Work Synopsis:

• Leopoldo Torralba

  Leopoldo Torralba holds a BA in Economics from the University of Zaragoza and an MBA from the IE Business School. Torralba, who has worked 12 years on the stock  exchange as a banking analyst, is senior analyst for the strategic planning department at Ahorro Corporacion and Associate Professor of Finance at IE Business School.

• Bárbara Huerta

  Barbara Huerta holds a doctorate in economics and has a Masters degree in financial management from the IE Business School as well as a Masters degree in Auditing from the Universidad San Pablo CEU. She is currently a manager of the Telefonica Group and Associate Professor of financial accounting at IE.

  Barbara has spent more than 10 years of her professional career in auditing (Arthur Andersen) and in accounting management for Telefonica. She has published several articles and is the author of a book.
  
  

• Ignacio de la Torre

  Ignacio de la Torre holds a BA in both Economics and Law, and a doctorate in History. He also has an MBA from INSEAD business school. De la Torre, a partner and head of the capital markets division of Arcanum, has worked for 10 years as an equity analyst for Deutsche Bank and UBS.

  He is also the academic director of the Master in Finance program at the IE Business School, Associate Professor at this institution, author of several books and a columnist for a number of  leading financial newspapers.
  
  

Work title: The end of the crisis?

The book began as a short technical note for students written by Ignacio de la Torre and Barbara Huerta, two associate professors at the Instituto de Empresa (IE). The paper soon became popular among students, lecturers and managers of IE. With time, the idea of broadening and deepening its contents arose and a third associate professor at IE, Leopoldo Torralba, joined the team. This was the start of the book project.

The work combines three different approaches to the crisis, associated with three concurrent professional areas of activity: economics, finance and accounting.

After analysing the causes of the crisis, based essentially on a series of dilemmas, the book invites the reader to put themselves in the position of the main actors responsible for the crisis and to understand the complexity of the options and their interconnection. It then goes on  to contemplate the immediate consequences of this crisis for accounting, fiscal and economic policy. The third part of the book, the most extensive, analyses these consequences in depth, focusing on Spain and the solutions to be applied in order to reach the long-awaited end of the crisis.

The fact of working in economic sectors, especially in the area of finance related to investment banking, has generated mixed feelings for the authors. On the one hand, these feeling were negative since the course of events did not look exactly promising, but at the same time these same events have turned out to be a motivating and exciting experience to live through. Indeed, such an abrupt crisis as the current one only happens once in a lifetime making it possible to merge theory with practical reality. Few economists have ever had this chance.

The above prompted the authors to share their knowledge and to record on paper the multiple issues, dilemmas, and concerns that have arisen since the beginning of the crisis. The intention is to allow people with an average economic background to understand the origin of the current problematic situation, possible solutions and their consequences, how to position oneself within this environment, what key lessons can be drawn - all this using clear language and incorporating some economic theories especially the most recent concepts.

The authors hope this book will give the reader a clear and practical point of view on how to react in a macroeconomic environment as uncertain and unpredictable as the current one. Thus, we suggest strategies for businessmen and -women and a variety of ideas for financial institutions with regard to the future of Spanish and global banking.

The book is also aimed at policymakers, students of economics, or of general graduate and professional courses wishing to read about aspects of investments and savings, spending levels or future debts.

Following the case studies and discussions of the origin of the crisis, the book delves into the strong fiscal and monetary stimulus and the extensive state support of financial systems influencing the United States and then reflects on the possible consequences of various policies for solving the economic problems faced by many countries.

The book attempts to address all issues related to the potential risks of deflation or hyper-inflation that may be brewing and their possible consequences. Special emphasis is placed on the need for co-ordinated and binding international co-operation.  There is a detailed study of past banking crises and their effect on economies in order to have an idea of what to expect. There follows a comparative ranking of sectors and countries with regard to the crisis and an extensive chapter dealing with the specific Spanish situation. This chapter covers a variety of aspects such as structural and economic problems, the potential drop in structural GDP, inescapable reforms, solvency of the banking system, and suggestions for the optimal positioning of Spanish companies in the economic environment.

Moreover, the text examines all issues that should receive careful attention in the long term once the crisis has been reasonably controlled. These include: rebalancing of global growth patterns, the future of the dollar as world reserve currency, living with high public debt, the long hoped for major reform of financial systems, oil and other commodities, and major geopolitical risks.

The final section provides some general reflections, for instance the global need to recover from the economic hole that will be left by the US consumer faced with a long and painful process of debt reduction. It also identifies the risks of not correctly identifying the type, the intensity and the timing of aggressive measures to raise public support for the economy. This could result in either deflation or hyperinflation both of which would be negative, as well as the possible withdrawal of the private sector, which may involve a significant increase in public sector contribution to the economy.

However, the book also refers to the rays of hope that provide the green shoots that have appeared since the start of the second quarter of 2009 in some countries. It also shows that although in developed economies it is difficult to find evidence of significant growth in future potential productivity, history shows that certain things such as technology can often surprise us. At the very least, if the crisis serves to instill a more ethical and responsible attitude in society, there will undoubtedly be long term benefits.