The Meltdown Years: The Unfolding of the Global Economic Crisis

Wolfgang Münchau is considered one of the world's foremost experts on the Eurozone. He writes the European economic column of the Financial Times. He wrote in the Prologue to this 2010 book, "[The book] takes the reader on a journey starting in the early 1970s and ends in 2009, in the hope of presenting a broader picture of our crisis... [it] aims to furnish the reader with sufficient background knowledge to understand what happened, and to follow the present debate about the economic recovery, how to rescue the banking sector, and what consequences to draw for the future of financial capitalism." (Pg. 2-3)

He notes, "The buyers of these loans are the Special Purpose Vehicles (SPVs) mentioned earlier... The important thing is that the SPV does not appear on the bank's balance sheet. An SPV is therefore a nonbank, but part of the shadow banking sector. An SPV performs the function of a bank, and yet it is not regulated as a bank." (Pg. 67)

He observes, "Most economists, central bankers, and finance professionals looked the other way. And as for the general public, they had no idea that the credit market even existed. They certainly had no idea that it would soon blow up and so greatly affect their lives." (Pg. 94) He adds, "After the collapse of the credit markets in 2007, the blame game began... The rating system was completely discredited... the question arises as to whether a system that consists of the ratings and valuations of a small group of private companies is optimal." (Pg. 113-114)

He states, "When the big banks and insurance companies got bailed out by their governments... the top executives nevertheless insisted on their bonus payments... Bankers were so incompetent that they had to be bailed out by the government, and then they rewarded themselves for their failure. It is no surprise that this outrageous behavior has greatly contributed to what I call regulatory outrage." (Pg. 170)

He concludes, "the really good news is that the best talent of the next generation will no longer be devoted to moving wealth from one corner of the globe to another. There are more important things to do in the twenty-first century. Nobler tasks will emerge." (Pg. 222-223)

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