Editorial Review

The #1 New York Times bestseller: a brilliant account—character-rich and darkly humorous—of how the U.S. economy was driven over the cliff.When the crash of the U. S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine, and the SEC doesn’t dare, or bother, to tread: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can’t pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren’t talking.

The crucial question is this: Who understood the risk inherent in the assumption of ever-rising real estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages?Michael Lewis turns the inquiry on its head to create a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 best-selling Liar’s Poker. Who got it right? he asks. Who saw the real estate market for the black hole it would become, and eventually made billions of dollars from that perception? And what qualities of character made those few persist when their peers and colleagues dismissed them as Chicken Littles? Out of this handful of unlikely—really unlikely—heroes, Lewis fashions a story as compelling and unusual as any of his earlier bestsellers, proving yet again that he is the finest and funniest chronicler of our times. ... Read more

Reviews

Who knew?, March 15, 2010
Based on reading Michael Lewis' Liar's Poker and Moneyball, I wondered whether The Big Short would prove to be entertaining and informative. If you've read some of Lewis' books, you might agree that the "entertaining" part would seem to be a reasonably safe bet. It turns out, it is. The Big Short is fast-paced, straightforward, conversational and salty--very much like his earlier works. Indeed, if you didn't know Michael Lewis had written this book, you could probably guess it. It is easy reading and very hard to put down. In short (no pun), The Big Short doesn't disappoint in being entertaining.

In a sense, this book is similar to Moneyball in that Lewis tells his story by following a host of characters that most of us have never heard of--people like Steve Eisman (the closest thing to a main character in the book), Vincent Daniel, Michael Burry, Greg Lippmann, Gene Park, Howie Hubler and others.

How informative is the book? Well, it may seem that Lewis has his work cut out for himself, since the events of the recent financial crisis are already well known. More than that, lots of people have their minds made up concerning who the perps of the last few years are--banks and their aggressive managers, "shadow banks" and their even more aggressive managers, hedge funds, credit default swaps, mortgage brokers, the ratings agencies, Fannie Mae and Freddie Mac, the Fed's monetary policy, various federal regulators, short sellers, politicians who over-pushed home ownership, a sensationalist media, the American public that overextending itself with excessive borrowing (or that lied in order to get home loans), housing speculators, etc. The list goes on--and on. Okay, so you already know this. The defining aspect of this book, however, is that it asks (and answers) "Who knew?" about the impending financial crisis beforehand. Who knew--before the financial crisis cracked open for everyone to see (and, perhaps, to panic) in the fall of 2008--that a silent crash in the bond market and real estate derivatives market was playing out? Indeed, the good majority of this book addresses events that occurred before Lehman's failure in September of 2008. In describing what led up to the darkest days of the crisis, Lewis does a good job helping the reader to see how the great financial storm developed. All in all, this is an informative book.

Interestingly, in the book's prologue, Salomon Brothers alumnus Lewis explains how, after he wrote Liar's Poker over 20 years ago, he figured he had seen the height of financial folly. However, even he was surprised by the much larger losses suffered in the recent crisis compared to the 1980s, which seem almost like child's play now.

For a taste of The Big Short, Steve Eisman was a blunt-spoken "specialty finance" research analyst at Oppenheimer and Co., originally in the 1990s, and he eventually helped train analyst Meredith Whitney, who most people associate with her string of negative reports on the banking industry, primarily from late 2007. Giving a flavor of his style, Eisman claims that one of the best lines he wrote back in the early 1990s was, "The [XYZ] Financial Corporation is a perfectly hedged financial institution--it loses money in every conceivable interest rate environment." His own wife described him as being "not tactically rude--he's sincerely rude." Vinny Daniel worked as a junior accountant in the 1990s (and eventually worked for Eisman), and he found out how complicated (and risky) Wall Street firms were when he tried to audit them. He was one of the early analysts to notice the high default rates on manufactured home loans, which led to Eisman writing a 1997 report critical of subprime originators. Michael Burry (later Dr. Michael Burry) was, among other things, a bond market researcher in 2004 who studied Warren Buffett and Charlie Munger, and who correctly assessed the impact of "teaser rates" and interest rate re-sets on subprime loans. In 2005, Burry wrote to his Scion Capital investors that, "Sometimes markets err big time." How right he would be.

Greg Lippmann was a bond trader for Deutsche Bank, who discussed with Eisman ways to bet against the subprime mortgage market. Before home prices declined, he noted, for example, that people whose homes appreciated 1 - 5% in value were four times more likely to default than those whose homes appreciated over 10%. In other words, home prices didn't need to actually fall for problems to develop. (Of course, home prices fell a lot.) When Lippmann mentioned this to a Deutsche Bank colleague, he was called a Chicken Little. To which, Lippmann retorted, "I'm short your house!" He did this by buying credit default swaps on the BBB-rated tranches (slices) of subprime mortgage bonds. If that's not a mouthful, read further in the book for a description of Goldman Sachs and "synthetic subprime mortgage bond-backed CDOs." Then there's the AIG Financial Products story, told through the story of Gene Park, who worked at AIG, and his volatile boss, Joe Cassano.

Did I say this book is informative? Here's a bit more: Did you know that a pool of mortgages, each with a 615 FICO score, performs very differently (and better) than a pool of mortgages with half of the loans with a 550 FICO score and half with a 680 FICO score (for a 615 average)? If you think about it, the 550/680 pool is apt to perform significantly worse, because more of the 550 FICO score loans develop problems. Think about how that got gamed.

There's more, but hopefully you've gotten the point. This is a very interesting, entertaining and informative book that accomplishes what it sets out to do. Chances are you'll enjoy it.

The Big Short Falls a Bit Short, March 15, 2010
Let me get the easy part of this out of the way first. Michael Lewis is a remarkably gifted writer, and I have often found his books impossible to put down. When I first read his debut at book authorship, Liar's Poker, I literally read it straight through. I was not alone in this, as Liar's Poker rightfully made Michael a very well-respected author and a very wealthy man. Moneyball, The Blind Side, and numerous other best-sellers built on that reputation. The long-awaited newest contribution from Michael Lewis, The Big Short: Inside the Doomsday Machine, is 264 pages long, and I also read this in 24 hours. However, I doubt many others will feel the same. The book was compelling, I thoroughly enjoyed reading it, and nothing in the book modified my view that Michael Lewis is one of the most interesting writers of this era. I simply doubt that this book evoke the same response from the masses of people who will buy it. Perhaps I am wrong. So before I begin to disect the important parts of the book (its underlying messages, etc.), I will say that it was another hard-to-put-down book from Michael Lewis. Thumbs up, and all that stuff.

So what did I really think of the book? Well, Lewis should be commended for writing a book on the 2008 financial crisis from the most unique perspective thus far. Rather than focus on the major characters that a plethora of other books have focused on (Paulson, Bernanke, Geithner, etc.), Lewis tells his story using some extremely obscure characters as his lead actors: A handful of hedge fund managers who made massive bets against the subprime industry (and by hedge fund managers, I am not referring to high profile, well-known hedgies; I am talking about very, very minor players). Readers will feel connected to the characters when they are done with the book, and a less gifted writer could have never pulled this off. It was a difficult task for Lewis as well, but he skillfully made the points he wanted to make and simultaneously told a story, all through a narrative of four or five unconnected characters of whom the public has never heard.

What are these points Lewis wanted to make? I suppose the major tension of the book is the teeter-tottering between the greed/evil genius of the major Wall Street firms (on one hand), and then the utter stupidity and incompetence of Wall Street (on the other). It is a difficult balance to strike, and one reason it is difficult is because, well, one can not have it both ways. Lewis can not claim, as he astonishingly and explicitly does, that Goldman Sachs made AIG write credit default swaps on the subprime mortgage industry, guaranteeing AIG's demise and Goldman Sachs flourishing, but then on the other hand claim that the firms had no idea what they were doing, and were completely shell-shocked by what happened to their CDO's (the collateralized debt obligation instruments which served as the toxic assets you hear so much about). This inconsistency permeates the book, and tonight on 60 Minutes I heard Lewis repeat what his major thesis is: Wall Street did not know what they were doing. This is the correct thesis. But it is wholly imcompatible with the obscene Goldman Sachs conspiracy movement that has taken over the Oliver Stone mainframe of our society. Even a Michael Lewis fan like myself was taken aback by the audacity of this oft-repeated contradiction.

Perhaps the most disappointing message of the Lewis book is the conclusion he saved for the final chapter - the one I have heard him preaching for some time now on the media circuit. Lewis has been preaching since the days of Liar's Poker that the great sin of Wall Street was when all of the major firms went public (i.e. rather than function as closely-held partnerships, they sold shares to the public in the IPO market and now have no reason to ever check their evil inhibitions at the door). It is a rhetorically effective charge, but one that is not up for the most routine of examinations. The individuals most responsible for the massive money-losing operations of 2005-2007 were the largest shareholders in the firms. Jimmy Cayne of Bear Stearns saw his stock holdings decline from $1 billion of value to $50 million of value, directly under his watch. Richard Fuld was thrown to the lions as Lehman Brothers burned to the ground, but it burned up his $550 million of Lehman stock as well. The gentlemen running these firms were wealthy, and they were driven by a desire to get even wealthier, but it is absurd to postulate that the performance of these companies in the public stock markets were not important to them. It was all that was important to them. Are we really to believe that Wall Street would not have found more creative ways to raise capital in the capital markets if they were partnerships? Whether the firms were partnerships or public corporations, they lived off of balance sheet capital that they mostly raised in the debt markets. It was the bondholders who were on the verge of utter collapse in September of 2008. Why would that be different if they were partnerships? The most obvious refutation of Lewis's thesis is the question many are probably dying to point out to him after reading it: If being a public corporation corrupts the intentions of financial firms, why couldn't the same broad brush be used for all public corporations of all industries? If the removal of the partner capital from the company capital is a self-corrupting event, why should any corporation ever be allowed to go public? What exactly is the difference? Do not huge retail businesses, manufacturing firms, and technology outfits also use shareholder money to grow and operate? Does Lewis really want to advocate the abolition of public equity markets in America? It is absurd to even carry that argument through to its logical conclusion.

I do not want readers to be confused. There are some stellar observations in Lewis's newest book. He gets inside some of the most confused and ridiculous financial transactions ever conducted in the history of civilization, and he does it with the precision of a surgeon. But Lewis does not use his 264-page book to even apply one word - not one single utterance - against the malignant government policies behind much of this malaise. He could easily counter that his book was not meant to be a comprehensive introspection of the financial crisis, and that would be a fair response. But readers hoping for a biog-picture analysis of this crisis will not get it here. They will see the worst of a very small number of Wall Street traders, and they will see a system that was clueless to keep this process from ballooning out of control (his section on the high seven-figure bond traders being regulated by the high five-figure ratings agency analysts is choice). The risk management processes of Wall Street broke down. The hubris of a select number of people grew to a point of perversity. Contrary to Lewis's assertion, the bulk of these CEO's and executives did lose their jobs (Citi, Merrill Lynch, UBS, Lehman Brothers, Bear Stearns, etc.) all fired their Presidents and CEO's as their houses burned to the ground. But overall, the book has a ton of good to say about the crisis. Most notably, he demonstrates how "in an old-fashioned panic, perception creates its own reality" (a concept that I want to explore much further in the future). He summarizes in a single sentence the most important thing that can be said about Lehman Brothers ("the problem wasn't that Lehman had been allowed to fail; the problem was that Lehman had been allowed to succeed").

I am truly glad that I read this book, and I do recommend it. However, as the pivotal work of evaluating the big picture of the crisis continues, the conclusion that Wall Street's transition to a shareholder-owned entity was at the heart of the matter is quite lacking. Unfortunately, both evil and incompetence exist in all kinds of business structures.

Liars Poker Squared, March 15, 2010
Mike Lewis has the gift for watching America and picking stories that are interesting to the public: in the last ten years Moneyball (the effect of statistical analysis on baseball) and The Blind Side (Importance of Left Tackles in American Football and rescuing an impoverished athlete). But his undying fame was Liars Poker, the story of Solomon Brothers Investment firm where he worked when 24 and made bonuses of about $200,000 without really understanding what he was doing. Possibly the most interesting part of this book is the foreward where Lewis describes how he felt when writing Liars Poker Wall Street provided worthless value to the economy and it was just a matter of years before the market recognized this. Unfortunately he was about 24 years too late. Couple this with his closing lunch with John Gutfruend and you have a great bookend for closure.

Now Lewis presents us with this bookend to Wall Street, how it universally missed the bad securities being issued backed by subprime securities destroying over $1 trillion in wealth. And his vehicle for this exploration is not a complete rehash but rather documenting the very few people (he estimates fewer than 20) that recognized that market crash coming and profiting immensely, people like Michael Burry, a Stanford Medical student who left to manage his own Hedge Fund. Actually there were many more than 20 people that knew this was coming. I began giving speeches in 2004 on "The Coming Crash in Home Prices". But these people he mentioned left conventional wisdom in believing that the subprime mortgages were worthless AND discovered the newly created tools to profit from them: credit default swaps and the ABX index. With the belief and knowledge these investors were rewarded handsomely whereas the rest of us suffered through a very downbeat market. But they deserved it and in Lewis' upbeat writing style he conveys eloquently but simply how the decisions were made and how they profited beyond belief.

There is one problem with this book. The subject was just covered quite well in The Greatest Trade Ever by Gregory Zuckerman which was released in November 2009. I've now read both books and there is an overlap. Greatest Trade is a very fast read and tells the story well focusing on John Paulson. This book doesn't delve on Paulson but does cover Michael Burry who was featured in the other book also.

