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Bailouts or Bail-Ins?: Responding to Financial Crises in Emerging Economies
Roughly once a year, the managing director of the International Monetary Fund, the US treasury secretary and in some cases the finance ministers of other G-7 countries will get a call from the finance minister of a large emerging market economy. The emerging market finance minister will indicate that the country is rapidly running out of foreign reserves, that it has lost access to international capital markets and, perhaps, that is has lost the confidence of its own citizens. Without a rescue loan, it will be forced to devalue its currency and default either on its government debt or on loans to the country's banks that the government has guaranteed.
This book looks at these situations and the options available to alleviate the problem. It argues for a policy that recognizes that every crisis is different and that different cases need to be handled within a framework that provides consistency and predictability to borrowing countries as well as those who invest in their debt.
This book looks at these situations and the options available to alleviate the problem. It argues for a policy that recognizes that every crisis is different and that different cases need to be handled within a framework that provides consistency and predictability to borrowing countries as well as those who invest in their debt.
348 pages, Paperback
First published January 1, 2004
6 people are currently reading
207 people want to read
About the author
Nouriel Roubini
14 books167 followersNouriel Roubini is a Persian American professor of economics at New York University's Stern School of Business and chairman of Roubini Global Economics, an economic consultancy firm.
Roubini's critical economic views have earned him the nicknames "Dr. Doom" and "permabear" in the media. In 2008, Fortune magazine wrote, "In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage". The New York Times notes that he foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". In September 2006, he warned a skeptical IMF that "the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence, and, ultimately, a deep recession". Nobel laureate Paul Krugman adds that his once "seemingly outlandish" predictions have been matched "or even exceeded by reality."
As Roubini's descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. He has appeared before the US Congress, the Council on Foreign Relations, and the World Economic Forum at Davos.
Roubini's critical economic views have earned him the nicknames "Dr. Doom" and "permabear" in the media. In 2008, Fortune magazine wrote, "In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage". The New York Times notes that he foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". In September 2006, he warned a skeptical IMF that "the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence, and, ultimately, a deep recession". Nobel laureate Paul Krugman adds that his once "seemingly outlandish" predictions have been matched "or even exceeded by reality."
As Roubini's descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. He has appeared before the US Congress, the Council on Foreign Relations, and the World Economic Forum at Davos.
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Displaying 1 - 5 of 5 reviews
June 25, 2018
A really fantastic overview of the Emerging market crisis of the 1990s and early 2000s and the lessons learned. The book focuses on that time period, though it is a general book for the study of whether Bail outs or Bail ins are best.
Aside from just being a great comparative study, I would mention that the authors have done a fabulous job of creating comparative charts of the various crisis that make it very easy to understand why each nation has had a different experience and why there might be multiple solutions that are right depending on the nation involved, their existing infrastructure, their particular history, and what they might be expected to do given their existing resources.
I don't know that I would recommend this book for the absolute beginners as one might not appreciate the nuance with which the authors articulate the differences. That said, it might be a book that you read and come back to after you get a sense for what happened in a few of the different nations.
I particularly like the detail with which the authors discussed market forces, banking forces, and just plain general poor macro management. Each are actually separate mechanisms that must be considered when thinking about international liquidity and how to address a nation that may be having difficulty.
Aside from just being a great comparative study, I would mention that the authors have done a fabulous job of creating comparative charts of the various crisis that make it very easy to understand why each nation has had a different experience and why there might be multiple solutions that are right depending on the nation involved, their existing infrastructure, their particular history, and what they might be expected to do given their existing resources.
I don't know that I would recommend this book for the absolute beginners as one might not appreciate the nuance with which the authors articulate the differences. That said, it might be a book that you read and come back to after you get a sense for what happened in a few of the different nations.
I particularly like the detail with which the authors discussed market forces, banking forces, and just plain general poor macro management. Each are actually separate mechanisms that must be considered when thinking about international liquidity and how to address a nation that may be having difficulty.
March 26, 2023
Reading this almost 2 decades after it was written, it's almost prescient in terms of the challenges and changes the global sovereign debt architecture would undergo since the early 2000s. While the current structure is not exactly what was proposed/expected by Roubini and Setser, reading through the books gives both am excellent overview of the topics of discussion 20 years ago, but also a great foundation to interpret the same questions in today's context. As the world is going through what looks like another series of EM debt defaults, a critical piece of work to understand both what helps and what could happen regardless.
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February 10, 2009from Wikipedia:
As of January, 2009, he remains pessimistic about the US and global economy. He says "we have a subprime financial system, not a subprime mortgage market". And while he does not believe that the United States is at risk of another Great Depression, he expects it to be the worst recession since the 1940s. Looking at the global picture, he writes, "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe, Canada, Japan, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain."[8:]
His pessimism is focused on the short-run rather than the medium or long-run.[2:] In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst" In conclusion, he adds, "This will be a painful year. Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be." [8:]
At a conference in Dubai on January 20, 2009, he said, "I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers. If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis. . . The problems of Citi, Bank of America and others suggest the system is bankrupt. In Europe, it’s the same thing." [9:]
In short: another of the very few who a) really understands what's going on in the financial meltdown; and b) understands the enormity of the denial currently in place to a scary degree; and c) is willing to communicate urgency around these things.
As of January, 2009, he remains pessimistic about the US and global economy. He says "we have a subprime financial system, not a subprime mortgage market". And while he does not believe that the United States is at risk of another Great Depression, he expects it to be the worst recession since the 1940s. Looking at the global picture, he writes, "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe, Canada, Japan, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain."[8:]
His pessimism is focused on the short-run rather than the medium or long-run.[2:] In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst" In conclusion, he adds, "This will be a painful year. Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be." [8:]
At a conference in Dubai on January 20, 2009, he said, "I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers. If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis. . . The problems of Citi, Bank of America and others suggest the system is bankrupt. In Europe, it’s the same thing." [9:]
In short: another of the very few who a) really understands what's going on in the financial meltdown; and b) understands the enormity of the denial currently in place to a scary degree; and c) is willing to communicate urgency around these things.
February 8, 2012
I picked up this book after finished reading "Crisis Economics" by the same author. That one was a revelation, but this one? rather an utterly disappointment. It is not meant for general readers; I can't really recall if I've learnt anything from it. It felt like reading a very very long academic journal. not recommended.
Displaying 1 - 5 of 5 reviews