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Morten Pedersen (Guildford, UK)

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Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable (Bloomberg)
Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable (Bloomberg)
by Mark Gilbert
Edition: Hardcover
Price: £16.95

1 of 1 people found the following review helpful
4.0 out of 5 stars Yet another analysis of the current financial situation., 10 April 2010
It's based on the usual story - mortgages that shouldn't have been given, mortgage backed securities not worth ratings agencies 'AAA' rating, caused by too much liquidity, and failure on the investment banks behalves to analyse successes as well as failures.

Once the liquidity dried up, it took down Bear Sterns, Lehman Brothers as well as Northern Rock, an entity financed through the short-term commercial paper market.

It's very similar to a lot of other books on the topic, so if you've read one of those, chances are you know most of this already. It is slightly more technical than others, however, and it does a good job explaining some of the more technical details such as the operation of money market funds, and why "breaking the buck" matters.

It finally highlights the societal issue of the smartest people entering finance rather than science, which is clearly an issue in today's society.

Freefall: Free Markets and the Sinking of the Global Economy
Freefall: Free Markets and the Sinking of the Global Economy
by Joseph Stiglitz
Edition: Hardcover

25 of 37 people found the following review helpful
3.0 out of 5 stars Keynes on steroids., 6 April 2010
Stiglitz is a Keynesian, and he makes no attempt to hide it. Not only does he support stimulus spending, in fact he thinks the current round is insufficient. Not at any time does he consider the possibility of saddling future generations with too much debt. But then perhaps his plan is to inflate the debts away, seeing how he dedicated a substantial part of this book to defuse the debate on inflation.

Although he has good points with regards to gutted regulation, his solution besides improving regulation is essentially more of the same: lots of cheap credit - ignoring that this was what caused a large part of the issues we see around us at present.

At times, his solutions become rather confusing - he wants high interest rates on savings accounts, yet low interest rates on mortgages. According to the Austrian School of Economics, this separation is impossible; money will flow between sectors. He also argues against cutting wages during a recession, ignoring that this itself might very well cause an increase in unemployment, and during periods of deflation, a real-rate wage hike for those still with jobs and a decrease in competitiveness for the company in question. He furthermore recognizes the UK and the US might have to accept a 10% cut in consumption - but doesn't mention how this might be implemented, or even the basis of this assumption.

His historical perspective is debatable as well - he argues Hoover was a Laissez-Faire supporter, and what was needed during the Great Depression was even more stimulus (spot a pattern here?). He also claims no-one knows why the 1987 crash took place, despite significant indications this was caused by stop-loss triggers.

The book is very politically motivated, to the extent that he has no qualms with regards to criticising the US, but not a single bad word about China or Japan is mentioned, despite there being plenty of controversies. Issues such as differences in regulation favouring the East Asian economies are left out, but when regulation favours the US, it's branded "exploitation". He also states he foresaw the collapse, yet he sees no bubble brewing in China. Time will tell on that one, obviously.

I do want to point out he does a good job at summing up the current crisis. He does propose solutions, although they seem a bit far-fetched at times. For instance, a gross domestic "happiness" indicator would be virtually impossible to quantify.

All in all, a pretty good book. But I can't agree with his ultra-lax Keynesian outlook - especially not considering Keynes himself advocated running a surplus at the top of the cycle, which this new brand of Keynesians seem to conveniently ignore - and hence give it a 3/5.
Comment Comments (4) | Permalink | Most recent comment: Apr 29, 2012 7:31 PM BST

America's Great Depression
America's Great Depression
by Murray N. Rothbard
Edition: Paperback
Price: £17.99

7 of 7 people found the following review helpful
5.0 out of 5 stars Illuminating., 30 Mar. 2010
Popular belief is that Hoover was a firm believer in Laissez-Faire. This book sets out to clarify that he wasn't. Although he started to reverse his position late on in his presidency, most of his actions reflected an economic view not dissimilar to leaders in our present situation.

On the free markets, selling prices determine costs, not vice versa. This means that in a time of deflation, keeping wages high leads to more jobs losses, as wages reduce profitability, and in some cases even lead to closure of private enterprise. Yet, this was the course Hoover was on, declaring that wages should be kept high to retain spending power - ignoring that real spending power will increase during times of deflation, even with static wages. As an example - in the 1921 recession wages had been swiftly cut by 19%, and as a result, the United States were quick to emerge from the recession.

In the run-up to the depression (1927), Europe - and England especially - were in dire straits. The US Fed decided to cut interest rates, thereby artifially helping England, but also thereby boosting exports. However, once the European countries started faltering once again, the policy of cheap credit meant a substantial inflow of capital into the stock market, increasing stock prices and causing inflation. Furthermore, banks also shuffled deposits into time-locked accounts, thereby reducing reserve requirements, and allowing them to lend out even more money.