Since so many reviews seem to be more interested in giving their political view of this tragic occurence, I'm compelled to weigh in on this issue even though I know this will upset some politcally closed minds. We must recognize if it was so easy to comprehend and solve we would have all profited in the manner these investors did rather than suffer through the last two years. We wouldn't have had the meltdown that we had. The smart people on Wall Street would not have overleveraged creating the steep downward ascent in destruction of wealth as we deleveraged. Specifically, I'm startled how many people want to blame politicians and FNMA/FHLMC. As a seller of $1 billion a year to these entities and some knowledge of their loss history as well as debating this issue with a former Vice Chairman of one of these entities who is a neighbor, it is shocking when you hear people talk of the subprime mortgages that FNMA/FHLMC owned. Did they do some such targeted loans? Yes. But half their losses came from their foray into Alt A loans. Coupled with the drop in property value and low equity position (they were leveraged at an unsafe 30 to 1 ratio) their insolvency was guaranteed if there was a downturn. Why were they not managing for this? It wasn't politically motivated. It was profit motivated. Quasi-guaranteed by the govt. they could issue callable agencies, their drug of choice, and arbitrage this money into a higher yielding security which they did. UNTIL the losses started. With 3% equity/custion, the 30 to 1 leverage immediately worked against them. Where were the regulators? Where was management managing risk? As the Vice Chairman said, the problem was property value drop. Well, with much advance notice and concern, WHY WEREN'T YOU MANAGING FOR THIS?????

With that as a background, let's approach the question of should there be a FNMA/FHLMC? I believe there should be. Exactly what do they do? When they are not leveraging for earnings which BTW they started in the early 90s when loan volume dropped and they recognized they needed to do something else to "gin" earnings, they perform their intended function to make borrowing cheap for homeowners. If there were no FNMA/FHLMC for the past two years 30 year mortgage rates for the last two years would not have been 4.25% to 5.25% but rather approximately 5.75% to 7.50%. In addition there would have been a lot more balloon or adjustable rate loans. Now, does America want this higher rate when an effective "NON-Profit" or govt. entity could maintain this function? I think not and I think we need to recognize that the recovery would have been much slower if many people would not have had the availability of this lower cost money to buy homes and refinance to lower rates. Enough with policy and now back to a conclusion.

But Lewis' writing style makes this book and his credibility from having written Liars Poker and the unique perspective of having worked in the industry and left it will make this a big hit. I strongly recommend this well written, important book.

"W/O Gov't Intervention Every Powerful Financier would Have Lost His Job, & Yet, The Financiers Used Gov't 2 Enrich Themselves", March 15, 2010
Michael Lewis's "The Big Short" tells a rather disturbing tale of some of the biggest profiteers of one of America's worst financial crisis, which we are likely still in the midst of. The amazing thing cleverly illustrated by Lewis, is that while most of the brightest minds in America woke up to our shocking decline once it was too late, a small handful of speculators not only called it correctly, some became fantastically wealthy. The question that nagged me throughout the book was how should I feel about people who just made a killing while most of us watched our retirements suffer alarming declines, and witnessed friends & family lose their jobs and houses?

Greg Lippmann is credited with being the first to expose the weakness in the market around 2006. He pitched the idea to hundreds of financial groups, but most seemed to invest in insurance policies to protect their exposure.

P105:

"A smaller number of people -more than 10, fewer than 20- made a straightforward bet against the entire multi-trillion dollar subprime mortgage market and, by extension, the global financial system. The catastrophe was foreseeable, yet only a handful noticed. Among them: Whitebox hedge fund, The Baupost Group hedge fund, Passport Capital hedge fund, Elm Ridge hedge fund, a gaggle of NY hedge funds, Elliott Associates, Cedar Hill Capital Partners, QVT Financial, and Philip Falcone's Harbinger Capital Partners. What most of these investors had in common was that they had heard, directly or indirectly, Greg Lippmann's argument."

Mr. Lewis is a fun and witty writer and his energy in The Big Short is very reminiscent of Liar's Poker, but I really found something morbid and unappealing about this subject. Reading about Paulson's $15 billion killing in 2007 had a different feel than say Soros in the `80's & `90's, but maybe now I know how the English & Indonesians felt? Our society is bred to believe that hard work and ingenuity are rewarded, but in this case there is a tangible human tragedy as a consequence of speculators earning a massive imbalance of wealth in relation to the rest of the population.

All of the speculators Mr. Lewis uses as examples technically did the right thing and chose wisely. Some were more sophisticated than others, but they all have one thing in common: they all made an obscene amount of money betting America would be brought down to its knees. I am also even more disgusted now with the rating agencies that were super-slick in stamping AAA ratings on what was absolute garbage in hindsight.

I found the book both fascinating and disturbing. I think it is now clear to me that financial speculation that doesn't promote sustainable growth needs to be addressed and properly dealt with, and that adequate steps have not been taken. Lewis definitely added a new layer to my awareness of the credit crisis, and covered some fresh ground beyond typical news. I recommend the book if you want to gain a deeper understanding of the sucker punch that just hit most of us.

BookForum review, March 23, 2010
In the run-up to the housing collapse of 2007-2008, houses weren't merely expensive, they were insanely expensive. Yet just when it seemed that prices couldn't go higher, some fool would come along and pay an enormous sum for a glorified hovel. You didn't have to be a genius to realize that American real estate was overvalued. It did, however, take something special to figure out how to make money off the madness. A group of between ten and twenty people did just that, making the bet of a lifetime that author Michael Lewis calls "The Big Short"

The cast of characters in Lewis's highly readable chronicle of the collapse (and what led to it) includes a misanthropic former medical resident, a money manager who saw himself as Spider-Man, and a pair of men in their thirties who started with $110,00 in a Schwab account they managed from a backyard shed in Berkeley, California. "Each filled a hole," Lewis writes. "Each supplied a missing insight, an attitude to risk which, if more prevalent, might have prevented the catastrophe."

Ever since he left Salomon Brothers to write Liar's Poker, the classic 1989 account of his years as a bond salesman, Lewis has been waiting for a day of reckoning. Little did he realize that the Wall Street he once knew now seems quaint. By 2007, it had morphed into a financial Frankenstein, a "black box" filled with hidden risks on complicated bets that could destroy its creators, but only if the government allowed it to do so.

The first to figure out how to use the system against itself was a man named Michael Burry, who once described himself in an online personal ad as "a medical student with only one eye, an awkward social manner, and $145,000 in student loans." Burry possesses an intellect so unusual that Lewis turns his journey of self-discovery into a fascinating subplot. While working the grueling schedule of a medical resident, Burry started writing about stocks in an online forum. (He also took apart his personal computer and put it back together between 16-hour shifts at Stanford Hospital, prompting his superiors to send him to see a shrink.) When he quit medicine to start the hedge fund Scion Capital, admiring investors tracked him down and gave him money.

When Burry started buying insurance in 2005 on nearly two billion dollars' worth of bonds backed by lousy mortgages, his investors thought he had gone nuts and nearly mutinied. But in 2007, when the housing market began to crumble and Burry's bet paid off, everyone realized that his predictions weren't crazy so much as a sane interpretation of a market gone mad.

Burry might have set the trade in motion, but he was no salesman. The one who took his idea and ran with it, the "Patient Zero" of this tale, was a bond salesman at Deutsche Bank named Greg Lippmann, who went around telling everyone he could that the end was near. Only a few took his advice, but most who did became extremely rich. (John Paulson, who made an astounding personal profit of four billion dollars, is the subject of another recent book on the same theme, Gregory Zuckerman's The Greatest Trade Ever.)

The reader can't help but root for this gang of financial renegades as they take on a corrupt and rotten system. Still, The Big Short lacks the pure narrative drive of Lewis' best-selling sports books, Moneyball and The Blind Side. The new work draws its energy from a different source, a palpable undercurrent of anger at the excesses of Wall Street the author shares with his subjects. Lewis is justifiably outraged at the behavior of Wall Street and what its trillion-dollar subprime-mortgage business truly represented: a means of extracting money from the bottom of America's social pyramid and moving it to the top. The problem isn't that Lehman Brothers failed, he shrewdly observes, but that it was allowed to succeed in the first place.

Lewis reserves special scorn for the biggest banks. Goldman Sachs was selling large volumes of bonds backed by subprime mortgages and, at the same time, betting against the junk it was peddling. The Big Short also tells the little-known tale of how Morgan Stanley allowed a single trader to lose more than $9 billion.

It's appalling, but not much has changed. Most Wall Street CEOs who set a course for the iceberg remain in power today. The blind are still leading the blind. At any rate, as Lewis observes, they still can't see things any better than a one-eyed former medical resident.

Good book, but a little late to market, March 15, 2010
First, I'm a big Lewis fan. Like many, my first exposure to Lewis was Liar's Poker; although, I've read several other Lewis books, his columns in the now defunct Portfolio, and occasional writings on Bloomberg. The Big Short isn't really a Liar's Poker experience.

I enjoyed the book, and it's a quick read. It's just that a couple of Lewis's main characters--Burry of Scion and Lippman of Deutsche--were previously covered in another book, The Greatest Trade Ever. As a result of The Big Short being released comparatively late, some of Lewis's thunder has been stolen, so-to-speak.

Regardless, the story is well written and if I had no experience with sub-prime, structured finance products, etc., I would have enjoyed it more. For the most part, I found myself grinding through the pages covering Burry. Ok, sits in his darkened office, listens to heavy metal, pouring over documents, investment from Gotham Partners, at odds with investors, Goldman not valuing CDS fairly, brink of collapse, etc. There's really little insight to add to this character if you've read The Greatest Trade Ever. In some ways, the same can be said for Lippman.

I did enjoy reading about Eisman of Front Point and his crew.

Bottom line, if you've read The Greatest Trade Ever and you're a huge Lewis fan, you'll likely enjoy the book, but you'll be familiar with the tale. Otherwise, there are probably other titles on your "To Read" list where your time may be better spent.

Of course, if you haven't read The Greatest Trade Ever, The Big Short should be rewarding.

Informative and entertaining, March 15, 2010
Hugely entertaining look at the genesis of our current economic mess. Lewis finds the very few investors who predicted and profited from the sub-prime mortgage meltdown and follows their journey from initial realization of the impending disaster to eventual payout. Following these eccentric characters and their interactions with the big Wall Street investment banks is at turns laugh out loud funny and head shaking incredulous. Lewis knows how to turn a phrase and does a good job teasing out the dark humor of the situations. He also does a very good job at explaining the essence of very complicated financial transactions and gives the reader a good understanding of the whys and hows of the financial meltdown. While this book is an important addition to our understanding of what happened, it isn't complete as it doesn't spend any time talking about US government policies that contributed to the crash (specifically, the special legal status given to the three rating agencies, and Fannie and Freddie's role in weakening underwriting standards). Nonetheless, this is still both an important and entertaining book.

Beware: One Star Reviews Based Only on Kindle Availability, March 16, 2010
I just read through all the reviews. 35 of 41 one-star reviews were to punish Amazon for not making the book available on Kindle at the time of their review. They haven't read the book and don't intend to until it's on Kindle--but that's not going to stop them from punishing Michael Lewis to get back at Amazon. I suppose Amazon should have two rating systems--one for what the author actually wrote, and a second to tally the numbers of those expressing disapproval for the book not being available on Kindle.

The Big Short is a wonderful read, well-written and informative. Lewis is a storyteller who roots his understanding of human activity in humans rather than in larger "processes". There's nothing wrong with observing the latter, but without humans there would be no economics, financial markets, etc. Nature doesn't provide for them, people do, and people have stories. They make decisions. They do intelligent things, selfish things and nutty things. These things are the threads woven into the larger tapestry. Lewis doesn't tell the WHOLE story of the financial meltdown, but he identifies many of the key players and how their decisions made a difference to the Big Short. He names Names. His prose, as always, is clear, witty and informative. The Big Short filled in many gaps in my understanding of how smart people can make a lot of money without really knowing (or caring) about how their industry actually works or what the consequences of their decisions might be. Makes you wonder.

Another Michael Lewis gem!, March 17, 2010
Contrary to the whining horde of "munificent" 1-Star allocating-Kindle owners, I actually read the book. Yes, through that "antique" medium, a hardcover printed edition. A medium which allows me to lend it out, have it signed by the author, pick it up in 20 years once more (after Michael Lewis pens the sequel), and place it prominently alongside other Michael Lewis volumes on the book shelves of my homely reading room.

I refrain from a comprehensive review, given that numerous detailed and persuasive reviews appear on these pages, regrettably buried amongst an alarming preponderance of peeved Kindle owners, who have instead opted to commandeer the reviews for purely self-centered reasons. Reasons completely unrelated to the narrative. (Instead of unfairly skewing the book reviews of The Big Short, Amazon provides Kindle owners with the appropriate forum to voice complaints (below the book image): Tell the Publisher! I'd like to read this book on Kindle!)

The Big Short is an interesting read, written in the delightful, thoroughly investigated, and remarkably enlightened style to which Michael Lewis aficionados are accustomed. While the book certainly doesn't encompass the entire body of the financial crisis, The Big Short provides an interesting account on some unlikely luminaries engaged in the markets prior and during the heights of the recent financial crisis. The book merits a prominent place amongst a collection of texts recounting products and players that contributed to the rise and fall of financial institutions, markets, and concepts.

Another worthwhile read on those who saw the sub-prime crisis coming, March 28, 2010
Very much along the lines of Zuckerman's "The Greatest Trade Ever," Lewis explores the cast of characters who correctly deduced that the sub-prime fall was inevitable. Lewis' book arguably had much of its thunder stolen by being beaten to market by Zuckerman. Deciding between the two books, Zuckerman is marginally ahead, but Lewis' treatise covers enough new material and his style is different enough to make The Big Short a worthwhile read. It is an easy, uncomplicated read and flows quite well. It is not technical in nature, but should be more viewed as a populist commentary of characters and events. Lewis' analysis can't be viewed as being too in-depth (especially by market professionals) but then this book is not aimed at a dry academic market, but rather the general public interested in finance and the sub-prime crises. I enjoyed the book, but I'm still searching for the definitive account of the sub-prime debacle. ... Read more

Editorial Review

"Hell is empty, and
all the devils are here."
-Shakespeare, The Tempest

As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street, or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators, or clueless home buyers?

According to Bethany McLean and Joe Nocera, two of America's most acclaimed business journalists, the real answer is all of the above-and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

All the Devils Are Here goes back several decades to weave the hidden history of the financial crisis in a way no previous book has done. It explores the motivations of everyone from famous CEOs, cabinet secretaries, and politicians to anonymous lenders, borrowers, analysts, and Wall Street traders. It delves into the powerful American mythology of homeownership. And it proves that the crisis ultimately wasn't about finance at all; it was about human nature.

