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by Robin Sharma
The Financial Crisis, the Response, and the Work Ahead
'After the Music Stopped' by Alan S. Blinder is a comprehensive account of the 2008 global financial crisis. Blinder explores the causes, consequences, and policy responses to this devastating event that continues to impact the world today.
Before the financial crisis first became evident in 2007, buying a house or investing in bonds seemed like a very profitable investment. (In case you’re wondering, bonds are financial instruments for which the issuing company pays you an annual fixed rate of interest).
But underneath this positive outlook both markets were in fact in serious trouble.
First of all, a price bubble developed in the housing market, meaning that the prices had risen to wholly unsustainable levels. Indeed, between 1997 and 2006, house prices had risen by an average of 85 percent.
Despite this rise, or perhaps because of it, people kept investing in houses, naively believing that the prices would just keep rising year after year.
This was shown by a survey of Los Angeles’ home buyers, many of whom believed that their house values would rise by 22 percent each year, so that if they were to buy a house for $500,000, it would be worth over $3.6 million in ten years. Clearly these expectations were delusional.
Meanwhile, the bond market had also developed a price bubble.
To bounce back from a slump in the economy in 2001, the US Federal Reserve cut the interest rates at which banks could borrow money from each other to just one percent. The idea was that banks themselves would begin paying lower interest on people’s bank accounts, thus encouraging people to spend rather than save money. At the same time, the cut was reflected in the interest rate that investors got from buying government bonds, so they looked for more profitable investments.
What they found were bonds known as Mortgage Backed Securities (MBS) – essentially pools of mortgages from which the investor buys a slice as a bond and then earns money from the interest payments homeowners make on their mortgages.
At the time the housing market was booming, so MBSs were highly profitable, and hence desirable. This fuelled a price bubble in the mortgage-bond market too.
After The Music Stopped explains and analyzes the causes of the last decade’s great financial crisis. It details the mechanics of the underlying problems as well as the sequence of events as panic began to set in. Finally, it also explains how the US government managed to halt the chaos and rescue the economy.
After the Music Stopped (2013) by Alan S. Blinder is an insightful exploration of the 2008 financial crisis and its aftermath, offering valuable lessons for today's world. Here's why this book is worth reading:
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Try Blinkist to get the key ideas from 7,000+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.
Start your free trialBlink 3 of 8 - The 5 AM Club
by Robin Sharma
What is the main message of After the Music Stopped?
The main message of After the Music Stopped is an examination of the causes and consequences of the 2008 financial crisis.
How long does it take to read After the Music Stopped?
The reading time for After the Music Stopped varies depending on the reader, but it typically takes several hours. The Blinkist summary can be read in just 15 minutes.
Is After the Music Stopped a good book? Is it worth reading?
Yes, After the Music Stopped is worth reading because it provides a comprehensive analysis of the financial crisis and its aftermath, offering valuable insights and lessons.
Who is the author of After the Music Stopped?
The author of After the Music Stopped is Alan S. Blinder.