February 24, 2010
The month of March brings us three new books about the financial crisis. The authors are not out to make apologies for anyone. To the contrary, they point directly at the villains and expose the systemic flaws that were exploited by those who still may yet destroy the world economy. All three of these books are available at the Amazon widget on the sidebar at the left side of this page.
Regular fans of the Naked Capitalism blog have been following the progress of Yves Smith on her new book, ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism. It will be released on March 2. Here is some information about the book from the product description at the Amazon website:
ECONned is the first book to examine the unquestioned role of economists as policy-makers, and how they helped create an unmitigated economic disaster.
Here, Yves Smith looks at how economists in key policy positions put doctrine before hard evidence, ignoring the deteriorating conditions and rising dangers that eventually led them, and us, off the cliff and into financial meltdown. Intelligently written for the layman, Smith takes us on a terrifying investigation of the financial realm over the last twenty-five years of misrepresentations, naive interpretations of economic conditions, rationalizations of bad outcomes, and rejection of clear signs of growing instability.
In eConned (sic), author Yves Smith reveals:
–why the measures taken by the Obama Administration are mere palliatives and are unlikely to pave the way for a solid recovery
–how economists have come to play a profoundly anti-democratic role in policy
–how financial models and concepts that were discredited more than thirty years ago are still widely used by banks, regulators, and investors
–how management and employees of major financial firms looted them, enriching themselves and leaving the mess to taxpayers
–how financial regulation enabled predatory behavior by Wall Street towards investors
–how economics has no theory of financial systems, yet economists fearlessly prescribe how to manage them
Michael Lewis is the author of the wildly-popular book, Liar’s Poker, based on his experience as a bond trader for Solomon Brothers in the mid-80s. His new book, The BigShort: Inside the Doomsday Machine, will be released on March 15. Here is some of what Amazon’s product description says about it:
A brilliant account — character-rich and darkly humorous — of how the U.S. economy was driven over the cliff.
* * *
Michael Lewis’s splendid cast of characters includes villains, a few heroes, and a lot of people who look very, very foolish: high government officials, including the watchdogs; heads of major investment banks (some overlap here with previous category); perhaps even the face in your mirror. In this trenchant, raucous, irresistible narrative, Lewis writes of the goats and of the few who saw what the emperor was wearing, and gives them, most memorably, what they deserve. He proves yet again that he is the finest and funniest chronicler of our times.
Our third author, Simon Johnson, recently co-authored an article for CenterPiece with Peter Boone entitled, “The Doomsday Cycle” which explains how “we have let a ‘doomsday cycle’ infiltrate our economic system”. The essay contains a number of proposals for correcting this problem. Here is one of them:
We believe that the best route to creating a safer system is to have very large and robust capital requirements, which are legislated and difficult to circumvent or revise. If we triple core capital at major banks to15-25% of assets, and err on the side of requiring too much capital for derivatives and other complicated financial structures, we will create a much safer system with less scope for “gaming” the rules.
Simon Johnson is a professor of Entrepreneurship at MIT’s Sloan School of Management. From 2007-2008, he was chief economist at the International Monetary Fund. With James Kwak, he is the co-publisher of The Baseline Scenario website. Johnson and Kwak have written a new book entitled, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. Although this book won’t be released until March 30, the Amazon website has already quoted from reviews by the following people: Bill Bradley, Robert Reich, Arianna Huffington, Bill Moyers, Alan Grayson, Brad Miller, Elizabeth Warren and others. Professor Warren must be a Democrat, based on the affiliation of nearly everyone else who reviewed the book.
Here is some of what can be found in Amazon’s product description:
. . . a wide-ranging, meticulous, and bracing account of recent U.S. financial history within the context of previous showdowns between American democracy and Big Finance: from Thomas Jefferson to Andrew Jackson, from Theodore Roosevelt to Franklin Delano Roosevelt. They convincingly show why our future is imperiled by the ideology of finance (finance is good, unregulated finance is better, unfettered finance run amok is best) and by Wall Street’s political control of government policy pertaining to it.
As these authors make the talk show circuit to promote their books during the coming weeks, the American public will hearing repeated pleas to demand that our elected officials take action to stop the mercenary financial behemoths from destroying the world. Perhaps the message will finally hit home.
If you are interested in any of these three books, they’re available on the right side of this page.
Head For The Hills
March 12, 2010
When a stranger in a tinfoil hat tells me that the sky is falling, I don’t pay attention to him. On the other hand, when credible sources warn of an upcoming economic collapse as a result of our government’s financial ignorance — I listen.
Simon Johnson is a professor of Entrepreneurship at MIT’s Sloan School of Management. From 2007-2008, he was chief economist at the International Monetary Fund. He recently co-authored an article for CenterPiece with Peter Boone entitled, “The Doomsday Cycle”. Their essay began with this observation:
The essay contains a number of proposals for correcting this problem. One of them involves tripling the requirement for core capital at major banks to 15-20% of assets. They concluded with this warning:
Of course, the fact that scares me is that our government doesn’t give a damn. We aren’t likely to see any changes in capital requirements or anything else that was suggested in that article.
Niall Ferguson is a professor of economic history at Harvard. He recently wrote an article entitled, “Complexity and Collapse — Empires on the Edge of Chaos”. It was published in the March/April 2010 issue of Foreign Affairs magazine. The piece began with this summary:
Niall Ferguson’s essay inspired Paul Farrell of MarketWatch to write a commentary on Ferguson’s piece, summarizing the highlights, while driving home this message:
Fortunately, Mr. Farrell included some advice for those of us who are wondering about how to survive an economic collapse: Head for the hills. Here’s what he had to say:
A reading of Paul Farrell’s article about Barton Biggs from July of 2009, reveals a more comfortable assessment of a crisis which may be 40 or 50 years in the future. Professor Ferguson’s essay has apparently given Mr. Farrell a greater sense of urgency about the disaster ahead. Here’s the assessment Mr. Farrell gave last summer:
Compare and contrast that view with the concluding remark from Mr. Farrell’s recent piece:
You have just read the views of some intelligent men who are warning us that a huge disaster may lie just around the corner. Yikes!