Review: Stiglitz Presents Anti-recession Proposals

“Freefall: America, Free Markets, and the Sinking of the World Economy” (W. W. Norton & Co., 391 pages, $27.95): As a Nobel Prize winner, member of the cabinet under former President Bill Clinton and chairman of his Council of Economic Advisers, Joseph E. Stiglitz has some practical ideas on how to ease the pain of the Great Recession and maybe help prevent the next one.

In “Freefall,” Stiglitz quotes an estimate that 2.1 million people lost their homes last year — with millions more to lose their homes by 2012 — because they couldn’t keep up their mortgage payments.

“With the loss of their homes, many Americans are losing their life savings and their dreams of a better future, of an education for their children and a retirement in modest comfort,” he writes.

Meanwhile, the federal government can borrow money at next to no cost. It could lend such families at least part of what they need to keep up their payments, Stiglitz suggests, and charge them a modest 2 percent interest on the loans.

Some of his ideas are tougher going for the amateur economist to follow but Stiglitz — a ranking professor at New York’s Columbia University — adds touches of academic humor. He mocks bankers and other financial professionals as misusing mathematical models to justify risky ventures.

“According to the standard models,” he says, “the kind of stock market crash which occurred on Oct. 19, 1987, could have occurred only on(c)e in every 20 billion years, a length of time longer than the life of the universe.”

Astronomer-physicists mostly date the start of the universe from a Big Bang that occurred about 13.3 billion years ago.

What may be Stiglitz’s biggest idea corresponds to his latest title: chairman of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System.

He wants U.S. consent to create an internationally managed reserve currency to be used instead of the dollar, a move that would lower the dollar’s value compared with other currencies.

But he argues there would be advantages in a cheaper dollar: It would cut U.S. imports and increase exports, creating jobs in the U.S. and reducing the pressure on the government to run big deficits, as stimulus programs make it do.

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