The Financial Crisis Reconsidered ― The Mercantilist Origin of Secular Stagnation and Boom-bust Cycles

In The Financial Crisis Reconsidered Daniel Aronoff challenges the conventional view that reckless credit produced the US housing boom and the financial crisis, explaining how the large current account deficit, and its mercantilist origin, was a more fundamental cause. He also demonstrates that the decision to provide relief for bank creditors, rather than underwater homeowners, was responsible for the prolonged recession that followed the crisis.

Aronoff proposes a novel theory to account for the ultimate origins of secular stagnation and economic volatility, of which the housing boom, the financial crisis and the recession that followed are manifestations. He shows how accumulation, which occurs when a person or country earns more than they ever plan to spend, generates both an excess of saving and a deficiency in demand. The saving promotes booms, while under-consumption promotes stagnation. Aronoff argues that mercantilists and top income earners engage in accumulation, and that the influence of both types has grown in recent decades.

This book addresses the pre-eminent economic issues of our time in clear and jargon-free prose. It should influence the policy debate and it will be of interest to a wide readership.

Daniel Aronoff is President of Landon Companies, USA. He has served as Vice Chairman of the Board of Trustees of Grand Valley State University, USA. Throughout several decades of participation in the professional world, Aronoff has been a frequent contributor to many media outlets including the Financial Times.