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Customer reviews

4.4 out of 5 stars
4.4 out of 5 stars

on 18 October 2011
Satyajit Das first gave us Traders, Guns and Money, a delightful book on how the derivatives market across the world really works.
Now he has given us Extreme Money, a book which captures the financial crisis as it has happened and evolved till now beautifully. Das references from a wide area of subjects, from movies to Shakespeare to his own experiences as one of the world's foremost derivatives expert, and gives us a book with great acerbic wit as well as in-depth analysis of the financial crisis.
The book has been written in the style of a Ludlum thriller and the arguments just keep coming at you. And by the end of it all, you wonder, how does this guy know so much? The book is a must read for anyone who "really" wants to understand the times that we live in. Das doesn't spare anybody, be it the investment banks and the hedge funds of Wall Street which caused the crisis or the governments across the world who are trying to clear it up and in the process making an even bigger mess.
I sincerely hope that few years down the line, when the crisis has evolved further, Das is ready with a sequel. Because as they say when they say, you ain't seen nothing yet!
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on 2 September 2011
Satyajit Das' new book "Extreme Money" has weaknesses, but these do not stop the book being a five-star read. The book is essential reading by anyone (everyone?) who has an inkling that the western world's financial market system over the past 25+ years has evolved into a giant Ponzi scheme. The book proves your inkling is correct and does so with the presentation of well-compiled and convincing evidence at the level of both illustrative individual transactions and of the financial system as a whole.

Das is one of the few people in the world who has the knowledge, skills and practical experience to go substantially beyond making generalized and unsupported pronouncements. He's a details person and these details help the rest of us understand aspects of market behavior that are not self-evident. For instance, read of why (swap) derivative transactions are off balance sheet transactions (page 242) and of Lehman Brothers' flip clause in its legal documentation (page 255).

Das' book is outrageously critical of virtually every entity that has been associated with "extreme money" creation over the past 25 years, regulators included. But his criticism is warranted. The financial leverage the western world has experienced in recent years has been extraordinary and most of us have been happy to ride the wave of (apparent) prosperity for all it was worth ... until now.

A sense of the vigor and breadth of Das' thinking can be gleaned from a selection of sentences in the book:

Rather than using derivatives to manage risks, dealers structured transactions to create risks, disguise true values, delay competition and prevent clients from unbundling products (pg 272)

Risk models underestimated volatility and used incorrect correlations (pg 289)

Extreme money created a powerful coalition of financiers, business interests, regulators and politicians that increasingly dominated the economy. This oligarchy set the agenda and set policies, which benefited them and their constituencies. Similar backgrounds, education and interests, especially a common cognitive view of the world shaped the oligarchy (pg 305)

The new liquidity factory .... was based on financial alchemy. Securitization and derivatives provided most of the money, around 79 percent of total liquidity. ... The astonishing growth in global liquidity was driven by financialisation. (pg 312)

Complex chains of transactions allowed risk and debt to move from a place where it was observable to places where it was hidden and unregulated (pg 313)

Risk managers with the `brain the size of a caraway seed and the imagination of a parsnip' slavishly used inadequate techniques (pg 318)

Mathematical finance lent credibility and false precision to the dismal reality of risk management (pg 318)

Financial economists and risk management just replaced oracles and soothsayers (pg 318)

The Greenspan put ensured that at the first sign of trouble central bankers - `pawnbrokers of last resort' - flooded the system with money, lowering interest rates to protect risk takers" (pg 326)

Central bankers' assumption about securitization and derivatives reducing risk were wrong (pg 327)

Modern accounting struggles to provide tolerably accurate, reasonably objective and meaningful information about financial positions (pg 333)

When things were going well, regulators favoured self-regulation, which bears the same relationship to regulation that self-importance does to importance (pg 341)

Well-meaning and ineffectual hearings, irrespective of topic, typically conclude that any failure was systemic, not attributable to any individual. The inadvertent, unconscious clan and class sympathies of men and women dressed in similar attire on both sides of the bar are a factor in the outcome. (pg 352)

The economic and financial models were deeply flawed and had failed. The available tools and knowledge were insufficient to manage the crisis and restore the health of the global economy (pg 391)

Short-term profits were pursued at the expense of risks that were not evident and would only emerge later. Financiers entered into increasingly destructive transactions, extracting large fees and leaving taxpayers to cover the cost of economic damage (pg 422)

By October 2010 the fees paid to lawyers, advisers and managers involved in the bankruptcy of Lehman Brothers reaches over $1,000 million (pg 432)

New instruments emerge, being traded in huge volumes among institutions essentially trading with themselves. They undertake transactions, price them and book fictitious earnings, neglecting to establish whether any of it is real or makes economic sense. (pg 438)

The deadly pathology of finance - the gaming of bonus systems, manipulation of valuations and accounting tricks - continues (pg 443)

Over the last 40 years, financial fundamentalism and financial oligarchs changed the world (pg 447)

Although not an easy read (how could it be so?), Extreme Money is a tour de force.

