How to Mishandle a Crisis (Review of Barry Eichengreen, Hall of Mirrors: The Great Depression, The Great Recession and the Uses—and Misuses—of History)

Abstract

The current crisis may not have shattered the ossified shell of economic theory, but it has unleashed a cascade of arguments within the policy-making elite. The Bank for International Settlements and the IMF are at odds. The Bundesbank is pitted against virtually every other major central bank in its dogged adherence to deflation. Larry Summers, Clinton's Treasury Secretary and once a cheerleader of market liberalization, has announced that what we have been living through since the 1980s is a steady slide into secular stagnation disguised by a series of credit-fuelled bubbles. The unlikely success of Piketty's Capital has provoked a half-hearted debate about inequality in the financial press. Barry Eichengreen's latest book, Hall of Mirrors, is most interesting when read as a voice from within this establishment turmoil.