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The Era of Tough Choices


In his new book, Fault Lines, Raghuram Rajan examines the complex issue of the global financial crisis, which he predicted in 2005.  Rajan explains how a series of economic realities and regulatory changes converged to collapse the economy and how those ‘fault lines’ still exist.

Rajan, who spoke at the Milken Institute on Monday, discussed the main fault lines that have been growing for the last 30 years – (1) growing economic disparity, (2) under-spending exporters and (3) an inadequate safety net – all which lead to  politically expedient poor choices that cause more economic harm in the long run.  As a result, we have some tough choices to make – reforming the financial system, improving access to opportunity and restoring market discipline.

People generally tend to be ahead of the government on these – witness the rise in credit unions and community banking, socially responsible investing, corporate responsibility initiatives and public school alternatives such as private, charter, and home-based.  Now it’s up to our elected representatives to catch up and make the legal and regulatory changes with the needed “teeth” to get the US back on the road to sustainable economic growth – can they act on behalf of the nation?

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