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The political economy of the subprime crisis: the economics, politics and ethics of response

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Brassett, James, Rethel, Lena and Watson, Matthew, Ph.D.. (2010) The political economy of the subprime crisis: the economics, politics and ethics of response. New Political Economy, Vol.15 (No.1). pp. 1-7. ISSN 1356-3467

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Official URL: http://dx.doi.org/10.1080/13563460903553533

Abstract

Media and policy discourses on the subprime crisis and the ensuing credit crunch have been dominated by historical analogies, whereby a sense of how bad things have been since the autumn of 2007 arises from comparing the situation directly to other notable moments of financial meltdown. Typical of this approach is the measured insistence of the Chair of the US Federal Reserve, Ben Bernanke, that the spiral of illiquidity which engulfed the banking sector in September 2008 provided the most serious threat of systematic bank collapses since the Great Depression. Such constructions are clearly not without justification. Commercial banks have been nationalised at a rate unprecedented in recent memory; the once seemingly omnipresent giant US investment banks have failed to survive in their extant form; the UK has witnessed its first genuine run-on-the-bank dynamics since the middle of the nineteenth century; the interest rate spread between inter-bank lending and government bonds has reached record highs almost worldwide; and the drying up of mortgage lending has led to record annual falls in house prices in many countries. However, as an explanatory device, inference by historical analogy alone places unnecessary and unhelpful restrictions on attempts to understand how events surrounding the sub-prime crisis and its associated credit crunch have unfolded.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions J Political Science > JZ International relations P Language and Literature > P Philology. Linguistics
Divisions:	Faculty of Social Sciences > Politics and International Studies
Library of Congress Subject Headings (LCSH):	Global Financial Crisis, 2008-2009, International economic relations, Banks and banking, International, Mass media -- Political aspects, Mass media and business, Social responsibility of business
Journal or Publication Title:	New Political Economy
Publisher:	Routledge
ISSN:	1356-3467
Date:	March 2010
Volume:	Vol.15
Number:	No.1
Page Range:	pp. 1-7
Identification Number:	10.1080/13563460903553533
Status:	Peer Reviewed
Access rights to Published version:	Restricted or Subscription Access
Description:	Special issue of New Political Economy, edited by the authors
Funder:	Economic and Social Research Council (Great Britain) (ESRC), EU Network of Excellence on Global Governance, Regionalisation and Regulation (GARNET), Political Studies Association of the United Kingdom
Grant number:	RES-000-22-2198 (ESRC)
References:	Brassett, James, Rethel, Lena, and Watson, Matthew (2009) „Introduction to the Political Economy of the Sub-prime Crisis in Britain: Constructing and Contesting Competence‟, British Journal of Politics and International Studies, 11(3): 377-381. Cohan, William (2009) House of Cards: How Wall Street’s Gamblers Broke Capitalism, London: Allen Lane. Darling, Alistair (2009) „Kamikaze Fatcats: Darling Targets Bankers‟, News of the World, July 5th 2009. Dodd, Randall (2007) „Subprime: Tentacles of a Crisis‟, Finance and Development: A Quarterly Magazine of the IMF. 44(4), http://www.imf.org/external/pubs. Krugman, Paul (2008 [1999]) The Return of Depression Economics and the Crisis of 2008, London: Allen Lane. Mason, Paul (2009) Meltdown: The End of the Age of Greed, London: Verso. McDonald, Lawrence and Robinson, Patrick (2009) A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, New York: Crown Business. Minsky, Hyman (2008 [1986]) Stabilizing an Unstable Economy, New York: McGraw-Hill. Muolo, Paul and Padilla, Mathew (2008) Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis, Hoboken, NJ: John Wiley and Sons. Shiller, Robert (2008) The Subprime Solution: How Today’s Global Financial Crisis Happened and What to Do about It, Princeton, NJ: Princeton University Press. Soros, George (2008) The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, New York: Public Affairs.
URI:	http://wrap.warwick.ac.uk/id/eprint/3014