In The Financial Crisis and the Free Market Cure, John A. Allison writes, ”The financial crisis is the most important event in 80 years. It will have a significant impact on the quality of your life and of your children. The majority of the explanations for the crisis and the ensuing recession presented in the popular press are not true. Destructive policy decisions are being made based on this misidentification of the causes of our financial problems.”
Mr. Allison is president and CEO of the Cato Institute. (Debbie and I are Cato Benefactors.) John previously was at BB&T, where he was the longest-serving CEO of a top 25 financial institution. During Mr. Allison’s tenure, BB&T’s assets grew to $152 billion from $4.5 billion, and BB&T became the tenth largest financial services holding company headquartered in the United States. In his position, Mr. Allison indeed shared a unique inside view of the factors leading to the financial crisis.
Through Cato, I’ve gotten to know John and just recently finished John’s latest book, The Financial Crisis and the Free Market Cure. Not only is John’s book invaluable on explaining the crisis, but it is also the best book I have read on an industry in which I have been involved for nearly five decades. Below are some highlights from The Financial Crisis. In coming posts, I will continue to share some of John’s most important and vital insights with you.
- Government policy is the primary cause of the financial crisis.
- Government policy created a bubble in residential real estate.
- If we do not change direction soon, the United States will be in very serious financial trouble in 20 to 25 years.
- The economic forces that now have been set in motion are laying the foundation for a long-term disaster.
- Social Security deficits, Medicare deficits, unfunded state and local pension liabilities, government spending deficits, retirement of the baby boomers, and a failed K12 education system are huge issues.
- Countries do not go bankrupt like businesses do. They typically hyperinflate—that is, print valueless money—and move to some form of authoritarian government. In 1920, the U.S. and Argentina had the same standard of living. Argentina, through authoritarian government policies, has made itself into a third-world country despite having vast natural resources. The U.S. will be the next Argentina if it does change direction soon.