Summary of “The Subprime Solution” ...

Summary of “The Subprime Solution” by Robert Shiller
Robert Shiller is the economist and author of some of the best - selling books in the world. He is also ranked amongst the top 100 most influenced economist of the world. He has asserted “The key to the subprime solution, to preventing future crises like the current one, as well as mitigating its after-effects, is democratizing finance – extending the application of sound financial principles to a larger and larger segment of society, and using all the modern technology at our disposal to achieve that goal” in his book “The Subprime Solution”.
Shiller rightly said that the key to the solution of subprime crises is preventing future crises. The reason behind that is very clear that we will come out of this crisis in some months or years but our main concern should be that it should not occur again. In his book he has pointed out an apt reason for this crisis which is that the housing sector was untouched and there were no financial reforms for it. Due to which there is an imperfection in economic institutions and that is not been discussed, which leads to market bubble burst. As of now our major concern should be the citizens of the country who are affected by subprime crisis because of the minimal protection taken against their economic risk and undiversified portfolios. With all this we need to keep in mind that public’s confidence is not destroyed.
For current situation government can grant extension for repayment of principle amount and can also make a settlement amount by taking their repayment capacity in to consideration. There are so many different ways and methods which can be used to come out of this crisis and even in future. One of them is modern information technology the best device that will help us from such kind of crises even in future. The development in computers, data collection and other processing is rapidly increasing. It’s easily, readily and cheaply available but as noted everyone should have an access to such information, not only the rich and high end or agencies but also the lower class of people because even they are the part of this whole situation. Lower-class people are the one who are most suffered, as they did not knew anything about the housing bubble and they could not take necessary steps to avoid, and now they are suffering losses.
The second theory which it points out is the agency theory. This also has its own importance. Agency and agents are the person who guides and advices you regarding when, where, and how much to invest. They are ones who gives common person a market and economic information. Agency theory focuses on motivating agents to behave in the interest of all the parties and not only for themselves or for corporate. They should disclose all the necessary and important information to public and their customers.
Another way to prevent future crisis is by improving ...