Econned Paperback – 11 Oct 2011
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"The helplessness you feel, in the face of the demonic complexity of modern finance . . .set it aside, and pick up Yves Smith book ECONned. Indignation and clarity and omnivorous knowledge come together in her writing, to explain how we, the taxpayers, are being meticulously fleeced. Never go into an argument about the financial crisis unarmed again." - Stephen Metcalf, Slate Columnist "In ECONned, Smith blows the top wide open on the role that economists and policy makers had in enabling Wall Street greed and misdeeds. This fascinating book reads like a detective story uncovering the roots of our disastrous financial philosophy - the book must be read by everyone from Wall Street to Washington." - Nouriel Roubini, Professor of Economics at New York University and founder of RGE Monitor "Yves Smith has written a wonderful book which combines first hand knowledge of financial markets with a devastating attack on the scientific pretensions of economics. It is required reading by all those who want to dig below the surface of the worst economic collapse since the war to the intellectual and regulatory rottenness underlying it." - Lord Skidelsky, author of Keynes: The Return of the Master "This book is a fascinating and insightful reminder that economics is like any other powerful tool. It can be used to help understand the world and solve important problems - or to rationalize ridiculous behavior and overwhelm common sense. Smith provides a brilliantly researched tour of good ideas gone bad." - Charles Wheelan, author of Naked Economics: Undressing the Dismal Science "Lost your job, lost your life savings, the country's going down the proverbial - want to know who did it? Yves Smith tells the tale of how bad economics created the foundations for the 'Madoff economy'. After you read the book, just collect your pitchforks and get ready to march on the University of Chicago or Wall Street or both! A refreshingly sane and honest analysis." - Satyajit Das, author of Traders, Guns & Money: Knowns & Unknowns in the Wonderful World of Derivatives "If you only read one book on the global financial crisis, it should be Econned by "Yves Smith", an entertaining, thorough and damning indictment of the way that Western economists, bankers and politicians together messed up - and are still messing up - the global financial and economic system." - Kevin Rafferty, South China Morning Post "ECONned by Yves Smith has three great merits: what it says is largely accurate, largely interesting, and largely new." - Central Banking Journal "Econned is one of the most important books on the financial crisis. Yves Smith understands both the Street and finance theory in a way that few writers do. Her argument that short sellers provided critical fuel for subprime lending flips The Big Short's conventional wisdom on its head and belies Bernanke's arguments that the housing bubble was the result primarily of a global supply glut. There is no other book with an appendix (Appendix II, no less!) that is a must-read for understanding the financial crisis. - Adam J. Levitin, Professor of Law, Georgetown University Law Center
A highly praisedexamination of whytoday's economists cling to failed economic policies, and how they continue to put the world in jeopardy.See all Product description
Top customer reviews
For the millions of working tax payers stuck with levels of debt, public and private, it seems impossible to understand how so many of the smartest brains in the western world could have come together to produce a financial crash the like of which the world has never seen.
There are now several published accounts, written at both the personal and the technical level, of the ingenuity and greed with which bankers both in Wall Street and in London devised ever more complicated debt instruments from which enormous levels of apparent profit could be taken. Econned is different. Smith focuses not simply on the king's non-existent new clothes, but on the courtiers. How could so many people have persuaded themselves and each other that financial risk had been eliminated and endless wealth within reach?
The book traces the evolution of the origins of the crash from the end of the second world war to the collapse of the Berlin Wall and on to the completion of financial de-regulation under Clinton. It examines with wit and erudition how Adam Smith's ideas in The Wealth of Nations were cherry-picked and evolved into an ideology which came to dominate university economics departments all over the western world. It turns a baleful eye on the so-called science of economics itself, showing how, as ever more computing power became available, it came to be dominated by models which could never take full account of life as it really happens, and how increasingly it took over political debate, producing, incidentally, the pitiful level of debate in which the current British general election is now being couched.
Smith does not shrink from detailed, expert descriptions either of economic theory or of ever more complicated debt instruments. I can only urge non-technicians like myself to have faith, perhaps skate over ideas, sometimes difficult to grasp at first and go on to enjoy and be profoundly educated by her book. One is constantly astonished and entertained by the sort of nuggets of information and insight which clear and change one's thinking. Did you know, for example, that the Wall Street rating agencies whose AAA AA BBB ratings are locked, by US law into the sort of frantic securities trading which broke the banks have successfully contested litigation over their ratings by claiming their grades are `mere journalistic opinions'? Or enjoy and ponder the Wall Street joke about `trading sardines.' And there's more.
This is a book which should be on the desks of bankers, politicians, journalists, university teachers and every angry, confused or even curious citizen with a will to find out how we came to be in the present mess and what the prospects might be for emerging from it. Only if we can come to understand the extent to which `free market' propaganda has corrupted our understanding can we begin to correct it and find a new way ahead. With Econned Yves Smith has made a major contribution to that.
The preceding chapters are devoted to the two main reasons of the collapse of this financial house of cards. First there is neoclassical economics. It is a theoretical construct based on the most implausible assumptions, such as perfect competition, perfect information, utility-maximizing individuals to achieve its goal of "proving" that markets are efficient. Financial economics adds to the mix with its simplistic probability distributions that should have modeled risk accurately. Based on this shaky theoretical foundation the complex financial products were bound to come apart.
There is another, ideological, reason, however, a kind of free market fundamentalism. Starting from neoclassical economics it argued that any government interference in markets is bad. (Trade unions should be banned too.) The unfettered market is the nec plus ultra of economic efficiency and by implication above any moral criticism. Smith retraces the origin of this ideology to the activities of right-wing think-tanks that sprang up in the mid-sixties. It is this mind set that drove the deregulations of the Reagan era and of which the repeal of the Glass-Steagall Act is just another consequence and that enabled the unbridled growth of the financial services industry and ultimately the cultivation of its predatory nature.
The most chilling message is contained in the last chapter. Having laid the groundwork in the preceding chapters Smith offers well-founded suggestions for improving oversight of the financial markets. Comparing these with the timid attempts of reform by the Obama administration, so many members of which are from the financial services industry (Geithner, Summers, Rubin), the conclusion that the regulators are eating out of the hand of the banking sector is almost inescapable (the alternative being that regulators are utterly incompetent). Society as a whole is set up for another fall.
Most helpful customer reviews on Amazon.com
She does a good job of describing different financial instruments in understandable terms.
The author gives examples of why self-regulating on Wall Street, especially with derivatives, is a proposition that doesn't and why that won't change.
She offers up some interesting solutions to guard against another meltdown.
This is a good book, a bit outdated, but worth the read anyway.
Smith goes well beyond tired political tropes and rhetorical namecalling to explain exactly how a lack of proper banking regulation, an overabundance of shortsighted profiteers, an overly self-satisfied attitude among economists, and the beguilingly complicated nature of investment markets came together to erase trillions of dollars of American wealth. I can't argue that this is a great introductory tome on the subject, because you need to be prepared to run with Yves from page one. That being said, it is clearly the best book I've read on the subject.
Undoubtedly, there are those that will claim ECONned is nothing more than liberal propaganda. I'd like to challenge that argument now. There is a clear line between rhetoric and solid, logical argument. Smith isn't making an argument that will make conservatives happy, but that doesn't seem to be the intention of the book and certainly doesn't justify cheapening the completeness of her work as being 'propaganda'. At no point during the read did this feel like a politically inspired text. Instead, the read is as close to scholarly detail as can be expected from a non-textbook/non-professional journal source.
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