Among the devils you'll meet in vivid detail:

• Angelo Mozilo, the CEO of Countrywide, who dreamed of spreading homeownership to the masses, only to succumb to the peer pressure-and the outsized profits-of the sleaziest subprime lending.

• Roland Arnall, a respected philanthropist and diplomat, who made his fortune building Ameriquest, a subprime lending empire that relied on blatantly deceptive lending practices.

• Hank Greenberg, who built AIG into a Rube Goldberg contraption with an undeserved triple-A rating, and who ran it so tightly that he was the only one who knew where all the bodies were buried.

• Stan O'Neal of Merrill Lynch, aloof and suspicious, who suffered from "Goldman envy" and drove a proud old firm into the ground by promoting cronies and pushing out his smartest lieutenants.

• Lloyd Blankfein, who helped turn Goldman Sachs from a culture that famously put clients first to one that made clients secondary to its own bottom line.

• Franklin Raines of Fannie Mae, who (like his predecessors) bullied regulators into submission and let his firm drift away from its original, noble mission.

• Brian Clarkson of Moody's, who aggressively pushed to increase his rating agency's market share and stock price, at the cost of its integrity.

• Alan Greenspan, the legendary maestro of the Federal Reserve, who ignored the evidence of a growing housing bubble and turned a blind eye to the lending practices that ultimately brought down Wall Street-and inflicted enormous pain on the country.

Just as McLean's The Smartest Guys in the Room was hailed as the best Enron book on a crowded shelf, so will All the Devils Are Here be remembered for finally making sense of the meltdown and its consequences. ... Read more

Reviews

I thought it would take at least a decade for a book this good
I am only about 40% through this book but I had to stop and give it 5 stars! This is an excellent and balanced account of the events, laws and business practices that led up to the crisis. This is not a book that over-simplifies the crisis with terms like "Wall Street Greed". Instead, it sheds light on all the variety of players that it took to create this mess: Fannie/Freddy, The Sub-prime companies (many you probably never seen mentioned in press), policies and laws that go back to the Clinton era, failures of regulators and the justice department, the Fed, Banks, Wall St., the Rating agencies and of course, the general publics own stupidity.

If you are willing to accept the fact the the answers to the cause of the crisis are not simple and you "can handle the truth" then you must read this book.
... Read more

Editorial Review

The dramatic story behind the most audacious power grab in American history
 
The financial crisis that exploded in 2008 isn’t past but prologue. The stunning rise, fall, and rescue of Wall Street in the bubble-and-bailout era was the coming-out party for the network of looters who sit at the nexus of American political and economic power. The grifter class—made up of the largest players in the financial industry and the politicians who do their bidding—has been growing in power for a generation, transferring wealth upward through increasingly complex financial mechanisms and political maneuvers. The crisis was only one terrifying manifestation of how they’ve hijacked America’s political and economic life.

Rolling Stone’s Matt Taibbi here unravels the whole fiendish story, digging beyond the headlines to get into the deeper roots and wider implications of the rise of the grifters. He traces the movement’s origins to the cult of Ayn Rand and her most influential—and possibly weirdest—acolyte, Alan Greenspan, and offers fresh reporting on the backroom deals that decided the winners and losers in the government bailouts. He uncovers the hidden commodities bubble that transferred billions of dollars to Wall Street while creating food shortages around the world, and he shows how finance dominates politics, from the story of investment bankers auctioning off America’s infrastructure to an inside account of the high-stakes battle for health-care reform—a battle the true reformers lost. Finally, he tells the story of Goldman Sachs, the “vampire squid wrapped around the face of humanity.”

Taibbi has combined deep sources, trailblazing reportage, and provocative analysis to create the most lucid, emotionally galvanizing, and scathingly funny account yet written of the ongoing political and financial crisis in America. This is essential reading for anyone who wants to understand the labyrinthine inner workings of politics and finance in this country, and the profound consequences for us all. ... Read more

Reviews

Wonderfully written and biting
I've been reading all kinds of books since I was 8-9 and have always been able to absorb the information without getting too emotional or involved in the story. I can't count the # of times I shook my head in disbelief or cursed or hoped it was a joke while reading this one. Although I've read all of Matt's books and pretty much read all his blogs/essays that I can find online, this book has left a different mark on me. Is it the seriousness of the tone in this book that's different from the funny/sarcastic humor & petty name calling that's prevalent in his other works(btw there is no shortage of funny one liners and comparisons-the best one being the answer you get for asking why you like pepsi)? I don't know, but I wish, and I certainly plan to do my homework, someone or a lot of folks would prove these assumptions, allegations and accusations to be wrong. Not in the way it was presented (as was the case in all the responses I saw after the squid RS article) but factually! I need someone to prove he's wrong about everything in this book and prove that Matt doesn't know what the hell he's talking about. If there aren't any factual rebuttals to the discussions in this book, I am afraid I'll regret reading this book in the first place. This is too corrupt and cruel to be true. I've never wished for author to be so wrong about so much. Not sure how this review appears to a stranger but as much as I want and need to commend Matt on his efforts, I am not able to. Because if the book is true, I guess he's done too good a job of exposing a lot of painful things that am not able to see past. Ultimately, may be that's the best review an author can get-doing such a wonderful job that the reader wishes he hadn't read it!
Great, just a great book.
Thanks Matt.
murugan ... Read more

Editorial Review

Reviews

Definitive Indeed!
This new edition of the RTS is worth buying even if you already own an earlier edition. The editor has included important material on how this book was developed and interpreted.

As for the book itself, the Road to Serfdom explains the rise of totalitarianism in twentieth century Europe. Yet it also made a more general argument concerning the incompatibility of democracy and comprehensive central planning. Hayek argues that the pursuit of socialist ideals leads to totalitarianism. While socialist ideals seem noble to many, those who persist in realizing these ideals will find it necessary to adopt coercive methods that are incompatible with freedom. Thus socialists must choose between their egalitarian goals and the preservation of individual liberty.

Hayek describes how Europeans came to expect progress, and became impatient for faster progress. The liberal reforms of the 19th century delivered unprecedented economic progress. Much of this was directly due to scientific discovery. The role of free competition in promoting scientific discovery was less obvious. Europeans increasingly came to believe that scientific planning of society itself could accelerate greater progress.

Europeans also changed how they thought about equality and freedom. Insistence upon freedom from want displaced the yearning for freedom from coercion. Democracy came to be seen as a means of realizing an increasing number of social goals, rather than as a means of preserving freedom. To Hayek, these were dangerous errors. Democracy could only work effectively in areas where agreement upon ultimate ends could be attained with little difficulty. A democratic government could enforce general rules of conduct that applied to all equally (i.e. free speech and free association). Democracy can never produce agreement over policies that affect specific economic results. One always gains at the expense of others in such matters. Such Economic planning places impossible demands upon democracy. This is because pursuit of specific ends requires timely and decisive action. Democracies move too slowly to attain specific ends, so arbitrary powers of government will grow. A planned economy will ultimately require acceptance of dictatorship. This is a dire consequence, as it is the worst sort of tyrants who are most adept at wielding dictatorial powers.

Some might say that these arguments are unduly pessimistic. Hayek points to the examples of Hitler and Stalin to support his case. Of course, these are worst case scenarios. Have not England, Sweden, and the US adopted large welfare-regulatory states without such tyranny? This is a fair point, yet we should remember two things. First, Hayek claimed that centralized control of the economy would destroy freedom ultimately, but gradually. Second, Western nations have not yet gone as far in planning their economies as did Russia and Germany in the 1930's. The fact that we have yet realized the horrible results of Stalinism implies neither that were are safe from despotism in the future, nor that our present situation is entirely satisfactory. One can easily argue that we have already started on the wrong path. For instance, Hayek's chapter on `The End of Truth' applies to modern political correctness.

Hayek wrote this book not only to warn people about the limits of democracy and the incompatibility of planning and freedom. This was the start of his project concerning the abuse of reason. His warning is also about the tendency to overestimate the abilities of even the best and brightest individuals. Not even the best and brightest can comprehend modern societies. Socialists who favor comprehensive planning, and even modern liberals and conservatives who want to plan part of society, proceed on a false assumption concerning human reason. Ultimately, Hayek makes a strong case for limited constitutional government. To expect more of democracy than what Madison and Jefferson intended invites disaster.

The Road to Serfdom is a profound defense of commercial society and limited government. The RTS also is where Hayek started his 'abuse of reason' project. To fully appreciate Hayek's genius in the RTS, one should read his subsequent books in this project- The Constitution of Liberty and Law Liberty and Legislation V1-3.

The RTS has its critics, mainly on the left. Due to its insightful nature the Road to Serfdom has produced hysterical responses from the left. Leftists despise the RTS simply because it strikes at the core of both democratic-socialist or Marxist beliefs. Some serious scholars have attacked the RTS (i.e. Farrant and Levy) but their objections are misguided. The Road to Serfdom stands out as a true classic, as timeless as it is insightful. It offers insights that are relevant to our current problems with growing Federal spending and regulation. Read it completely and repeatedly.

Ahead of his time
Over 30 years ago, when I was in graduate school, this book was nowhere to be found on any Political Science or Political Theory reading list. I suppose part of the reason was that once the Nazis and Fascists had been defeated, their ideas were no longer seen as important. The question then was whether or not Communism would succeed. Furthermore, then and now, many people in academia had no complaint about government power as long as their side holds the power.

Hayek skillfully deflates that delusion by showing how the very economic powers of government created by the Social Democrats were the powers the Nazis used to consolidate their power.

This book was published 64 years ago but is as timely today as it was then.

Too bad we aren't taking this advice
Friedrich Hayek, the Nobel prize winning economist, wrote this brilliant classic as a critique of government intervention and manipulation in markets. I am neither an economist nor a political scientist, but I was led to this book after watching with horror the recent outrages that are consciously being inflicted on us by our elected officials, most recently the bailout and socialization of the two giant mortgage lenders, Freddie and Fannie. I couldn't remember that I ever received any share of the loot when those companies were making huge profits and their CEOs were earning tens of millions per year, but now I find that our elected officials have written a blank check in my name, the taxpayer, to bail out these companies' losses and stupidity, and then handed the check to a group of unelected officials (and, surprise, surprise, those two companies spend hundreds of millions on congressional lobbying). Privatize the gains, socialize the losses: sounds like a win-win situation for somebody.

This kind of disastrous socialism is exactly what Hayek critiques in devastating form in this book, specifically government control of the economy. Apparently, they say, this book has been very influential, but a layman could certainly never tell by looking around. Hayek was writing from the perspective of a central European who had recently witnessed first-hand the unfolding development of National Socialism (Nazism) in Germany, and he is warning that the exact same attitudes and policies that had been followed in Germany were uncritically being followed by the Allies, merely at a few years distance.

He begins by recollecting the ideals of old, classic liberalism, "the forgotten road". Of course, in Hayek's context, "liberal" means the true, historic liberalism of limited government, free markets, and private property, not "liberal" in the bastardized sense somehow hijacked by Leftists to mean unlimited government, socialized markets and massive forced wealth redistribution. He looks at the rise of collectivist thinking versus individual (it's all for the greater good); the problems of central planning in a democracy (someone in power makes the economic decisions for everybody else); the downfall of the Rule of Law (government is no longer bound by fixed rules announced beforehand but instead possesses arbitrary power limited only by its own discretion); the inextricable link between centralized economic planning and totalitarian regimes (if we're going to follow a plan, someone's got to force everyone to follow it); the problem of deciding how the society's production will be distributed; a chapter showing that "nothing is more fatal than the present fashion among intellectual leaders of extolling security at the expense of freedom" (Republicans apparently didn't get the memo); how in a socialized economy the worst individuals inevitably rise to the top (Really? Can it be? Obama and McCain?); the necessity of manipulating truth in a socialized society; and the fact that Nazism was a direct outgrowth of socialism and socialist ideology.

The relevance of the points enumerated above does not require comment. We are running madly down the road to serfdom, which is the road of socialism. Unfortunately for those of us who are being dragged along against our will, history is not neutral, and we will suffer the consequences of other peoples' decisions, just as the Jews in Germany did and the Russians in the Soviet Union did. Socialism has always led to poverty and oppression, and freedom, on the rare occasions it has been tried, has produced unparalleled prosperity. Hayek shows in detail why. We've decided to give socialism another try. God help us.

It will convert you into a libertarian
I read it at the University, here in Guatemala, where my University has a library that is called Ludwig Von Mises and the Auditorium's name is Friedrich Von Hayek.

Once you read this book, it is impossible not to believe in freedom and to know that freedom and big interventionist government are not compatible concepts.

The principles are so basic that you do not need to be an economist (I am not) to understand them. If people do not trust themselves to make decisions because "people are ignorant or greedy" then they will give someone else the power to decide for them (government) that is the road to serfdom. People will lose their freedom to decide which insurance, retirement plan or things to buy, which charity to help, these decisions will be made by powerful burocrats (that maybe who friends of someone in government) that will know what is best for you. Big taxes so government will decide better what do do with the money you earned.

I have seen my government follow all these steps that go to the road of serfdom and I have seen exactly the results Hayek points out, I have been seeing that happens for 20 years (since I read the book). The book is so logical that after reading, if you have common sense and do not have a burocratic position to defend, you will definitely become a libertarian.

True Liberty Is Not the Freedom to Take From Others...This Book Explains Why
This is a new version of "The Road To Serfdom." Although it is a classic, I had never read it until now. I appreciated the additional information about how it was developed and interpreted. I believe Hayek is brilliant in his perception of with is the big picture regarding the results of the various political philosophies. It is not any easy read, but it is worth reading.

Primarily this book explains the rise of totalitarianism in twentieth century Europe and extends it to an argument concerning the incompatibility of democracy and comprehensive central planning. Hayek argues that the pursuit of socialist ideals leads eventually leads from socialism to totalitarianism.

While many think that socialist ideals are noble, those who implement socialism will find it necessary to adopt coercive methods that are incompatible with freedom of the poeple. Thus socialists must eventually choose a big central form of government that sets aside their egalitarian goals as it destroys individual liberty.

Hayek describes how Europeans tried to accelerate greater progress and freedom from want by giving up individual freedom from coercion. Their form of democracy came to be seen as a means of realizing an increasing number of social goals, rather than as a means of preserving freedom.