Once the depression hit, Hoover decided to increase public spending through infrastructure construction, and make cheap credit available to banks and heavy industry. The banks however, with interest rates on the decline, didn't find many opportune risk-reward scenarios, and cut lending thereby aggravating the situation. Furthermore, with the price of especially wheat and cotton prices on the decline, the government responded by artificially propping up the prices of both to keep farmers from going bankrupt. This led to farmers increasing acreage thereby compounding the problem. It also led to significant damage to US exports, as their competitiveness was reduced by this action. Ultimately, this led to losses and protectionism, which led to further damage to US exports.

But the similarities with the current situation doesn't stop there.
- Much like Gordon Brown's current policy, anyone questioning the policies where "unpatriotic" and "selling America short".
- Interest rates were swiftly cut, driving up the market temporarily, but ultimately only postponing the pain.
- Blame was placed with foreign immigrants, reducing wages (very similar to the cut in the H1B program).
- Short sellers were roundly condemned, and ultimately, restrictions put in place.
- Bankruptcy laws were weakened. This led to a reduction in available credit (risk/reward), and enabled people to refuse to pay their debts.
- Taxes increased significantly, thereby reducing the appetite of investors.
- "Hoarders" were blamed. As the gold standard is no longer used, today's equivalent would be the thrifty saver.
- Banks and heavy industry (railroads) were bailed out in secrecy, allegedly to keep "faith in institutions". Ultimately, however, the veil of secrecy was partially lifted, and substantial allegations of political collusions were made.
- Heavy industry responded in kind to the bailouts, by repaying loans to the banks. With loans repaid, the Missouri Pacific promptly went bankrupt.

And finally, when the US Fed pursued a strategy to purchase bonds to reduce interest rates (ie Quantative Easing), foreigners responded in kind by withdrawing gold as these policies would ordinarily lead to inflation. However, when this deliberate policy of inflation failed, the flow of gold was reversed.

However, there are significant differences. State spending a part of GDP was a fraction of what it is today, and all the way up to (and including) 1930, the United States ran a budget surplus, and debts were insignificant. This is widely different to today, where most of the Western World run a significant deficit. In 1932, the US Fed was given the power to change the value of the dollar in relation to gold late on in Hoover's presidency, and in 1933/34 under Franklin D. Roosevelt, the dollar was devalued from $20/ounce to $35/ounce. And if one were to speculate, this could very well be the path current world governments are attempting to put us on at present time.

A few things kind of nagged me about this book - it seems too hypothetical. It is considered that all regulation is bad, but surely it can be proven that this is not always the case, or we'd be up to our eyeballs in Chinese lead paint. It also works on the premise of a "fair" global economic landscape - but since regulations DO differ, this will produce unfairness. And finally, when the US finally emerged from the depression, it was due to the Second World War. And what is a war but public spending on a massive scale?

A sidenote about Keynes - he claimed pre-crisis that Hoover's currency management was "a triumph", and post (1930) that the US was "on track to recovery". And yet, we base our current economic policies on his ideas.

Party's Over: Oil, War and the Fate of Industrial Societies
Party's Over: Oil, War and the Fate of Industrial Societies
by Richard Heinberg
Edition: Paperback
Price: £12.99

4 of 6 people found the following review helpful
2.0 out of 5 stars Alarmist., 27 Mar. 2010
There is mounting evidence of a decline in oil production. This obviously creates a need for new energy production, and production methods.

Unlike Simmons' "Twilight in the Desert", this book doesn't take an in depth look at present production and extrapolates a future from expected developments, instead focusing more on a historical look at what energy does for us, and where it has historically come from. This part is reasonably good, though a slight leftist bias (never misses a chance to criticize Bush) occasionally shines through.

But the entire book seems to have been written with a pre-conceived conclusion in mind. All throughout the book, he is consistently negative, seemingly expecting society to collapse. He even goes to the extent of mentioning the Olduvai theory, which in this context is bit of a red flag.

Net energy yields are consistently understated. As an example, he puts net energy for nuclear at 4, whereas general consensus puts it somewhere in the region of 5-15, which includes construction costs.

He also too casually dismisses the potential of power from tide, wind and solar to supply us in the future, although he does has a point that the currently electrical grid doesn't hold the capacity to transfer all our energy needs. But instead of this being upgraded, he expects the electrical grid to collapse due to overload - the worst-case-scenario here surely is that it'll be capacity constrained, and fixed when breaking down?

His solution to it all seems a rather pie-in-the-sky, caring-and-sharing perfect society - but somehow it fundamentally seems against human nature, and I just can't subscribe to this vision.
Comment Comment (1) | Permalink | Most recent comment: Jan 27, 2015 4:22 PM GMT

The Big Short: Inside the Doomsday Machine
The Big Short: Inside the Doomsday Machine
by Michael Lewis
Edition: Hardcover

21 of 24 people found the following review helpful
4.0 out of 5 stars Late to the party., 24 Mar. 2010
Michael Lewis definitely has an ability to tell a story in an engaging fashion. "Liar's Poker" was great, and this is no different. He takes the reader through the past few years of calamity, tracks the origins, and identifies the main weaknesses of the system.

Predictably, he comes to the conclusion - like so many others have - that the ratings agencies and credit default swaps had significant roles in the development of the financial crisis.

