Open AccessAtif Mian and Amir Sufi. House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again. University of Chicago Press. USA. 2014. 192 pages.
Author(s) -
Asad Zaman Kemal
Publication year - 2013
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v52i3pp.247-260
Subject(s) - debt , economics , deflation , great depression , keynesian economics , financial crisis , equity (law) , happening , recession , depression (economics) , aggregate demand , monetary economics , macroeconomics , history , political science , monetary policy , law , performance art , art history
This is a review and a summary of some of the key argumentspresented by Mian and Sufi in their recent book “House of Debt.” Ithighlights the contribution of Mian and Sufi by showing how they havesolved the mystery of why there was a huge drop in aggregate demandduring the Great Depression of 1929 and also following the recent GlobalFinancial Crisis of 2007-08. The article shows how major economists likeKeynes, Friedman, Lucas and others tried and failed to provide anadequate explanation of this mystery. The key to the mystery is the hugeamount of levered debt present during both of these economic crises. Thesolution suggested by Mian and Sufi is to replace interest based debt byequity based contracts in financial markets. This solution resonatesstrongly with Islamic teachings on finance. These links are alsohighlighted in this article. JEL classification: B22, E12, E32 Keywords:Great Depression, Global Financial Crisis, Debt-Deflation, LeveredDebt