Hayek believes these were dangerous errors, especially for those countries like Germany and Russia, which ultimately required the acceptance of dictatorship. This is a dire consequence, as it is the worst sort of tyrants who are most adept at wielding dictatorial powers. The fact that other European countries have yet realized the horrible results of Nazism or Stalinism does not mean that they are safe from despotism in the future. It only says they are just moving toward it more slowly.

Hayek wrote this book to warn people about the limits of democracy and the incompatibility of social planning and freedom. Socialists who favor big government and its comprehensive planning, and even modern liberals and conservatives who want to plan part of society, proceed on a false assumption concerning human reason. Ultimately, Hayek makes a strong case for limited constitutional government. To expect more of democracy than what Madison and Jefferson intended invites disaster.

I believe "The Road to Serfdom" is a profound defense of our U.S. Constitution and its form of limited government. Because of that I give it 5 stars. I can see why this book stands out as a true classic. It is both timeless and it offers insights that are relevant to our current problems with growing Federal spending and regulation.

I also beleive it wakes people up and will get them to join the new American Revolution that the Tea Party started in order to take back the Government and make it responsible again. If you love America and want to see it continue to be free for your children, then I highly recommend you read this book ASAP.

A WORD OF CAUTION: If you read this book and begin speaking out or taking action to defend Liberty, there is a very high chance that those who embrace social governmental control (and the removal of our U.S. Constitutional rights) will become offended. And, because they don't have a regard for following laws (because they equate liberty with the freedom from moral discipline), they might try to accuse you of false wrong doing (i.e. lie about you and perhaps call you a racist) and otherwise try to harm your reputation.

Therefore, I would highly recommend getting another book called, Wild West 2.0: How to Protect and Restore Your Reputation on the Untamed Social Frontier. As a Patriot, it is inevitable that you will run across people who will try to ruin your online reputation (like they do to other conservatives). This book tells you exactly where to look for the problems that Liberals might cause for you and then how to repair them.

A major SOURCE (not always credited) for many of today's trendy writers
The Road to Serfdom by F.A.Hayek


(Note: I own and have READ this book) (...)

Short review: strongly recommended. A timeless classic. An analytic exposition of the same old re-cycled, cancerous, glib, smug nonsense that we hear endlessly repeated so often today. Namely that (yawn) Capitalism and the Free Market are unjust, inequitable, and dying anyway. No good has ever (EVER) come from rich, corrupt businessmen. They are exploiters and parasites. They need to be replaced by a benevolent, kind, compassionate 'planned' society. Administered by an Elite body of Federal Planners in Washington, who are wise and kind, (a tear trickles down our cheek), and who consist heavily of academics, intellectuals and Supreme Court Judges. We need more Government bodies, because they are fair, balanced, and wise. We need more rules, regulations, taxes and government inspectors to help business and private investment. (All kneel....)

A heavy read, requires concentration and dedication, and be prepared to look up many references. Some long paragraphs, some convoluted sentences, some ponderous pronunciations, but a work, written roughly between 1938 to 1944, which can be used as a stunning blue print to understand today's misleading representations by left wing extremists and political agitators. .What we see today in America is nothing new. The poorly read, uninformed, short sighted, activists, eager as ever to mount the barricades, but quite unwilling to sit, read, listen... and think.
It's the Old Marxist Brigade, the dreamers and the malcontents, revamped, with changed colors, new rhetoric, and lots of Utopian promises of 'free lunch' for all. In fact, they are intent on their own personal gain and self aggrandisement. Power politics as usual. Hayek foresaw it all, and described it for us in this incredibly clear sighted and clairvoyant work. This book has been an important inspirational source for many of today's more popular trendy conservative writers, although, so it seems, most will not admit to it. (With the exception of Mark Levin in his interesting "Liberty and Tyranny")

Long review: I like an author who entitles a chapter "Why the worst get on top" (chapter 10). I've often wondered the same thing. On page 160 he says: "There are three main reasons why such a numerous and strong group with fairly homogeneous views is not likely to be formed by the best but rather by the worst elements of any society."
He then gives "three main reasons", which I suggest are well reasoned, well thought out, and ring remarkably true of today's self appointed saviours of the exploited masses. Check it out yourself.
I'll quote you part of his third reason:
"It seems almost a law of human nature that it is easier for people to agree on a negative program - on the hatred of the enemy, on the envy of those better off - than on any positive task."
P.162: "Collectivism has no room for the wide humanitarianism of liberalism but only for the narrow particularism of the totalitarian."
Chapter 2 is called "The Great Utopia", and if you're a bit of a weathered cynic like me, you'll enjoy it. Page 77 contains the classic quote from Tocqueville "Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude".
On p. 78, Hayek says: "There can be no doubt that the promise of freedom has become one of the most effective weapons of socialist propaganda and that the belief that socialism would bring freedom is genuine and sincere. But this would only heighten the tragedy if it should prove that what was promised to us as the Road to Freedom was in fact the High Road to Servitude..."
Chapter 11 is called "The End of Truth" and you have to smile. Maybe Hayek was a secret time traveler. Maybe he visited America in the year 2009. If he did, then he penned the opening paragraph of this chapter for Americans today. Read it, you might like it. He continues on page 172: "The moral consequences of totalitarian propaganda....are of an even more profound kind. They are destructive of all morals because they undermine one of the foundations of all morals: the sense of and the respect for truth."
Chapter 13 is called "The Totalitarians in our Midst", and must have been written yesterday. It contains so many quotable quotes, I shall limit myself to two: "...there is scarcely a leaf out of Hitler's book which somebody or other in England or America has not recommended us to take and use for our own purposes." (p.195)
Or how about this one, same page: "Individualism must come to an end absolutely. A system of regulations must be set up, the object of which is not the greater happiness of the individual.... but the strengthening of the organized unity of the state for the object of attaining the maximum degree of efficiency..."

This book is a classic. The introduction by Bruce Caldwell is detailed.
My two minor grumbles would be:
1) that some of the sentences are very long winded. Lots of clauses, juxtapositions, conditional statements. I read a lot, but I frequently found myself forced to re-read a sentence, and sometimes a whole paragraph. Hayek crams a lot into every word. Anybody who says this book is an 'easy read', with 'smooth prose' possesses a much higher IQ than I do.
I still can read any page in Hayek, and enjoy it. It's a rich offering.
2) So why in heck are there only 44 reviews so far of this masterpiece on Amazon? Many authors today, with over 1,000 reviews, widely feted with lots of rah-rah-rah and prime time hoopla-la-la, clearly show Hayek Road-to-Serfdom influence in their work. They don't always admit it.
For my money, THIS is a major source for many of today's writers. Yup, you have to work at Hayek. He's not easy. Roll up your sleeves. Take notes. You can't watch the 'Commie News network' (CNN) at the same time, do the crossword, and listen to your favorite rapper. But Hayek is overwhelmingly well worth every effort.
A truly great, gripping, far sighted classic.

The Road to Serfdom Revisited
This is Friedrich Hayek's magnum opus. It is so, however, not because it his most insightful, his most deep, or his most innovative book (his more specialized works in political philosophy and economics claim those titles), but because it is the opposite, that is, a general book, and because this is the kind of book that the world most needed then, and most desperately needs again now.

I say this because Professor Hayek's work is essentially a restatement of the age-old principles of classical liberalism, dating at least back to the Enlightenment, in light of the then seemingly insurmountable approach of socialism, which Hayek feared (rightly) would lead to a totalitarianism just as deadly as that of Nazi Germany. Hence Hayek's thesis is twofold: it is a warning against the path Great Britain was on at that time (which is a path well-trod by the twenty-first century), which Hayek believes leads to slavery, to misery, and to totalitarian control; at the same time, Hayek makes these critiques in light of the central tenets of old liberalism (to be clear to reviewers, this liberalism has nothing to do with modern day "liberalism") - free markets and individual liberty.

As for Hayek's analysis itself, it is nothing short of brilliant. Again, Hayek more meticulously works out the details of his political theory in works like the "Constitution of Liberty", but here he is at his best, providing the big picture of the threat of socialism, in all its guises, and what it represents to any country which values individual freedom. A number of chapters will seem prescient, such as "The End of Truth" (Orwell's 1984 clearly borrows from this), detailing how under a totalitarian regime, truth becomes a matter of utility for the ruler, a pliable tool rather than an objective goal to be sought and conformed to. Most scary, Hayek shows how this is partly accomplished by the manipulation of language.

There are two things, however, which make this book so accessible, and therefore serve as the quintessential introduction to classical liberal thought. First, it is remarkably conciliatory towards opponents. Hayek is not a firebrand or an ideologue, but an intellectual, who holds strong views, but knows and respects members of the opposite camp. Hence, he dedicates this book, "to socialists of all parties," and never lowers himself to the level of diatribe or rambling. His earnest goal is to open his readers' minds to ideals that are perishing, and he knows eristic does not accomplish that. This alone allows the book to stand in marked contrast to any contemporary book. Second, however, Hayek's book is still read because though the circumstances have changed, it is as relevant as though it were written yesterday. As Milton Friedman says in his introduction, during the first half of the twentieth century people praised socialism but practiced capitalism; today, we praise capitalism but practice socialism. We are moving, sluggishly it is true, but certainly nonetheless, down the same road that Hayek feared sixty-six years ago. We are traveling down the road to serfdom.

Do Not Stop Here!
This book has come across some recent popularity after Glenn Beck dedicated an entire show to this book.

I picked up this book a year and a half ago. It is truly a tremendous book, and one that provided me motivation to continue my studies at a fervent pace.

I suggest Glenn Beck fans should not stop here. The Austrian school is going to open your eyes. If you have not already, I highly suggest you begin to look into studying the many important works of Murray Rothbard and Ludwig Von Mises. Rothbard particularly had a tremendous ability to make complex subjects simple and actually pleasurable, so fear not if you are at all turned off by studying economics. It is much too important to push aside. If you do not wish to buy the books, you can download e-books absolutely free on the Mises Institute website. Also, the site offers free articles, lectures, and audio downloads on subjects including economics, history, and libertarian thought.

Especially relevant in today's world
This book contains the most notable works of F.A. Hayek, the famed, Nobel-prize winning economist who explained yet again why democracies are best based on free market capitalism, and that socialism tends to lead to tyranny.

Hayek demonstrates how socialist governments, motivated by political considerations, can't help but interfere with markets. But economic principles are like the law of gravity...they can't be altered at the whim of a state bureaucrat, so government tampering usually results in cycles of clumsy tampering, suboptimal economic performance, financial crisis, and greater intervention. Hayek would argue for solutions based on individual freedoms while limiting government's ability to intervene in markets, but socialists see it differently. Instead, they demand greater and greater powers, claiming that only greater intervention can fix the problems their actions have caused. To the extent that people buy into this thinking and vote to grant governments ever more power, economic and personal liberties are surrendered, eventually resulting in tyranny and totalitarianism.

One of the other interesting points Hayek makes is that socialism and it's characteristic centrally planned economies tends to concentrate power in a small band of political elites. In this type of system, only the most corrupt and politically ruthless tend to advance, and over time it gets to be increasingly difficult to oppose them. Leaders, unable to offer real growth and prosperity, turn to things like thought (media) control and other nefarious means to stay in power and advance their socialist agendas.

It's also important to understand that this book, while scholarly, has its roots in a far more pragmatic and patriotic place. Written in 1944, Hayek and some of his peers were afraid that the drastic government market intervention surrounding WWII would be carried forward after the war, and the entire world would settle into a Soviet-style socialism. At the time, the Soviets were seen as successfully managing their economy through central planning, and socialism was the darling of intellectuals around the globe. Hayek, fearing this outcome, organized numerous meetings among the world's leading economic minds, and eventually, his book would have a dramatic impact on economic thinking for people in general as well as economists. Milton Friedman writes on this topic and it makes a fascinating read.

Although Hayek used Nazi Germany and the Soviet Union for most of his examples, it's striking to see current events through the lens of this book, whether the mortgage lending crisis, AIG, GM, Cap and Trade, US health care system intervention and so on. Although few disagree with Hayek's principles, it is as though we need to relearn them every so often. Indeed, Hayek isn't the first (or last) to advocate these principles...Hobbes, Locke, Adam Smith, Milton Friedman and so on have been pointing the way for most of the last three centuries. Perhaps "Hope and Change" is just easier to believe in than sober, economic policies of individualism and personal freedom.

Very highly recommended and should be required reading for patriots and voters trying to make sense out of today's march towards socialism. ... Read more

Editorial Review

A brilliantly reported true-life thriller that goes behind the scenes of the financial crisis on Wall Street and in Washington.

In one of the most gripping financial narratives in decades, Andrew Ross Sorkin-a New York Times columnist and one of the country's most respected financial reporters-delivers the first definitive blow- by-blow account of the epochal economic crisis that brought the world to the brink. Through unprecedented access to the players involved, he re-creates all the drama and turmoil of these turbulent days, revealing never-before-disclosed details and recounting how, motivated as often by ego and greed as by fear and self-preservation, the most powerful men and women in finance and politics decided the fate of the world's economy. ... Read more

Reviews

Simply a chronology
The book details the events, the people and the conversations that roiled the banks in 2008. The book does not really discuss why the events happened. If you're looking to understand why these banks fell, this is not the book to read.

The book is very readable and even at 539 pages, a person can finish it quickly. Another plus is that unlike most NY Times reporters, the author keeps most of his opinions out of the story until the last 2 pages.

His opinions are:

The government allowing Lehman to go into bankruptcy was the catalyst that caused the floodgates to open. This is probably why he spends a lot of the book developing the Lehman story.

He's ambivalent about whether the government players could have prevented the collapse of the banks or even if they did the right things when they did act. But he's quite clear that more banking regulation was needed then and is needed now.

One can disagree with his opinions, but he does well to leave most of them till the end of the book.

A few criticisms:

As mentioned, he does not discuss why exactly these events happened. In the epilogue, he briefly mentions 4 events that percolated over 10 years that conspired to cause the perfect storm in 2008. But he could have spent a chapter (prologue) describing these events and how they conspired to cause the problem. Apparently he's not a banker or an academic, so maybe he didn't feel qualified to do this.