The book's faults are relatively minor, but one is worth noting. Das makes extensive use of illustrative quotes throughout the book. There are probably hundreds of them. Although sometimes interesting, I generally found them to distract me from the book's messages. Maybe their inclusion was the publisher's idea to lighten the read (?!)

Still, a terrific book .... a five-star read!
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on 11 October 2011
Das' bold new inside story on the modern world of money will fascinate, enlighten and enrage finance professionals, their clients and industry outsiders. His narrative blends wisdom and wit from throughout the ages. Where else can you meet a colourful cast of thousands from Napoleon to Buffett, Madoff, Soros, Keynes, Greenspan, Elvis, Gecko, Beckham and even The Pope?

This is a candid, epic journey weaving economic and social history with popular culture.
Disturbing at times, yet jam-packed with rarely-told war stories and anecdotes, Das carefully peels away the rotten skin to allow you a glimpse inside this illusory system. You'll discover how and why oligarchs, crooks and charlatans - many masquerading as industry professionals - continue to pillage the global investment world.

Extreme money can be defined as dangerous sophisticated games with debt, leverage and derivatives that unleash steroid-fuelled, phantom and unsustainable levels of consumption, growth and prosperity. In Das' words: "once used to value and exchange goods, money has become the main way to make money...(we) mistook money, a lubricant of society and the economy, for an end in itself". We worshipped the wrong deity. And we will have to pay the inevitable price.

Das challenges you to explore an alternative view of reality:

* How hubris, faith, "fundamentalism" and alchemy led to cracks in the system
* How it went wrong, why it went wrong and how it will end badly
* How masters of the universe, institutions, governments, corporates, regulators, credit rating agencies and other shady characters manipulate financial and commodity markets to serve deep vested interests
* How hedge funds are "courtseans: high-class prostitutes" and banks are their "pimps and bordello keepers"
* How an inevitable move away from extreme money will re-define future expectations for economic growth and living standards

A prolific reader and educator with 33 years of experience as a market practitioner, I like how Das takes a very different approach to the hundreds of other post-GFC authors:

1. He doesn't offer a simple 10-step solution to save the world - the problems are complex and have much to do with human behaviour and entrenched attitudes; and
2. He steadfastly maintains his role as a background historical observer inviting you to draw your own conclusions as to his motivations for writing the book

Comprehensively-researched and structured, Extreme Money also contains an amazing 85 pages of footnotes, bibliography and indexing for those hungry for more.

Read this book. It gives you a fresh, alternative view.

And maybe even a few clues as to what happens next...
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on 15 December 2011
Das combines readability, humour, and detail.

The narrative takes readers from the early years of 1960s and 70s leveraged buy-outs, through the junk-bond era of the 1980s, up to the tradeable-mortgage derivatives that underlay the 2008 crisis we're still hungover with.

He mixes entertaining anecdotes about individual financiers with clear explanations of some of the crucial "debt vehicles" and "collateralised securities" worked - or failed to work. These "instruments" were the bewildering objects that more people traded than understood, until they caved in to cause the current meltdown. I had only read his concise article in the multi-author paperback collection Collateral Damage: Global Crash Phase Two before now. Both that chapter and this book share his distinctively witty writing style.

Involved in many of the crucial deals & discussions during the collapse, Das is well placed to explain what went wrong. This book is a vital, but thank goodness also enjoyable, part of recovering from the disastrous 2008/2009 credit crunch.
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on 6 December 2011
I picked up this book thinking it would be a quick airport lounge read. How wrong I was. Neither for that matter is it purely a book about high finance. Rather Mr Das weaves a magnificent multi-disciplinary path blending philosophy , history, economics, finance, politics and dare I say a review of (mostly) English literature through his generous use of quotations.

His conclusion is simple - live according to your means as governed by the real economy. His journey in getting there provides a fascinating read whether or not one agrees with all his analysis.

