Boom and Bust Forever
We will never return to the old boom and bust.
—Prime Minister Gordon Brown, March 2007, six months before the run on Northern Rock, Britain’s largest mortgage bank
FINANCIAL BOOMS AND BUSTS have baffled and fascinated economic thinkers since capitalism’s earliest days. It is therefore no surprise that the greatest financial crisis in living memory, which occurred in the months after the bankruptcy of Lehman, elicited many different explanations. These ranged from excessive savings in China to policy mistakes by the Federal Reserve Board, from corrupt political lobbying to the immutable facts of human psychology, crystallized by the unforgettable two-word phrases from Alan Greenspan that punctuated the boom ...