For the second time this decade, the U.S. economy is sinking into a recession due to the collapse of a financial bubble. The most recent calamity will lead to a downturn deeper and longer than the stock market crash of 2001.

Dean Baker’s Plunder and Blunder chronicles the growth and collapse of the stock and housing bubbles and explains how policy blunders and greed led to the catastrophic—but completely predictable—market meltdowns. An expert guide to recent economic history, Baker offers policy prescriptions to help prevent similar financial disasters.

Dean Baker is co-director of the Center for Economic and Policy Research in Washington DC. A frequent guest on National Public Radio, CNN, and CNBC news programs, Baker has written for the Washington Post, the Atlantic Monthly, and the Financial Times. He writes a column for the Guardian, the American Prospect, and Truthout.org. He is the author of several books, including The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and The United States since 1980. He received his Ph.D. in economics from the University of Michigan.
 
 

“Dean Baker warned us what was coming. Alas, the government and most economists ignored him. They denied that a housing bubble existed and would soon collapse with devastating consequences. Now we can read why Dean got it right when so many experts were blind. The story is intriguing—and deeply disturbing.”
—William Greider, national affairs correspondent, The Nation, and author of Come Home, America

“Dean Baker foresaw the housing crisis, first, persistently, and almost alone, while Bush fiddled, Congress snoozed, and the media looked resolutely the other way. In Plunder and Blunder, he delivers his trademark one-two punch: clarity and honesty, in the face of vast malfeasance.”
—James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

Bubble troubles
Plunder and Blunder: The Rise and Fall of the Bubble Economy
Dean Baker
Polipoint Press

By Seth Sandronsky
www.newsreview.com - 1.22.09

Dean Baker is obsessed with the U.S. stock- and housing-market bubbles. The economist and author has written a book to help laypersons get a better grasp on our post-bubble mess, the end of which is nowhere on the horizon.

Plunder and Blunder: The Rise and Fall of the Bubble Economy begins by introducing the “very human policy choices” made since the Reagan era. These policies paved the way for today’s wave of home foreclosures, job losses and taxpayer bailouts for bank failures. A post-World War II trend of rising wages which helped create a middle class ended, thanks to company owners and lawmakers attacking labor unions. The deregulating of finance spawned a debt trap for working Americans.

Next, Baker turns to the roots of the stock and dollar bubbles in the Clinton era. What responsibility do former Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin have in spurring both market bubbles? Baker examines the duo’s roles, revealing the causes and consequences of their policies for capital and labor.

Then Baker delves deeper into the boom in stock prices. Energy firms like Enron, politically connected as fundraisers to former President George W. Bush, profited from weak auditing practices, looting (as we well remember) ratepayers in California and elsewhere. Baker, who is not anti-capitalist, understands that the system needs more, not less, oversight to prevent such fraud. “Bubble euphoria” made this fact hard to see, infecting reporters who should have been watchdogs in the public interest.

The housing bubble emerged at the turn of the 21st century. Greenspan, as home prices began to rise in 2002, testified before Congress on the reasons for the real-estate boom. He offered factors of supply and demand, standard microeconomics. Baker spends a chapter investigating the validity of each of Greenspan’s claims.

Then Baker moves on to survey the excesses—from toxic loans to risky investments—that worsened the current economic and financial disaster. Mid-2006 marked the end for the housing bubble, with the newest homebuyers the most at risk, writes Baker. The “perverse policy incentives” that underpinned the speculative insanity were not the half of it. Recently, our politicians bailed out the financial institutions at fault, a bit like a fire department giving gas cans to arsonists.

Baker’s final two chapters cover ways to learn from the past 15 years of a bubble-driven economy. His expertise comes from his day job as co-director of the Center for Economic and Policy Research, a progressive think tank in Washington, D.C.

To this end, Baker argues for the Fed to regulate rather than promote bubbles. He also makes an argument against U.S. currency policy that supports a high value for the dollar. This choice prices American-made goods out of the global market, a force in the loss of 4 million factory jobs nationwide since 1998.

Some with power in the worlds of economics and politics speak of the need for those below them to be accountable. Baker agrees, but he also calls for those at the top to lead by example. Begin with the high-paid heads of major institutions whose policies have failed and caused widespread harm. They should deal with the consequences of their actions, as do cooks, custodians, nurses and teachers—in short, most of us.

For Immediate Release
December 2008
Gail Leondar-Wright, (781) 648-1658

“Dean Baker warned us what was coming…. The story is intriguing—and deeply disturbing.”
—William Greider, The Nation, and author, Come Home, America

“In Plunder and Blunder, he delivers his trademark one-two punch: clarity and honesty, in the face of vast malfeasance.”
—James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

Plunder and Blunder: The Rise and Fall of The Bubble Economy
By Dean Baker, Foreword by Thomas Frank

In his new book, Plunder and Blunder: The Rise and Fall of The Bubble Economy, Dean Baker chronicles the growth and collapse of the stock and housing bubbles and explains how policy changes since 1980 laid the groundwork for catastrophic–but completely predictable–market meltdowns. Baker argues not only that competent economists should have recognized the developing housing bubble, but also that policy makers and the media cheerfully neglected those economists who did predict danger. Baker doesn’t engage in 20-20 hindsight, but he does documents the fundamental policy changes since 1980 that destabilized the economy and eroded the broad prosperity of the post-war period. During an interview, Dean Baker will be prepared to discuss:
• The deepening recession
• Obama’s economic initiative in his first 100 days
• The causes of the current financial crisis
• The economic impact should the big three US automakers all crash
• The current status of the $700 billion bailout bill

Dean Baker is co-director of the Center for Economic and Policy Research in Washington DC. He is a frequent guest on National Public Radio, CNN, CNBC and other news programs.
His articles have appeared in the Washington Post, The Atlantic Monthly, the Financial Times, and the Guardian. He writes a column for the Guardian, the American Prospect, and Truthout.org. He is the author of several books, including The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and The United States since 1980. He received his Ph.D in economics from the University of Michigan.

Publication Date: Jan 20, 2009 Coincides with the Presidential Inauguration; Pub Date: Jan 20 2009, Price: $15.95 US/CAN, ISBN-13: 978-0981576992, Trim: 5.5″ x 8.5″, Format: original trade paper, Pages: 180