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Fault Lines by Raghuram G. Rajan

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CHAPTER EIGHT

Reforming Finance

WE HAVE MADE A FULL TOUR DE TABLE in searching for the underlying causes of this crisis. As I write, financial sectors around the world have been brought back from the brink through a combination of government guarantees, injections of capital, and central bank lending. Rock-bottom interest rates continue to bail out banks at the expense of savers: if banks can borrow at almost no interest and lend at a hefty spread, it is hard for them not to make money. Government spending across the world seems to have helped maintain activity, though it is still uncertain whether heavily indebted households, especially in the United States, will take up the task of spending when the government stimulus runs out. The most ...

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