And that is really the main problem with this book. Although, it is an engaging read, it doesn't really add anything new to the picture, and as such, it feels as if it's at least a year late to the party.

Frozen Assets: How I Lived Iceland's Boom and Bust
Frozen Assets: How I Lived Iceland's Boom and Bust
by Armann Thorvaldsson
Edition: Hardcover
Price: £16.99

3.0 out of 5 stars Rosy, 22 Mar. 2010
Most books written by insiders tend to overlook the substantial issues facing their concerns, and this book is no different. Leveraged to the eyeballs, and substantially financed through short-term bonds and commercial paper, and with no adequate central bank support, in reality Icelandic banks were always running high on risk.

The story covers the entire trip from a small investment arm, into a multinational company. It portrays how deals were initially done through due diligence, and how leverage and the artificially low interest credit bubble changed the rules - and not for the better in the long run.

Plenty of space has been set aside to describe the good times, and only the final 50 pages really start to deal with the crisis itself - as a result, the book feels like a shallow attempt of the author to relive the glory, and justify his own actions.

It does however explain Iceland's meteoric rise to fame in the financial markets, which is a fascinating chapter in itself.

Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalisation
Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalisation
by Jeff Rubin
Edition: Paperback
Price: £8.99

3 of 5 people found the following review helpful
3.0 out of 5 stars Introductory, 14 Mar. 2010
A reasonable - albeit rather shallow - middle-of-the-road introduction to the topic of peak oil. It introduces the key concepts without paying particular attention to any of them.

This is written from the perspective of an economist, and as such, puts in focus on the ways in which society will change due to economic factors. This means that the world will go local, frequent air travel will disappear, and suburbia will be remodelled.

Ultimately, it doesn't really add anything to the discussion. It does however come to the conclusion that the near-term economic landscape looks to be an inflationary one.

The only slight issue I have with this book, is that it revises old conspiracy theories as to why GM killed off the EV1 electric car, but except for that, it stays off the alarmist course.

Nineteen Eighty-four
Nineteen Eighty-four
by George Orwell
Edition: Paperback
Price: £7.19

5.0 out of 5 stars Perfect, 13 Mar. 2010
This review is from: Nineteen Eighty-four (Paperback)
A harrowing tale, deeply critical about totalitarianism, and the complete destruction of individualism and desires.

Given it was written in 1948, in some ways an almost prophetic tale of systemic control over the individual. One of the few books I've read that make you seriously appreciate living in a democratic country.

An absolute masterpiece.

The Web of Debt: The Shocking Truth About Our Money System And How We Can Break Free (Revised and Updated)
The Web of Debt: The Shocking Truth About Our Money System And How We Can Break Free (Revised and Updated)
by Ellen Hodgson Brown
Edition: Paperback

17 of 45 people found the following review helpful
1.0 out of 5 stars Fiction., 12 Mar. 2010
Armed with an extremely shaky understanding of economics, the author has produced a blatantly self-contradictionary, infinitely naive, endless socialistic tirade against the Federal Reserve.

Failing to grasp even simple concepts such as the link between interest rates and default risk, biased to the extent that not once is a counterargument even considered or debated, and with an endless added stream of fabricated or "revised" historical revelations, it's only fitting that just about every left-wing economical conspiracy theory ever generated is contained within this book.

Of historical revelations it can be revealed that Dwight Eisenhower WAS a significant figure before the 2nd World War, Lincoln was assassinated by the banking cartel, and Trotsky was a Wall Street agent! Seriously - I couldn't make this stuff up myself.

Externalities such as the 70'es oil crisis are ignored, and Volcker's interest rate hikes in the 80'es is penned down to "intention of extracting usurious interest payments off 3rd world nations" - blatantly ignoring the global inflation caused by a supply/demand imbalance in terms of oil delivery.

And finally, she claims the main reason for Zimbabwe's hyperinflation was caused by speculators, so if you believe this, I guess this book is for you.
Comment Comments (3) | Permalink | Most recent comment: Oct 7, 2013 4:33 PM BST

Media Control: The Spectacular Achievements of Propaganda
Media Control: The Spectacular Achievements of Propaganda
by Noam Chomsky
Edition: Paperback
Price: £6.99

7 of 23 people found the following review helpful
1.0 out of 5 stars Obvious., 6 Mar. 2010
I must be mistaken - the title of the book is "Media Control", but its content is more like "American Hypocrisy".

Yes, in the first World War, American entry was sold on the premise of German soldiers committing atrocities to Belgian babies. The very same concept was used to sell the western world entry to Operation Desert Storm. There is nothing new about this.

The rest of the book is a continuous rant about American (and Israeli) use of the word "terrorism", when in reality, their own brand of terrorism is ignored by Western media. Well... DUH!

The reason I gave this book 1 star rather than 0 is because it only took 1 hour to read. Slightly more amusing than watching public opinion on John Terry being debated on Question Time.
Comment Comment (1) | Permalink | Most recent comment: Jul 19, 2010 2:29 PM BST

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