In clear and straightforward language, Debt Spiral tells the story of the financial crisis of 2007-2009 for non-expert readers. It is the first book to cover the many aspects of the history of the crisis. It focuses on public policy and the ways the U.S. Government s policies not only failed to prevent the crisis, but actually contributed to it.

Part I covers the history of the markets, the various types of banking institutions, and the governmental authorities. It covers mortgage lending, the ways in which the U.S. subsidizes mortgage lending, the Federal Reserve Board, the mechanics of securitization, the rating agencies, and the boom state conditions that set up the crisis.

Part II is the story of how the crisis unfolded in 2007-2008. It includes background sketches of the major firms that failed and a discussion of the difficulties that the Fed and Treasury faced in dealing with the crisis. It demonstrates that the U.S. Government was behind the curve and did not promptly take the actions that could have significantly reduced the eventual size of the problem.

Part III, called Taming the Debt Spiral, analyzes the events of 2007-2008 in the light of history. It includes a discussion of other writings in the field, which enables the reader to place the author's conclusions in the context of what other commentators are saying.

Excessive debt and financial leverage caused the crisis, as they have caused many financial crises in the past. Debt Spiral shows how this excessive debt and leverage are encouraged by U.S. Government policies and subsidies. Author Martin Lowy concludes that if Americans want to avoid recurrent booms and busts, the Government will have to stop subsidizing debt and, by encouraging debt, in effect encouraging excessive financial leverage throughout the economy.

Banks receive many of the subsidies that encourage debt. Some of these subsidies may have been appropriate in the past, but with 21st century technology, they are no longer needed. Eliminating these subsidies would be an important part of reforming the banking system.

Capitalism was not on trial, author Lowy concludes, but the crisis shows how the failure to regulate properly can lead to excesses. Competitive markets confer the benefits of capitalism, but competitive markets need government help to thrive. In particular, two natural tendencies of market participants have to be curbed: the tendency of competitors to collude; and the tendency of agents to pervert the market by acting in their own interests instead of the interests of the principals (and principles) they have agreed to represent. These are old problems, but many people who should have known better forgot about them.

Readers will enjoy a trip through the financial world with Martin Lowy as their guide.