Written clearly and entertainingly, Crashed provides numerous insights for economic historians trying to assimilate the events of the past decade into their view of the world. For the general reader to whom it is addressed, however, it will be depressing to learn that the global financial crisis (GFC) of September 2008 lingers on. Adam Tooze, a self-described “Left-liberal historian” emphasizes that the financial forces that spawned the 2008 crisis remain in place. Global finance, underpinned by the resources of the Federal Reserve System of the United States, is perhaps even stronger and less susceptible to “prudential regulation” than ever. No resolution, whether from self-correcting market forces or initiatives of government regulation, is in sight.

Moreover, while the crisis appeared to originate in the United States, due to regulatory negligence, foreign governments and financial intermediaries were fully responsible as well. Indeed, foreign responses since the crisis have made a final resolution even more complicated and remote. Tooze’s extensive narrative of both political and financial events, based on a wide variety of international sources, albeit mainly European and American, continually raises the question of legitimacy—were the financial policies undertaken in the United States, Europe, and China worth the loss of political acceptance even if they seemed effective in terms of financial outcomes?

How will it all turn out? Wisely, Tooze does not predict, but he does provide an extensive list of financial factors and government policies across the world we should keep watching. First, we must monitor the financial innovations that have enabled ever-larger capital movements across national boundaries since 1971. After the collapse of the Bretton Woods Agreement, the central banks of the world took full responsibility for control of the world’s money supply for the first time in history. Just how they should exercise their responsibility, however, is still an ongoing learning-by-doing process of making mistakes and then correcting them—or not, depending on political incentives and directives as well as economic. In the meantime, multinational corporations have exploited opportunities for profit opened in a global market for their products, their labor force, and for their debt.

Second, how are governments coordinating their fiscal and monetary policies internationally? Governments now accounting for two-thirds of the world’s population and 85 percent of gross domestic product did respond to the Asian crises in the late 1990s by forming the G-20 in 1999. Its initial purpose, absent any political charter much less formal treaty, was to provide annual meetings of finance ministers and central bank governors beyond the tight-knit group of the G-7 countries. After the financial crisis of 2008, the G-20 added annual summit meetings of the respective country leaders to encourage better coordination of policies and to provide some measure of political credibility to whatever policies might be agreed upon.

Part 1, “The Gathering Storm,” recounts the standard histories of how the sub-prime crisis spun out of control in the United States, but emphasizes as well how transatlantic finance enabled it. Not only did rules governing accounting for “repo” financing through prime brokers differ across the pond, the capital ratios required of banks differed as well. All these differences created multiple opportunities for what we euphemistically call “regulatory arbitrage.” Further, the European Union created a novel structure designed to control its common currency. Supposedly free from political control by any of the member governments, nevertheless, the European Central Bank allowed the sovereign debt of each member country to be collateral for new issues of euros. This rule, politically motivated, created (inadvertently?) a tremendous opportunity for an international “carry trade,” which allowed multinational banks and nonfinancial corporations to borrow cheaply in Europe in order to invest in higher yield assets abroad and then to repay in euros that had meanwhile fallen in value. Oddly, European sovereign debt did not increase in response, but private debt did, while yields on European sovereign debt fell and remained at low levels. Regulatory arbitrage between Europe and the United States allowed repeated “re-hypothecation” of sovereign debt collateral to occur.

Financial innovation combined with regulatory arbitrage created increasing gross capital flows, especially between Europe and the United States, but also between Asia Pacific (China, Japan, and South Korea) and Europe and the United States. Gross cross-border financial claims as monitored by the Bank for International Settlements are where the action occurs, Tooze insists, not in the net balance of claims as monitored by the International Monetary Fund.

Part 2, “The Global Crisis,” will bring some relief to American readers, as Tooze highlights the importance of actions taken by the Federal Reserve System, led by Ben Bernanke, to open and maintain open huge “dollar-swap” lines of credit to other central banks. In September 2013, moreover, the Fed announced that the temporary agreements were now standing arrangements with the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada, and the Swiss National Bank. Those central banks, in turn, could provide liquidity to their affiliated central banks. Japan, for instance, provided swap lines with Singapore, Thailand, and Malaysia while doubling existing swap lines with Indonesia and the Philippines. While the East Asia countries provided effective stimulus to their respective economies and came through the 2008 crisis more quickly and in better shape compared to their crises in the late 1990s, the Federal Reserve System of the United States provided the necessary finance through the currency swap-lines of credit.

While the swap-lines were effective in financial terms, Tooze raises the issue whether they also had political legitimacy. All were bilateral agreements made between central banks, each enjoying a large degree of independence from their domestic political authorities. The issue of legitimacy remains in further doubt given the nature of the personalities who deal with each other at the annual summit meetings of the G-20 country leaders. The first meeting, organized by Gordon Brown in 2009, “was a freak show of outsized personalities (p. 269).” (News reports on the most recent G-20 summit in Buenos Aires in November 2018 could well have used that phrase for their headlines.) Sadly, the European response, articulated by Sarkozy of France and Merkel of Germany in 2009, and Macron of France and Merkel of Germany in 2018, insisted on taking the moral high ground of fiscal probity and austerity rather than on encouraging further injections of central bank liquidity as initiated by the Federal Reserve Bank and continued by the European Central Bank.

Part 3, “The Eurozone,” recounts the lack of effective political leadership within the European Union, even as the outsized European banks continue to channel much of the global liquidity sloshing around the world through their off-balance sheet “special investment vehicles.” The continued reluctance of unified Germany to move beyond its problems of financing internally the costs of absorbing East Germany to take on the responsibility of the financial hegemon within the Eurozone is the heart of the problem. The adoption of quantitative easing by the European Central Bank (ECB) by the Italian Governor Mario Draghi in 2013 was effectively an “Americanization” of its monetary policy. It was effective despite the continued political schadenfreude of the French and German leaders about the barbarism of Anglo-American capitalism. The political stalemate over the creation of a common Eurozone sovereign bond, however, remains due in large part to the success of the ECB’s quantitative easing, albeit at the expense of the Greek economy and people.

Part 4, “Aftershocks,” takes up the political problems created in the United States by the policy of saving Wall Street at the expense of Main Street. Increasingly, economists analyzing why the gap between rising labor productivity and stagnant labor compensation keeps rising have concluded, “It’s politics, stupid!” And the politics of inequality continue to play out in the United States, further undermining the legitimacy of the political system. Meanwhile, the Fed stabilized its swap lines with other leading central banks and the G-20 continued to have annual summit meetings with recurring media performances by the attendees with no binding agreements. What stands out for Tooze, however, is how the American political dysfunction has been reflected in global finance. After fiscal loosening to counter the crisis in 2009, mainly in Asia but to some degree also in the United States, all the main players moved to tightening thereafter (graph, p. 466), with only a minor loosening in 2015.

Tooze concludes in “The Shape of Things to Come,” by calling attention to the importance of China’s financial policies in 2017, which he credits for allaying the possibility of a massive financial crisis, which otherwise threatened the beginning of Donald Trump’s presidency in the United States. Will China continue to step into a role of financial leadership? Will the U.S. Fed continue to be the world’s central banker based on the standing arrangements with its partner central banks? Both scenarios depend on the future direction of U.S. policy, now framed by its leader’s desire for reality show ratings.