The author's clear expertise make this book worthy of a comprehensive read. Financial services employees are unlikely to find this book in the proverbial Christmas stocking. More so the pity.
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on 7 September 2011
Extreme Money : The Masters of the Universe & the Cult of Risk is a fascinating account of how money and debt have come to dominate and potentially overwhelm the real economy. Securitisation, sub-prime mortgages, junk bonds, leveraged buyouts, derivatives, investment bankers, central bankers, financial regulators, Chicago school economists , option models, hedge funds, Nobel laureates and rating agencies are all roundly castigated and critiqued with devastating lucidity for their contribution to the wall of liquidity that the world is now struggling to confront. A sobering account that is essential reading for all those seeking some form of context for the sub-prime and sovereign debt crises and the asset bubbles that preceded them. The linkages between the worlds of real industry and money are explored with humour and devastating but insightful cynicism.
The analysis is current to August 2011 and helps the reader draw his or her own conclusions as to "how long the governments [could] keep the economic life support system switched on." The effectiveness of the Volcker rule and other regulatory, monetary and fiscal interventions are discussed in an analysis that is real time for us all. Das' conclusions include that the world has unsuccessfully tried to defy financial gravity and that the ability of governments and policymakers to control the world economy is questionable.
A highly recommended read for all those involved or affected by the financial markets.
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on 19 October 2011
If I could vote 4 1/2 stars I would have done. This is a great book, one of the best in its genre, and the argument is extremely persuasive. I doubt that even the most ardent fan of liberalised financial markets could read it and not come away feeling that root and branch reform of the world's financial system is necessary. With 15 years working in various city roles from pit trader to hedge fund analyst I can honestly say no other book comes close to describing our deeply flawed industry.

However, it is let down by some sloppy editing. An exhaustive list would unfairly dominate this review so I shall mention just a few. Global GDP is under-estimated by a factor of 1000 when being compared to global FX volumes. There are also some strong unsubstianted claims such as "the gold standard was the basis of money for substantially all of human economic history" which given silver's dominant role in Europe, the US and Asia until the C19th at the very least needs more explanation. Paragraphs are often overladen with quotes so the flow is lost. These are all issues that I would have hoped that Prentice Hall would have tidied up.

However, these problems are small relative to the brilliant insights this book provides. Extreme Money is a must read for anyone who wants to comment knowledgably on financial markets.
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on 19 October 2011
A truly remarkably piece of work by a master of his craft. Extreme Money provides a bone chilling insight into how an international financial system was created where risk and accountability were viewed as mere commodities. This is mandatory reading for everyone with fiduciary responsibilities.
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on 17 November 2011
The only way we can avoid facing another economic crisis is to understand how we got into the mess we are in now - this book tells you what happened and why. The only way that our children can avoid being taken in by the same snake oil salesmen is to set this book as a senior year text book.
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on 3 October 2011
Das has a dual existence as a writer. On the one hand, he is the author of daunting tomes such as "Structured Products (2 Volumes, 1200 pages each), or the (no kidding) 4,700 page "The Swaps and Financial Derivatives Library: Products, Pricing, Applications and Risk Management." Pretty much an insider then, and on the muscular side.

On the other hand, he can travel light, as in "Extreme Money" (and in the prescient "Traders, Guns and Money" of 2006). On the surface, it is all breezy style, vivid stories and snazzy quotations, but even if the erudition is weightless, it's still there. The book is always informed by the perspective of a beady-eyed insider who is, if not jaded, certainly disillusioned, and quite often, an eye witness. The folly is documented deadpan, but mercilessly. Das's background as consultant, negotiator and (one imagines) expert witness clearly help, with both the deadpan and the mercilessness.

Das is utterly addicted to the illustrative quotation, by the way. If you've read any 'financial crisis books' you'll have seen some of them before. But the breadth of reference, and the surprising yet apt novelties that result (I hadn't thought of Kierkegaard as a theorist of offshore finance before) more than make up for that.

His theme is the folly of modern finance. It isn't quite a narrative, more a set of quasi-anthropological themes arising from modern finance, illustrated by quotations, personal experiences, and commentary on current events and recent history. The themes are roughly:

1. The rise of the financialized economy ("money culture")during the second half of the 20th century
2. The economic theory that goes with the money culture
3. The characteristic artifacts of the money culture (the zoo of new financial products)
4. The various tribes that create the culture (politicians, economists, bankers, regulators)
5. The signs of the collapse of the money culture.

It's a thorough job, and yet, so entertaining. However, the conclusion is as gloomy and uncertain as could be. How on earth do we get out of this mess? Das doesn't offer an answer, though he is not optimistic about how smoothly the adjustment will go. Still, you couldn't wish for better background to the question.

Highly recommended.
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