Second criticism: In a few places prior to his epilogue, he lets us know his (negative) opinion of some players. It's obvious his disdain for Chris Cox and Sheila Bair. But he's particularly vitriolic towards the Wall Street Journal editorial page. I thought that as a chronicler, the author should have omitted his opinions of these people/institutions. Except for these incidents, he does largely keeps his opinions out of the manuscript until the last few pages.

Overall, a quick read that details the players and the chronology of events. If all you need is to understand the crisis, then this book should suffice.

A Real Page Turner
This is an excellent book that reads like something that Dan Brown might have written. But its real. The part that amazed me was the level of detail Sorkin was able to get about behind the scenes conversations that took place. Stuff about how people such as Dick Fuld of Lehman reacted to the problems when it was becoming clear that the company was going down and he was in denial. How Paulson was reacting to things when there were no rules about what to do.

But probably the most interesting parts were how the different personalities were reacting while the ground was shifting under them. At the peak, many of the people involved were literally working 24 hours a day highlighted by a phone call made to Vikram Pandit, CEO of Citibank at 3 am telling how a deal he made at midnight for Wachovia had instead been trumped by another and that that deal had already been signed and blessed by the government. How major decisions were being made on the run and how solid institutions became institutions on the brink in a matter of hours.

The book also explains how companies like Barclays and China Investment Corporation were working behind the scenes as well how Paulson, Geithener and others in the government were scrambling to keep things from collapsing. There is a lot of Monday Morning Quarterbacking going on and some of the things these people did may not have been the best, but they pulled it off and we should all be grateful.

But there some bad guys, namely the short sellers and as usual some in congress. The book makes clear that out of control short selling added fuel to the flames that were occurring and that when we were facing this emergency some members of Congress were focused on their own butt instead of doing what was needed.

There is a huge cast in this book and its is sometimes hard to keep the people and their roles straight, but make the effort. You will be rewarded.

Interesting reading
I was interested in knowing what goes on behind the scenes in these financial crisis times. I thought maybe it would be a little dry reading matter, but found it was as hard to put down as an adventure novel. Very indepth without any apparent bias in my opinion on the author's part.

The Definitive Book on Financial Crisis
After reading two other well-publicized books on the real estate bubble and following market crash, I felt like I had been had. One book, primarily about Lehman, was shallow and written by an egotistical prima donna. The other was too technical and appeared to not have been edited well.
This book was written by a finanial author and is fair, thorough, and puts everything in perspective. It is well-written and flows for an easy read.
If you have any interest in financial history, this book belongs on your shelf along with other classics like When Genius Failed, Barbarians at the Gate, and the Smartest Guys in the Room. Ignore the poor ratings by those who were disappointed in the Kindle price. That is another issue.

Strong Recommendation
I have read many books on last year's economic crisis, and this book if not the best is certainly one of them. It is a well-written description on literally a day to day basis of the events in NYC and DC that changed our economic landscape forever. The book allows us to know the thoughts of many of the major participants and details the reasons for the actions taken, and shows us how close we came to an economic collapse. I strongly recommend it. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves

Important Lessons in Too Big To Fail
Book Review: Lessons From Andrew Ross Sorkin's "Too Big To Fail"
By Ravi Nagarajan
Published on January 5, 2010 at 6:05 pm
Originally published on The Rational Walk: [...]

Most outside observers had difficulty keeping up with the momentous events of the weekend of September 14-15, 2008 with all of the twists and turns that finally led to Lehman Brothers' historic bankruptcy filing, Bank of America's purchase of Merrill Lynch, and AIG's bailout only a few days later. Ever since that tumultuous period, there has been a need for a comprehensive book covering the behind the scenes events. Andrew Ross Sorkin's Too Big To Fail has succeeded in delivering exactly what is needed to gain a better understanding of these historic events.

If newspapers are the "first draft of history", Andrew Ross Sorkin played a major role with his New York Times coverage of the financial crisis in 2008. Although Mr. Sorkin is only 32 years old, he has obviously been able to build up a massive network of contacts on Wall Street and in Washington. Mr. Sorkin's coverage spans the timeframe from the failure of Bear Stearns up to the passage of the TARP legislation, but the narrative really shines when it comes to the events of a September weekend when the financial system came much closer to total collapse than anyone on the outside could have realized at the time.

Mr. Sorkin's book has received a great deal of media attention and book reviews, but there is also a need to step back and think about the lessons that must be learned if future crises are to be avoided. The inability of Washington to come to any agreements on financial system reform was a significant failure in 2009, but one that received little attention outside the financial press. With each passing week of relative "calm", chances grow greater than another crisis may be required to prompt reforms.

Greed and Fear

The old adage that a balance between greed and fear creates equilibrium on Wall Street seems hopelessly out of date in light of the revelations in this book. In the "text book world", investors and other players in a market system need to be driven by the profit motive ("greed") but decisions are tempered by a desire for safety ("fear"). For many decades on Wall Street, the partnership model in investment banking seemed to keep the level of risk aversion high enough to prevent overreaching (for a great book on the old model at Goldman Sachs, for example, see Charles D. Ellis' The Partnership).

One can argue that many leading Wall Street players lost huge sums of money in the 2008 crash, so the absence of more "fear" in the system cannot be explained merely by a change in the ownership models of the investment banks. Indeed, an absence of adequate levels of risk aversion extended to Main Street and Washington as well. Rep. Barney Frank's famous declaration in favor of "rolling the dice" with softer underwriting standards for mortgage lending as well as the reckless disregard of financial prudence by many subprime borrowers cannot be ignored.

False Illusions and Egos

From the outside looking in, Wall Street and Washington are populated by highly confident, assertive, and competent individuals who seem equipped to carry out their responsibilities in a capable manner. While there are many individuals who fit this description well, some of whom appear in Mr. Sorkin's book, many others appear to suffer from the human defects that affect everyone else. At several points in the book, we can see cases where ego prevented otherwise intelligent actions from being taken.

For example, why did Lehman Brothers' CEO Dick Fuld, shocking even his own team, attempt to abruptly change the terms of a nearly sealed deal with Korea Development Bank in early August that would have valued Lehman at a premium and likely saved the firm? Was it a matter of seeking better terms for his shareholders, a question of ego, or confidence that a government bailout would be a backstop if all else failed?

There are countless other situations in the book where the reader, with the benefit of hindsight, asks: Why?

Government Saviors?

Government players hardly come out of the story looking like heroes either, with the possible exception of Treasury Secretary Hank Paulson who had the unenviable task of coming up with solutions for the crisis without appearing to favor a bailout of his former colleagues at Goldman Sachs. Throughout Mr. Sorkin's account of the events, it becomes quite apparent that helping Goldman was probably the last thing on Mr. Paulson's mind.

Timothy Geithner, the current Treasury Secretary, was President of the Federal Reserve Bank of New York during the crisis. Mr. Geithner comes across as the main deal maker for the Fed while Chairman Ben Bernanke takes a much lower profile role. While there is no doubt that Mr. Geithner played a critical role, he often comes across as authoritarian in terms of his tactics. For example, at several points, he makes threats or orders bank CEOs to take action during meetings and simply leaves the room asking to be notified when a solution is in place. Whether this was necessary or not during these remarkable times is an open question, but this is not how we should want government officials to behave in normal times.

President Bush hardly appears in the narrative and seems quite detached in the few occasions where he is being briefed on the crisis. For all practical purposes, Secretary Paulson was calling the shots for the Executive branch of the Federal Government throughout this process. Sen. Barack Obama made a few appearances in the book (as well as on Secretary Paulson's calendar) but Sen. John McCain hardly appears at all which is surprising given that he famously suspended his campaign in order to return to Washington and work on a solution for the crisis.

Financial Regulatory Reform

One of the interesting aspects of the book is the degree to which government officials pushed to "marry" commercial banks and investment banks during the height of the crisis in September. It seems like every possible permutation was considered, to the point where Mr. Geithner was referred to mockingly as "E Harmony" in a reference to the online dating site. At the same time, many in government blame the 1999 repeal of the Glass-Steagall Act, which prohibited the union of commercial and investment banks, for precipitating the crisis.

While the idea of giving investment banks access to stable deposits through commercial banks had a great deal of merit during the crisis, such mergers also created ever larger institutions, many of which are considered "too big to fail". It seems that society must decide which is the lesser of two evils: Government regulations that seek to keep financial institutions small such that none can become "too big to fail" or heavy handed regulations that properly govern mammoth institutions that are obviously "too big to fail".

Wall Street: Pick Your Regulatory "Poison"

Wall Street cannot have it both ways: If regulations are repealed that then allow financial institutions to grow so large that a failure would have systemic impacts, then regulations governing the conduct of these institutions is essential to avoid future crises from developing. On the other hand, if we accept regulations that prohibit mergers that will result in massive institutions, Wall Street firms should have more flexibility to conduct their ongoing affairs without as much regulatory scrutiny since the failure of any one institution will not be systemically important.

It seems preferable to have "blocking" regulations such as Glass-Steagall rather than "operational" regulations required to govern massive financial institutions that are of systemic importance. A "blocking" regulation is not as intrusive into the day to day operation of firms and is less likely to throw sand in the gears of capitalism. In contrast, the regulatory regime required to monitor massive systemically important institutions will, of necessity, be intrusive and bureaucratic.

"Too Big To Fail: The Sequel"?

There are many potential solutions that should lead to a more stable financial system going forward, but each passing week makes it less likely that reforms will be made. As the economy recovers and "business as usual" returns to Wall Street, the seeds are now being planted for the next crisis. While no doubt capable of the task, we should hope that Mr. Sorkin does not have the opportunity to write a sequel to Too Big To Fail. The consequences could be even more severe.

Too Big to Fail is too Good to Skip
The litany of books on the 2008 economic crisis covers a lot of ground. There are a plethora of good books that have come out thus far (and plenty of bad ones). My reading has already taken me through some books that I find dangerous in their ideology, but also some that are remarkably astute. What I have not come across until this latest addition to the series is a book that was nearly impossible to put down. Andrew Ross Sorkin's Too Big to Fail put an end to that. While I have over a dozen books to complete still in this project, and am backed up more than that with books I have completed but not yet reviewed, I can safely say that no book will prove to be as much fun to read as Sorkin's. I recommend it for any reader who has the ability to take down over 500 pages of a brilliantly-written suspense thriller.

Sorkin's book does something that very few books written about the crisis will be able to do: It narrates a series of events with virtually no ideology or partisanship whatsoever. I can honestly say that after finishing the book I still had no idea what Sorkin believes about the TARP bill, the nature of Wall Street, the role of lawmakers in causing the collapse, the merit (or lack thereof) of the Federal Reserve's response to the crisis, etc. Sorkin tells the story of the events leading up to, and immediately following, last September's week from hell (the week that included the bankruptcy filing of Lehman Brothers, the government bailout of AIG, and the emergency sale of Merrill Lynch to Bank of America). Intertwined with the narratives of that fateful week, Sorkin incorporates extensive biographies of the lead characters including Henry Paulson, Tim Geithner, Richard Fuld, Ken Lewis, Jamie Dimon, Lloyd Blankfein, and many others. By the time I was done with the book I felt like I knew the characters personally. His research is comprehensive and his list of sources unmatched. No major character in this story has come forward to deny his version of any of the major stories. Whether someone is a hopeless obsessive of these events (like me) or not, the book is wildly entertaining, completely fascinating, and extremely well-told.

I do have to interact with the events described in this book at some point, and I intend to do so in greater detail when my review series is complete. I do not accept any version of the 2008 catastrophe that either totally villainizes Henry Paulson, or totally vindicates him. My interest in this review series is ideological: I believe that the Libertarian-anarchist crowd, and even more disturbingly the Keynesian-leftist crowd, have axes to grind in their portrayal of the crisis that must not be left unaddressed. Sorkin's book does not pose any such problems. The complex issues he addresses require an economic thinker like myself to formulate opinions, but he does so without poisoning the well. I did not complete this behemoth book with any more clarity about the propriety of TARP, the role of short sellers in the financial crisis, or the moral hazard embedded in much of Uncle Sam's reaction to the crisis. But what I did get out of reading this is an incredible amount of color on all the aforementioned issues (and others) that I desperately needed. The proper ideological commentary on September of 2008 is coming, but in the meantime, kudos to Andrew Ross Sorking for not attempting to provide that commentary, and instead providing me 550 pages of reading bliss.
... Read more

Editorial Review

How the actions of a few in Europe destroyed the prosperity of the many (and how it's happening again now in America)

After the fall of the Roman Empire, vicious barbaric tribes including the Hunds lead by Atilla, the Mongols, Charlemagne and the Vikings invaded Europe, plundering property and destroying homes. But, they didn't just steal and destroy property in the villages; they also stole and destroyed any prosperity the villagers had previously enjoyed. What's worse is the barbarians of the Dark Ages did all of this not out of any deeply held religious or political belief, but, rather, for the oldest reason in the book – their own personal financial gain. Some things never change.

Barbarians of Wealth examines how the greedy, self-serving decisions of a select group of politicians and financial institutions negatively impacts the economy and, ultimately, destroys America's prosperity and the American way of life. Compelling and engaging, the book

• Details how Goldman Sachs peddled mortgage backed securities up and down Wall Street while secretly betting against their demise
• Discusses how Sanford Weill, founder of Citigroup spent $100 million lobbying for the repeal of the Glass-Steagall Act that prevented the merger of commercial and investment banks and got his way.
• Examines Christopher Dodd, head of the U.S. Senate Banking Committee, has enriched himself while driving down the prosperity of his constituents
• Offers up examples of other modern barbarians, including the Federal Reserve, Alan Greenspan, Hank Paulson, and Timothy Geithner.
• Highlights greed driven tactics of Wall Street corporations including JP Morgan, Merrill Lynch, and Salomon Brothers.

Barbarians of Wealth is a timely must read for hard-working Americans concerned with their prosperity, as well as for those fascinated with the inner workings of Washington and Wall Street. ... Read more

Reviews

Shocked and Relieved
I have to say I was both shocked and relieved after reading this book.

Shocked at just how often and how blatant the corruption is when it comes to money and power. However I was relieved to find out that if you know what to look for you can spot these people a mile away and take action to protect yourself and your money.

The last few chapters gave real solid advice on what you can do right now to both protect and grow your money.

If you enjoy history, politics or investing, you'll enjoy this book.

