The Financial Crisis Reconsidered

The Mercantilist Origin of Secular Stagnation and Boom-Bust Cycles

  • Authors
  • Daniel Aronoff

Table of contents

  1. Front Matter
    Pages i-xvii
  2. The Current Account Deficit and the US Housing Boom: Establishing the Connections

  3. The Capital Flow Bonanza, the Credit Explosion, and the US Housing Boom: Channels of Transmission

    1. Front Matter
      Pages 67-67
    2. Daniel Aronoff
      Pages 81-98
    3. Daniel Aronoff
      Pages 99-126
    4. Daniel Aronoff
      Pages 127-130
  4. Accumulation and Secular Stagnation: Identifying the Underlying Malady

    1. Front Matter
      Pages 131-131
  5. The Financial Crisis, I: The Meltdown and the Successful Initial Policy Response

    1. Front Matter
      Pages 165-165
    2. Daniel Aronoff
      Pages 167-180
    3. Daniel Aronoff
      Pages 181-199
  6. The Financial Crisis, II: The Limits of Conventional Policy in a Balance Sheet Recession

    1. Front Matter
      Pages 201-201
  7. Policy Options: How to Exit the Balance Sheet Recession and End Secular Stagnation

    1. Front Matter
      Pages 219-220
    2. Daniel Aronoff
      Pages 221-238
  8. Back Matter
    Pages 239-291

About this book


In The Financial Crisis Reconsidered, Aronoff challenges the conventional view that reckless credit produced the US housing boom and the financial crisis, explaining how the large current account deficit, and its mercantilist origin, was a more fundamental cause. He also demonstrates that the decision to provide relief for bank creditors rather than underwater homeowners was responsible for the prolonged recession that followed the crisis.

Aronoff proposes a novel theory to account for the ultimate origins of secular stagnation and economic volatility. He shows how accumulation, which occurs when a person or country earns more than it ever plans to spend, generates both an excess of saving and a deficiency in demand. While savings provide the funds to promote booms, under-consumption ensures that these booms will turn bust and that the economy will fall short of its potential growth rate. Aronoff argues that mercantilists and top income earners engage in accumulation, and that the influence of both types has grown in recent decades. Combining economic theory and historical narrative, this book offers a new perspective of the housing boom and the financial crisis, concluding with innovative policy proposals to reduce accumulation without compromising the benefits of a market economy.


housing boom debt deflation accumulation volatility current account deficit capital flow bonanza mercantilism

Bibliographic information

Industry Sectors
Finance, Business & Banking