Bayoumi argues that the U.S. financial crisis of 2007–8 and the eurozone crisis of 2010–12 share a common origin: large, underregulated European banks making ill-advised loans for housing in the United States and to the peripheral countries of Europe. Such behavior was encouraged by an intellectual climate that favored financial deregulation and assumed that private-sector actors could judge risk better than regulators could. Bayoumi’s very useful history features villains but also heroes: the recessions produced by the crises could have been a lot worse if, for example, governments had not opted for fiscal and monetary stimulus. But Bayoumi emphasizes the role of intrinsic, structural flaws in the increasingly fragile international financial system, which he compares to the dysfunctional international political system that produced World War I, a conflict that few foresaw and no one wanted. He reminds readers that active participants in the financial system are typically playing with other people’s money. He worries about a relapse into crisis and ends his book with an epigram: “Beware of bankers proffering improvements.”
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