions in mind, this recent and timely publication by Professor Robert Shiller caught my attention. Within the 196 pages, Professor Shiller uses simple language to explain the fundamental problems of this subprime crisis, and provides some short-term as well as long-term solutions to it.