Good stuff and worth the read, IMHO. ... Read more

Editorial Review

A brilliant new reading of the economic crisis—and a plan for dealing with the challenge of its aftermath—by one of our most trenchant and informed experts.

When the nation’s economy foundered in 2008, blame was directed almost universally at Wall Street. But Robert B. Reich suggests a different reason for the meltdown, and for a perilous road ahead. He argues that the real problem is structural: it lies in the increasing concentration of income and wealth at the top, and in a middle class that has had to go deeply into debt to maintain a decent standard of living.

Persuasively and straightforwardly, Reich reveals how precarious our situation still is. The last time in American history when wealth was so highly concentrated at the top—indeed, when the top 1 percent of the population was paid 23 percent of the nation’s income—was in 1928, just before the Great Depression. Such a disparity leads to ever greater booms followed by ever deeper busts.

Reich’s thoughtful and detailed account of where we are headed over the next decades reveals the essential truth about our economy that is driving our politics and shaping our future. With keen insight, he shows us how the middle class lacks enough purchasing power to buy what the economy can produce and has adopted coping mechanisms that have a negative impact on their quality of life; how the rich use their increasing wealth to speculate; and how an angrier politics emerges as more Americans conclude that the game is rigged for the benefit of a few. Unless this trend is reversed, the Great Recession will only be repeated.

Reich’s assessment of what must be done to reverse course and ensure that prosperity is widely shared represents the path to a necessary and long-overdue transformation. Aftershock is a practical, humane, and much-needed blueprint for both restoring America’s economy and rebuilding our society. ... Read more

Reviews

An important book offering critical insight into the true cause of the economic crisis
AFTERSHOCK may well be the most important book written on the current economic crisis. I say this because it offers a critical insight that I have seen in very few other places: The fundamental cause of our problems is the relentless drive toward income concentration. The problem with concentrating income into the hands of a few people is that you take money from millions of people who would spend nearly all of it, and give it to a tiny number of people who can't and won't spend it -- but will instead save it, gamble with it, or invest it offshore. The end result is simply too few viable consumers to drive the economy.

Reich points out that income for American middle class families has been essentially stagnant or declining for over three decades. The middle class has coped with this in three basic ways: (1) Women have entered the workforce, (2) People worked longer hours, and, of course, (3) We all relied on debt (credit cards and home equity loans) rather than income to support our consumption. Those coping methods are now exhausted, and we are left in a position where average Americans simply do not have sufficient discretionary income to support a sustainable recovery. The great American consumer class -- which was the driving force behind our prosperity in the 1950s and 1960s -- has been largely decimated.

To his credit, Reich correctly identifies globalization and, especially, automation technology as primary forces behind declining middle class wages. At the same time, rather than enacting countervailing policies, the United States (beginning with Reagan) has gone in the exact opposite direction and adopted a conservative agenda that has actually accelerated the trend toward income concentration.

The one shortcoming of the book is that Reich -- not being a technologist -- fails to anticipate how advancing technology is likely to dramatically worsen the situation in the relatively near future. As someone who works in this area, I can tell you that the degree of progress we are soon likely to see in automation technologies is historically unprecedented.

To get a sense of what we may face in the future, I would strongly recommend that this book be read in conjunction with Aftershock: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. Both books offer an eerily similar analysis of the crisis -- both concluding that the problem is a dearth of viable consumers. Both books also propose very similar solutions: direct income supplementation. Reich proposes a negative income tax (which was supported by free-market icon Milton Friedman).

Anyone who wants to understand the current crisis and the danger we face in the future should read both "Aftershock" (for its emphasis on political and social implications) and "The Lights in the Tunnel" (for insight into how technology and globalization will continue to transform the economy -- and lead to an even more severe crisis, if we do not act ).

"History does not repeat itself, but it sometimes rhymes" Mark Twain
Every middle class American should read this book. Many observations about income disparities have been written up lately but Reich pulls the important points together in a powerful and accessible way.

Reich's main thesis is that the current transition the US economy is under is misunderstood. Many of the policy elite (Geithner, Volcker) have repeated the familiar claim that Americans are living beyond their means. Personally I don't discount that completely but Reich's insight goes much deeper and rings truer: "The problem was not that American spent beyond their means but that their means had not kept up with what the larger economy could and should have been able to provide them."

"We cannot have a sustained recovery until we address it. ... Until this transformation is made, our economy will continue to experience phantom recoveries and speculative bubbles, each more distressing than the one before."

Anyone looking at the unemployment data since WWII has to wonder why the unemployment component of the last three recessions is so prolonged. Instead of a sharp trend up, there are long slopes of delayed returns to peak employment. (Google "calculated risk blog" and look at Dec. 2010 articles.) I believe Reich has demonstrated the main culprit this. To be clear, he is not describing the detailed mechanics of what triggered the Great Recession. (Nouriel Roubini has a good book that I would recommend for more on the financial fraud, leverage and credit risks involved - Crisis Economics: A Crash Course in the Future of Finance. ) But Reich is taking a long term view and exposes a dysfunctional trait of the US economy that no one can afford to ignore. It is this weakness that will delay the current recovery and continue to create greater risks in the future.

Reich draws the parallels between the Great Depression and the Great Recession, particularly the imbalance of wealth concentrated in fewer hands and middle class workers with less income to convert into consumer demand. One of the fascinating devices he found to do this was the writings of Marriner Eccles (Fed chair between '34 to '48):

"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth - not of existing wealth, but of wealth as it is currently produced - to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped."

Reich also shares a couple of powerful and disturbing graphs that show how the middle class has been squeezed and also how since the late 70s, hourly wages have not only not kept up with the rise in productivity but have remained essentially flat.

Another driving theme Reich presents is the "basic bargain" and he evokes Henry Ford, the man that took mass production to new heights and paid his workers well:

"[Henry] Ford understood the basic enconomic bargain that lay at the heart of a modern, highly productive economy. Workers are also consumers. Their earnings are continuously recycled to buy the goods and services other workers produce. But if earnings are inadequate and this basic bargain is broken, an economy produces more goods and services than its people are capable of purchasing."

I was concerned early in the book that Reich would leave out some of the important complexities of the topic but he covered related finances, politics and even consumer/voter psychology in a succinct yet informative way. His summary of changes to the labor market in the last 30+ years was very good.

His ideas for correcting this were interesting if perhaps difficult to implement politically. My take away however was that this is a strong indicator of how bad he thinks the situation really is. Many Americans may be yearning to return to "normal". Reich is the first to thoroughly convince me that it is not going to happen.

This is a very quick read of 144 pages and is well worth the time.

The Widening Income Gap and the Beleaguered Consumer
The defining statistic of this book is the fact that by 2007 the top 1 percent of America's earners garnered 23 percent of the nation's income. It hasn't been that high since 1928 which of course was right before the Great Depression. Robert Reich thinks that this is one of the reasons we are now in the Great Recession. The recovery, if and when it starts, will be very weak since the middle class has not gained any real buying power for the last 30 years.

Consumers constitute 70 percent of all economic activity in the United States, and if they are no longer employed or overburdened with debt they can no longer be the engine of growth that drives the economy. Many say that this figure is too high and that consumers should learn to live within their means. Reich, on the other hand, thinks their means should be increased.

There was time in American history that Reich refers to as the Great Prosperity, the years 1947-1975. (Read also Reich's book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Vintage) for more on this period.) This was a time when income was more equally distributed. The top 1 percent received about 9 percent of the nation's income. The top marginal tax rate ranged from 70 to 90 percent.

During the Great Prosperity a single earner - usually male - could provide a middle class lifestyle for an average family. Since then wages have stagnated and families have found other ways to increase cashflow. Over the years women entered the workforce, people worked two or three jobs, and finally, during the last decade, they lived on credit cards and home equity to maintain middle class lifestyles. Now they have run out of sources of income.

Reich makes some suggestions that will have his critics up in arms. One of his proposals is a more progressive tax rate. In his plan the top 1 percent - those making over $400K anually - would pay a 55 percent marginal rate. This would be a relatively mild increase compared to the era of Great Prosperity. The top 2 percent would pay a 50 percent marginal rate and the top 5 percent would pay about 40 percent.

On the other end of the spectrum, those earning less than $20k would be supplemented and the large middle class - those with incomes ranging from $50k to $160k would be paying anywhere from a 10 to 20 percent rate. He believes something of this magnitude needs to be done to get the economy growing again. But it won't happen in the current political climate.

Many say progressive taxation and redistributive income is unfair, or worse yet, confiscatory. The fact of the matter is all taxation is redistributive. Taxation is the price of civilized society - to borrow from Oliver Wendell Holmes.

The current Tea Party movement is doing the bidding of the super rich. They are terrified of the poor and, in their view, the undeserving ending up with some of their money. Unbeknownst to them, the better off the poor and the middle class are, the better off the super rich will also be. Reich's modest proposal will not only strengthen the economy, it will also strengthen our democracy.

It's the ridiculous income gap, stupid!
We are slowing becoming more and more like third-world countries: a few ridiculously rich people; too many poor people; and what used to be the middle class joining the later. If anyone tries to point this out or do something about it the apologists for the rich (i.e., G.B. & R.L.) immediately cry "CLASS WARFARE".

Robert Reich's Aftershock rationally and succinctly explains the mess we're in and offers solutions that should be adopted by the Obama administration ASAP. Unfortunately, if they try, Republicans and Tea Partiers will scream "SOCIALIST" but offer no alternative.

Excellent source of solutions than mere theories
Okay so I actually bought this book through Audible but it still is his book. I found it to be very practical and relevant given the situation we are in. The remarks regarding ' The Independent ' party didn't surprise or shock me. R.R is known for his acumen, intelligence and his ability to bundle complex theories into simple text and understanding context. While explaining the current economic situation, he didnt get into what is a CDO, M&As, MBRM, ETFs and all the Wall street terms. Rather he focused on the core issues and provided explicit and specific solutions to back his ideas. That's what made this book different than others where we only hear what happened and what would've happened instead of solutions.

I would highly recommend this book if you want some insights into how we got here and how we get out of this mess. I liked it

Beautiful, relevant but fatally flawed



Fascinating, but fatally flawed; although Reich is probably the most knowledgeable, candid and relevant observer of the Washington Insider Establishment, he is flawed in expecting any sudden major change.

In America, where a two-cent rise in postage stamps is cause for major outrage, "change" comes on little cat feet. It's the fatal flaw of Obamania with its brilliant rescues of Wall Street and Detroit auto makers plus reforms of health care and the financial industry; it's these revolutionary successes that have infuriated voters.

Gratitude? "Wail Street" cried all the way to the Treasury; then, like pigs with their snouts in the trough of public money, stampeded the farmer who just filled their feed bowl. In his final 'How It Could Get Done' chapter of five and one-half pages, Reich offers a rational but revolutionary plan to rescue the Middle Class from 30 years of stagnation.

It took 30 years for the "vested interests" with their Greed Is Enough mantra to vastly increase their share of American earnings and wealth. However, in America, revolution won't work; this is a society that trusts gradualism instead of upheaval. President Barack Obama failed this test of the American character; he expected a miracle from "Change" and instead got doubt, suspicion and fear.

So much for Reich's conclusion. The other 134 pages are a cogent analysis of America from the Great Depression to the Great Prosperity and downward into the current Great Recession. Only the Super Rich are liable to disagree, primarily because Reich explains how they are usually the problem and never part of the solution.

It's this analysis that makes this book so worthwhile. Granted, Reich cites more than the Super Rich -- even they aren't astute enough to cause all problems -- but the first step toward a solution is understanding the origins of the problem. Instead of rants and raves about the current mess, Reich offers a succinct and practical analysis.

But then,who listens to intelligence instead of emotion in politics?

Our economy, a clear and concise explanation
A very readable and interesting review of our economy, and what brought the US economy to the point it is today. This book helps to clarify what really has happened to our economy and why. Reich makes a good Rx of what could be done to help our economic future to be more equitable, by restoring the "basic bargain". I would highly recommend this book to anyone wanting to cut through all of the chatter on the "news" and have a better sense of what needs to be done to make a brighter future for us in the "middle class". ... Read more

Editorial Review

A groundbreaking work that identifies the real culprit behind one of the great economic crimes of our time— the growing inequality of incomes between the vast majority of Americans and the richest of the rich. We all know that the very rich have gotten a lot richer these past few decades while most Americans haven’t. In fact, the exorbitantly paid have continued to thrive during the current economic crisis, even as the rest of Americans have continued to fall behind. Why do the “haveit- alls” have so much more? And how have they managed to restructure the economy to reap the lion’s share of the gains and shift the costs of their new economic playground downward, tearing new holes in the safety net and saddling all of us with increased debt and risk? Lots of so-called experts claim to have solved this great mystery, but no one has really gotten to the bottom of it—until now. In their lively and provocative Winner-Take-All Politics, renowned political scientists Jacob S. Hacker and Paul Pierson demonstrate convincingly that the usual suspects—foreign trade and financial globalization, technological changes in the workplace, increased education at the top—are largely innocent of the charges against them. Instead, they indict an unlikely suspect and take us on an entertaining tour of the mountain of evidence against the culprit. The guilty party is American politics. Runaway inequality and the present economic crisis reflect what government has done to aid the rich and what it has not done to safeguard the interests of the middle class. The winner-take-all economy is primarily a result of winner-take-all politics. In an innovative historical departure, Hacker and Pierson trace the rise of the winner-take-all economy back to the late 1970s when, under a Democratic president and a Democratic Congress, a major transformation of American politics occurred. With big business and conservative ideologues organizing themselves to undo the regulations and progressive tax policies that had helped ensure a fair distribution of economic rewards, deregulation got under way, taxes were cut for the wealthiest, and business decisively defeated labor in Washington. And this transformation continued under Reagan and the Bushes as well as under Clinton, with both parties catering to the interests of those at the very top. Hacker and Pierson’s gripping narration of the epic battles waged during President Obama’s first two years in office reveals an unpleasant but catalyzing truth: winner-take-all politics, while under challenge, is still very much with us. Winner-Take-All Politics—part revelatory history, part political analysis, part intellectual journey— shows how a political system that traditionally has been responsive to the interests of the middle class has been hijacked by the superrich. In doing so, it not only changes how we think about American politics, but also points the way to rebuilding a democracy that serves the interests of the many rather than just those of the wealthy few. ... Read more

Reviews

Transforming American politics, September 16, 2010
This is a transformative book. It's the best book on American politics that I've read since Rick Perlstein's Before the Storm. Not all of it is original (the authors seek to synthesize others' work as well as present their own, but provide due credit where credit is due). Not all of its arguments are fully supported (the authors provide a strong circumstantial case to support their argument, but don't have smoking gun evidence on many of the relevant causal relations). But it should transform the ways in which we think about and debate the political economy of the US.


The underlying argument is straightforward. The sources of American economic inequality are largely political - the result of deliberate political decisions to shape markets in ways that benefit the already-privileged at the expense of a more-or-less unaware public. The authors weave a historical narrative which Kevin Drum (who says the same things that I am saying about the book's importance) summarizes cogently here. This is not necessarily original - a lot of leftwing and left-of-center writers have been making similar claims for a long time. What is new is both the specific evidence that the authors use, and their conscious and deliberate effort to reframe what is important about American politics.

First - the evidence. Hacker and Pierson draw on work by economists like Picketty and Saez on the substantial growth in US inequality (and on comparisons between the US and other countries), but argue that many of the explanations preferred by economists (the effects of technological change on demand for skills) simply don't explain what is going on. First, they do not explain why inequality is so top-heavy - that is, why so many of the economic benefits go to a tiny, tiny minority of individuals among those with apparently similar skills. Second, they do not explain cross national variation - why the differences in the level of inequality among advanced industrialized countries, all of which have gone through more-or-less similar technological shocks, are so stark. While Hacker and Pierson agree that technological change is part of the story, they suggest that the ways in which this is channeled in different national contexts is crucial. And it is here that politics plays a key role.

Many economists are skeptical that politics explains the outcome, suggesting that conventional forms of political intervention are not big enough to have such dramatic consequences. Hacker and Pierson's reply implicitly points to a blind spot of many economists - they argue that markets are not `natural,' but instead are constituted by government policy and political institutions. If institutions are designed one way, they result in one form of market activity, whereas if they are designed another way, they will result in very different outcomes. Hence, results that appear like `natural' market operations to a neo-classical economist may in fact be the result of political decisions, or indeed of deliberate political inaction. Hacker and Pierson cite e.g. the decision of the Clinton administration not to police derivatives as an example of how political coalitions may block reforms in ways that have dramatic economic consequences.

Hence, Hacker and Pierson turn to the lessons of ongoing political science research. This is both a strength and a weakness. I'll talk about the weakness below - but I found the account of the current research convincing, readable and accurate. It builds on both Hacker and Pierson's own work and the work of others (e.g. the revisionist account of American party structures from Zaller et al. and the work of Bartels). This original body of work is not written in ways that make it easily accessible to non-professionals - while Bartels' book was both excellent and influential, it was not an easy read. Winner-Take-All Politics pulls off the tricky task of both presenting the key arguments underlying work without distorting them and integrating them into a highly readable narrative.

As noted above, the book sets out (in my view quite successfully) to reframe how we should think about American politics. It downplays the importance of electoral politics, without dismissing it, in favor of a focus on policy-setting, institutions, and organization.

First and most important - policy-setting. Hacker and Pierson argue that too many books on US politics focus on the electoral circus. Instead, they should be focusing on the politics of policy-setting. Government is important, after all, because it makes policy decisions which affect people's lives. While elections clearly play an important role in determining who can set policy, they are not the only moment of policy choice, nor necessarily the most important. The actual processes through which policy gets made are poorly understood by the public, in part because the media is not interested in them (in Hacker and Pierson's words, "[f]or the media, governing often seems like something that happens in the off-season").

And to understand the actual processes of policy-making, we need to understand institutions. Institutions make it more or less easy to get policy through the system, by shaping veto points. If one wants to explain why inequality happens, one needs to look not only at the decisions which are made, but the decisions which are not made, because they are successfully opposed by parties or interest groups. Institutional rules provide actors with opportunities both to try and get policies that they want through the system and to stymie policies that they do not want to see enacted. Most obviously in the current administration, the existence of the filibuster supermajority requirement, and the willingness of the Republican party to use it for every significant piece of legislation that it can be applied to means that we are seeing policy change through "drift." Over time, policies become increasingly disconnected from their original purposes, or actors find loopholes or ambiguities through which they can subvert the intention of a policy (for example - the favorable tax regime under which hedge fund managers are able to treat their income at a low tax rate). If it is impossible to rectify policies to deal with these problems, then drift leads to policy change - Hacker and Pierson suggest that it is one of the most important forms of such change in the US.

Finally - the role of organizations. Hacker and Pierson suggest that organizations play a key role in pushing through policy change (and a very important role in elections too). They typically trump voters (who lack information, are myopic, are not focused on the long term) in shaping policy decisions. Here, it is important that the organizational landscape of the US is dramatically skewed. There are many very influential organizations pushing the interests of business and of the rich. Politicians on both sides tend to pay a lot of attention to them, because of the resources that they have. There are far fewer - and weaker - organizations on the other side of the fight, especially given the continuing decline of unions (which has been hastened by policy decisions taken and not taken by Republicans and conservative Democrats).

In Hacker and Pierson's account, these three together account for the systematic political bias towards greater inequality. In simplified form: Organizations - and battles between organizations over policy as well as elections - are the structuring conflicts of American politics. The interests of the rich are represented by far more powerful organizations than the interests of the poor and middle class. The institutions of the US provide these organizations and their political allies with a variety of tools to promote new policies that reshape markets in their interests. This account is in some ways neo-Galbraithian (Hacker and Pierson refer in passing to the notion of `countervailing powers'). But while it lacks Galbraith's magisterial and mellifluous prose style, it is much better than he was on the details.

Even so (and here begin the criticisms) - it is not detailed enough. The authors set the book up as a whodunit: Who or what is responsible for the gross inequalities of American economic life? They show that the other major suspects have decent alibis (they may inadvertently have helped the culprit, but they did not carry out the crime itself. They show that their preferred culprit had the motive and, apparently, the means. They find good circumstantial evidence that he did it. But they do not find a smoking gun. For me, the culprit (the American political system) is like OJ. As matters stand, I'm pretty sure that he committed the crime. But I'm not sure that he could be convicted in a court of law, and I could be convinced that I was wrong, if major new exculpatory evidence was uncovered.

The lack of any smoking gun (or, alternatively, good evidence against a smoking gun) is the direct result of a major failure of American intellectual life. As the authors observe elsewhere, there is no field of American political economy. Economists have typically treated the economy as non-political. Political scientists have typically not concerned themselves with the American economy. There are recent efforts to change this, coming from economists like Paul Krugman and political scientists like Larry Bartels, but they are still in their infancy. We do not have the kinds of detailed and systematic accounts of the relationship between political institutions and economic order for the US that we have e.g. for most mainland European countries. We will need a decade or more of research to build the foundations of one.

Hence, while Hacker and Pierson show that political science can get us a large part of the way, it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms.

None of this is to discount the importance of this book. If it has the impact it deserves, it will transform American public arguments about politics and policymaking. I cannot see how someone who was fair minded could come away from reading this book and not be convinced that politics plays a key role in the enormous economic inequality that we see. And even if it is aimed at a general audience, it also challenges academics and researchers in economics, political science and economic sociology both to re-examine their assumptions about how economics and politics work, and to figure out ways better to engage with the key political debates of our time as Hacker and Pierson have done. If you can, buy it.

(RIch) Winners Take All, September 14, 2010
Many people have observed that American politics and the American economy reached some kind of turning point around 1980, which conveniently marks the election of Ronald Reagan. Some also pointed to other factors such as the deregulation of stock brokerage commissions in 1975 and the high inflation of the 1970s. Other analysts have put the turning point back in 1968, when Richard Nixon became President on the back of a wave of white, middle-class resentment against the 1960s. Hacker and Pierson, however, point the finger at the 1970s. As they describe in Chapter 4, the Nixon presidency saw the high-water market of the regulatory state; the demise of traditional liberalism occurred during the Carter administration, despite Democratic control of Washington, when highly organized business interests were able to torpedo the Democratic agenda and begin the era of cutting taxes for the rich that apparently has not yet ended today.

Why then? Not, as popular commentary would have it, because public opinion shifted. Hacker and Pierson cite studies showing that public opinion on issues such as inequality has not shifted over the past thirty years; most people still think society is too unequal and that taxes should be used to reduce inequality. What has shifted is that Congressmen are now much more receptive to the opinions of the rich, and there is actually a negative correlation between their positions and the preferences of their poor constituents (p. 111). Citing Martin Gilens, they write, "When well-off people strongly supported a policy change, it had almost three times the chance of becoming law as when they strongly opposed it. When median-income people strongly supported a policy change, it had hardly any greater chance of becoming law than when they strongly opposed it" (p. 112). In other words, it isn't public opinion, or the median voter, that matters; it's what the rich want.

That shift occurred in the 1970s because businesses and the super-rich began a process of political organization in the early 1970s that enabled them to pool their wealth and contacts to achieve dominant political influence (described in Chapter 5). To take one of the many statistics they provide, the number of companies with registered lobbyists in Washington grew from 175 in 1971 to nearly 2,500 in 1982 (p. 118). Money pouring into lobbying firms, political campaigns, and ideological think tanks created the organizational muscle that gave the Republicans a formidable institutional advantage by the 1980s. The Democrats have only reduced that advantage in the past two decades by becoming more like Republicans-more business-friendly, more anti-tax, and more dependent on money from the super-rich. And that dependency has severely limited both their ability and their desire to fight back on behalf of the middle class (let alone the poor), which has few defenders in Washington.

At a high level, the lesson of Winner-Take-All Politics is similar to that of 13 Bankers: when looking at economic phenomena, be they the financial crisis or the vast increase in inequality of the past thirty years, it's politics that matters, not just abstract economic forces. One of the singular victories of the rich has been convincing the rest of us that their disproportionate success has been due to abstract economic forces beyond anyone's control (technology, globalization, etc.), not old-fashioned power politics. Hopefully the financial crisis and the recession that has ended only on paper (if that) will provide the opportunity to teach people that there is no such thing as abstract economic forces; instead, there are different groups using the political system to fight for larger shares of society's wealth. And one group has been winning for over thirty years.

Adapted From Baseline Scenario Website

The Culprit: Enormous and Growing Inequality of Incomes, September 17, 2010
In Winner-Take-All Politics, two political science professors explain what caused the Middle Class to become vulnerable. Understanding this phenomenon is the Holy Grail of contemporary economics in the U.S.

Some may feel this book is just as polarizing as the current state of politics and media in America. The decades-long decline in income taxes of wealthy individuals is cited in detail. Wage earners are usually subjected to the FICA taxes against all their ordinary income (all or almost their entire total income). But the top wealthy Americans may have only a small percentage (or none) of their income subjected to FICA taxes. Thus Warren Buffett announced that he pays a lower tax rate than his secretary. Buffett has cited income inequality for "poisoning democracy."

When you search the `Net for Buffett quotes on inequality, you get a lot of results showing how controversial he became for stating the obvious. Drawing attention to the inequity of the tax regime won him powerful enemies. Those same people are not going to like the authors for writing Winner-Take-All. They say these political science people are condescending because they presume to tell people their political interests.

Many studies of poverty show how economic and political policies generally favor the rich throughout the world, some of which are cited in this book. Military spending and financial bailouts in particular favor the wealthy. Authors Jacob Hacker and Paul Pierson document a long U.S. policy trend favoring wealthy Americans. This trend resulted in diminished middle class access to quality healthcare and education, making it harder to keep up with the wealthy in relative terms. Further, once people have lost basic foundations of security, they are less willing and able to take on more risk in terms of investing or starting a business.

The rise of special interests has been at the expense of the middle class, according to the authors. Former President Carter talked about this and was ridiculed. Since then government has grown further from most of us. Even federal employees are not like most of us anymore. In its August 10, 2010 issue, USA Today discussed government salaries: "At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds."

An excellent documentary showing how difficult it is to address income inequality is One Percent, by Jamie Johnson of the Johnson & Johnson family. Collapse: How Societies Choose to Fail or Succeed, by Pulitzer Prize-winner Jared Diamond Collapse: How Societies Choose to Fail or Succeed shows examples of what can happen when a society disregards a coming disaster until too late. I hope that Winner-Take-All will prompt people to demand more of elected officials and to arrest the growing income gap for the sake of our democracy.

A Compelling Book, September 21, 2010
Even if you disagree with the implications, the book is very convincing that:

1. The richer you are, the more you have benefited from economic changes over the past 30 years.
2. The poorer you are, the worse your economic life has become over the past 30 years.
3. The previous two conclusions are largely the result of government policy.
4. If we want to avoid becoming a Latin American economy where the rich get richer and the rest suffer, we need to change government policies.

I am convinced that these 4 "facts" represent our current reality.... and that we need to address them. The book is required reading for anyone interested in federal tax or regulatory policy.

Interesting and Timely, but Also Off-Base in Some Regards, September 15, 2010
The thirty-eight biggest Wall Street companies earned $140 billion in 2009, a record that all taxpayers who contributed to their bailouts can be proud of. Among those, Goldman Sachs paid its employees an average $600,000, also a record, and at least partially attributable to our bailout of AIG, which promptly gave much of the money to Goldman. Prior to that, the top 25 hedge fund managers earned an average of $892 million in 2007. "Winner-Take-All Politics" is framed as a detective story about how we got to inequality levels where the top 300,000 (0.1%) receive over 20% of national income, vs. 13.5% for the bottom 180 million (60% of the population).

Between 1947 and 1973, real family median income essentially doubled, and the growth percentage was virtually the same for all income levels. In the mid-1970s, however, economic inequality began to increase sharply and middle-incomes lagged. Increased female workforce participation rates and more overtime helped cushion the stagnation or decline for many (they also increased the risk of layoffs/family), then growing credit card debt shielded many families from reality. Unfortunately, expectations of stable full-time employment also began shrinking, part-time, temporary, and economic risk-bearing (eg. taxi drivers leasing vehicles and paying the fuel costs; deliverymen 'buying' routes and trucks) work increased, workers covered by employer-sponsored health insurance fell from 69% in 1979 to 56% in 2004, and retirement coverage was either been dropped entirely or mostly converted to much less valuable fix-contribution plans for private sector employees. Some exceptions have occurred that benefit the middle and lower-income segments - Earned Income Tax Credit (EITC), Medicaid, and Medicare were initiated or expanded, but these have not blunted the overall trend. Conversely, welfare reform, incarceration rates rising 6X between 1970 and 2000, bankruptcy reform, and increased tax audits for EITC recipients have also added to their burden, Social Security is being challenged again (despite stock market declines, enormous transition costs, and vastly increased overhead costs and fraud opportunity), and 2009's universal health care reform will be aggressively challenged both in the courts and Washington.

Authors Hacker and Pierson contend that growing inequality is not the 'natural' product of market rewards, but mostly the artificial result of deliberate government policies, strongly influenced by industry lobbyists and donations, new and expanded conservative 'think tanks,' and inadequate media coverage that focused more on the 'horse race' aspects of various initiatives than their content and impact. First came the capital gains tax cuts under President Carter, then deregulation of the financial industry under Clinton, the Bush tax cuts of 2001 and 2003, and the financial bailouts in 2008-09. The authors contend that if the 1970 tax structure remained today, the top gains would be considerably less.

But what about the fact that in 1965 CEOs of large corporations only earned about 24X the average worker, compared to 300+X now? Hacker and Pierson largely ignore the role of board-room politics and malfeasance that have mostly allowed managers to serve themselves with payment without regard to performance and out of proportion to other nations. In 2006, the 20 highest-paid European managers made an average $12.5 million, only one-third as much as the 20 highest-earning U.S. executives. Yet, the Europeans led larger firms - $65.5 billion in sales vs. $46.5 billion for the U.S. Asian CEOs commonly make only 10X-15X what their base level employees make. Jiang Jianqing, Chairman of the Industrial and Commercial Bank of China (world's largest), made $234,700 in 2008, less than 2% of the $19.6 million awarded Jamie Dimon, CEO of the world's fourth-largest bank, JPMorgan Chase.

"Winner-Take-All Politics" also provides readers with the composition of 2004 taxpayers in the top 0.1% of earners (including capital gains). Non-finance executives comprised 41% of the group, finance professionals 18.4%, lawyers 6%, real estate personages 5%, physicians 4%, entrepreneurs 4%, and arts and sports stars 3%. The authors assert that this shows education and skills levels are not the great dividers most everyone credits them to be - the vast majority of Americans losing ground to the super-rich includes many well-educated individuals, while the super-rich includes many without a college education (Sheldon Adelson, Paul Allen, Edgar Bronfman, Jack Kent Cook, Michael Dell, Walt Disney, Larry Ellison, Bill Gates, Wayne Huizenga, Steve Jobs, Rush Limbaugh, Steve Wozniak, and Mark Zuckerberg).

Authors Hacker and Pierson are political science professors and it is understandable that they emphasize political causes (PACs, greater recruitment of evangelical voters, lobbying - eg. $500 million on health care lobbying in 2009, filibusters that allow senators representing just 10% of the population to stop legislation and make the other side look incompetent, etc.) for today's income inequality. However, their claim that foreign trade is "largely innocent" as a cause is neither substantiated nor logical. Foreign trade as practiced today pads corporate profits and executive bonuses while destroying/threatening millions of American jobs and lowering/holding down the incomes of those affected. Worse yet, the authors don't even mention the impact of millions of illegal aliens depressing wage rates while taking jobs from Americans, nor do they address the canard that tax cuts for and spending by the super-wealthy are essential to our economic success (refuted by Moody's Analytics and Austan Goolsbee, Business Week - 9/13/2010). They're also annoyingly biased towards unions, ignoring their constant strikes and abuses in the 1960s and 1970s, major contributions to G.M., Chrysler, and legacy airline bankruptcies, and current school district, local, and state financial difficulties.

Bottom-Line: It is a sad commentary on the American political system that growing and record levels of inequality are being met by populist backlash against income redistribution and expanding trust in government, currently evidenced by those supporting extending tax cuts for the rich and railing against reforming health care to reduce expenditures from 17.3+% of GDP to more internationally competitive levels (4-6%) while improving patient outcomes. "Winner-Take-All Politics" is interesting reading, provides some essential data, and point out some evidence of the inadequacy of many voters. However, the authors miss the 'elephant in the room' - American-style democracy is not viable when at most 10% of citizens are 'proficient' per functional literacy tests ([...]), and only a small proportion of them have the time and access required to sift through the flood of half-truths, lies, and irrelevancies to objectively evaluate 2,000+ page bills and other political activity. (Ideology-dominated economic professionals and short-term thinking human rights advocates are two others.)

Interesting -- but the argument is not credible, September 23, 2010
This is a very interesting and well written book. The central argument is that growing income inequality is primarily a result of the political policies enacted since the Reagan administration.

The book makes many valid points, for example marginal tax rates on the wealthy have been reduced dramatically.

The problem is that the book discounts the impact of both technology and globalization, and I find that to be simply not credible. The evidence of factory relocations, service offshoring and automation are all around us.

I believe there is solid evidence that globalization and technology are the primary forces driving inequality. The problem is that for most workers labor is becoming less and less valued -- and as a result they have less bargaining power.

Politics is certainly important, and if we had had more progressive, countervailing policies, then we could have mitigated the impact of technology an globalization. Instead we adopted conservative policies that actually accelerated the push toward more concentration of income.

It is very important to understand what is going on here, because if technology is to blame, then it is going to get worse. Technology is moving faster than ever before, and we will soon have far more advanced job automation. More and more people are likely to find that they no longer have marketable skills. Politics may worsen that -- or fail to help -- but it is NOT the fundamental cause.

For the real story on what is happening, and more importantly, a look at what is likely to happen in the future, I'd recommend this book:

The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future.

Read "Winner Take All Politics" by all means, because it certainly raises valid points. But if you want to understand the danger we face in the next couple of decades, be sure to read "The Lights in the Tunnel".

4.5 stars-Wall Street speculators control both parties, September 19, 2010
This book basically argues that Wall Street controls both political parties through the use of massive campaign contributions and lobbyists who buy off both the Republicans and Democrats in the White House,Senate and House.This is essentially correct but obvious.Anyone can go back to the 1976 Jimmy Carter campaign and simply verify that the majority of his campaign funds and advisors came from Wall Street.This identical conclusion also holds with respect to Ronald Reagan,George H W Bush,Bill Clinton,George W Bush and Barack Obama.The only Presidents/Presidential candidates not dominated by Wall Street since 1976 were Gerald Ford,Walter Mondale,Ross Perot,Ralph Nader and Pat Buchanan.
For instance,it is common knowledge to anyone who carefully checks to see where the money is coming from that Wall Street financiers ,hedgefunds,private equity firms and giant commercial banks are calling the shots.For example,one could simply read the July 9,2007 issue of FORTUNE magazine to discover who the major backers of John McCain,Hillary Clinton and Barack Obama were.One could also have read Business Week(2-25-2008) or the Los Angeles Times of 3-21-2008.Through February, 2008 the major donors to the McCain campaign were 1)Merrill Lynch,2) Citigroup,3)Goldman Sachs,4)J P Morgan Chase and 5)Credit Suisse.The major donors to the Hillary Clinton campaign were 1)Goldman Sachs ,2)Morgan Stanley,3)Citigroup,4)Lehman Brothers and 5)J P Morgan Chase.Guess who were the major donors to the Obama campaign ? If you guessed 1)Goldman Sachs,2)UBS Ag,3)J P Morgan Chase ,4)Lehman Brothers and 5)Citigroup,then you are correct.

It didn't matter who became President-Hillary Clinton,Barack Obama or John McCain.All three had been throughly vetted by Wall Street.The campaign staffs of all three candidates ,especially their economic and finance advisors,were all Wall Street connected.Wall Street would have been bailed out regardless of which party won the 2008 election.

Obama is not going to change anything substantially in the financial markets .Neither is Rep. Barney Frank,Sen. Chris Dodd ,Sen. Kerry or Sen. Schumer,etc.Nor is any Republican candidate going to make any changes,simply because the Republican Party is dominated even more so by Wall Street(100%) than the Democratic Party(80%) .The logical solution would be to support a Third Party candidate,for example, Ross Perot .

One aspect of the book is deficient. True conservatives like Ross Perot,Pat Buchanan and Lou Dobbs have been warning about the grave dangers of hallowing out and downsizing the American Manufacturing -Industrial sector,with the consequent offshoring and/or loss of many millions of American jobs,for about 20 years at the same time that the " financial services " sector has exploded from 3% of the total service sector in 1972 to just under 40% by 2007.This is what is causing the great shrinkage in the middle class in America .

Must reading for those concerned with economic equity, December 2, 2010
The book offers a revealing review and analysis of the politics behind America's shift from a nation of middle-class opportunity to one of �ber-rich privilege. Convincingly tossing aside the usual culprits--globalization, technology, educational decline, China, etc.--the authors illustrate the bipartisan nature of this swing in economic reality, with flashpoints occurring in the Carter and Clinton administrations when Democrats held sway, not during the popularly suspected Reagan and Bush-I regimes.

The egregious role of money in our political system--surely to be amplified following the recent Supreme Court decision allowing unfettered use of corporate funds in political campaigns--looms large in the analysis. It helps explain why both parties have abandoned economic fairness in favor of the have-it-alls, but party strategy and effectiveness on the ground also have played their role.

Although much content is disheartening for those concerned with decency and fairness in the economic lives of all Americans (and amazingly light in terms of prescriptions for change), it is certainly important fodder for those who favor a Congress concerned about the middle-class instead of the already very rich.

Great title; reasonable arguments, September 16, 2010
Some of the authors' positions may come off as slanted, but overall their arguments appear to be sound. Read this book along with "What Greenspan Can't Tell You", Jan '08, which addressed many of these issues (and many others), and argued how the imbalances in the system would lead to an imminent crash of the real estate and stock markets.

Timely and Important!, December 10, 2010
I give this book five stars because it is well written, well researched, AND because it is IMPORTANT! If every American were to read this book the political discourse would change significantly for the better. The book is very informative and (although I have not checked all of the references) it seems to be factual and fair. Any political biases of the authors seems to me to be restrained by facts and the desire to arrive at an accurate description of reality. ... Read more

Editorial Review

One positive side-effect of the recent financial market meltdown that toppled giant, century-old institutions and cost millions their jobs is that it created a strong desire among many Americans to better understand how the U.S. economy functions. In The Little Book of Economics, Greg, Ip, one of the country’s most recognized and respected economics journalists, walks readers through how the economy really works.

Written for the inquisitive layman who doesn’t want to plow through academic jargon and Greek letters or pore over charts and tables, The Little Book of Economics offers indispensible insight into how the American economy works – or, doesn’t. With engaging and accessible prose, the book

• Provides a comprehensive understanding of each aspect of our economy from inflation and unemployment to international trade and finance
• Serves as an insider’s guide to the people and institutions that control America’s economy such as the Federal Reserve and the federal budget
• Explains the roots of America’s current economic crisis and the risks the country faces in its aftermath, such as stratospheric government debt, while offering advice on overcoming these threats
• Walks readers through the basic concepts and terminology they need to understand economic news
• Punctures myths and political spin from both the left and the right with candid and often surprising insight

A must read for anyone who wants a better grasp of the economy without taking a course in economics , The Little Book of Economics is a unique and engaging look at how the economy works in all its wonderful and treacherous ways. ... Read more

Reviews

Connects the dots between economic theory and current economic issues
Greg Ip's Little Book of Economics frames current economic issues in an
easy to read and understandable fashion. It combines economic theory
with real world conditions. Ip provides context to the credit market
crisis, the Great Recession, and to the painfully high unemployment of
recent years. The book also explains in a non-technical fashion the role
of the Federal Reserve, the factors that are considered in the
formulation of policy, and the many unconventional policies of the
Federal Reserve employed during the crisis. I have assigned this book to
my Money & Banking class at Rutgers as a complement to the regular text.
Feedback from the students has been uniformly favorable. I strongly
recommend The Little book of Economics for those with an interest in
connecting the dots between theory and practice, for students who
are looking for purpose in economic theory, and for the more general
reader looking for the forest beyond the financial news trees.

Great, quick primer on the subjects
As someone with a degree in Economics who hasn't worked in the field as directly as Greg Ip, I found this book to be a great review of topics I had long forgotten about. Please don't confuse this with a textbook or a deep dive into any topic. It is to Economics what a cross-country flight is to geography. A lot of overview. A lot of great scenery. You will likely find a topic or two you want to delve in to deeper. Oh, and it takes about as long to read.

Thanks Greg.

Excellent text for public policy classes
The Little Book of Economics is engaging and interesting and written at a level that is perfect for students without much economics background. It gives them a basic understanding of the drivers of the economy and the effects of government policies. As an economist, I'd love to use the IS-LM and aggregate supply and demand framework, but I know from experience that economic models confuse and frighten some Masters in Public Administration [MPA] students. My students can get what they need without the math from Greg's book.

Qucik, Comprehensive, and an Excellent Read
Simply put... this is a superb read. If you are looking for that one book that tells you how the world really works, and want it done quickly, and without having to do any math with letters and funny symbols this is your book.

First-rate introduction for an adult who wants to know
The Little Book series on economics, money and investment is well served by this foundation book which is written so as to be easily accessible and clear about a subject often presented as very complex. It covers the issues that matter to us in our economic lives, shedding light where sometimes we are exposed to nothing but heat. It is a primer that escapes the fury of the Krugman/DeLong or Laffer/Kudlow battle over what theory must prevail in order to correct our employment woes.

This is an ideal book for my grandchildren who are teachers and engineers but with no exposure to economics. It and Jack Bogle's Little Book on funds make a great pair of helpful reads. Both are small enough to be non-threatening to those who live by the computer. It's a way to tell them about the game the real world plays with money and how to participate.

Wonderful (Little) Book
The book is very well written and organized. It's essentially what most people need to know about economics. In fact, I got more useful things out of this book than I did in many of my economics classes back in college. It's definitely worth the price and time to read through this.

Making Sense of Economics
Anyone who reads The Economist magazine on a regular basis has read plenty of Greg Ip's work, as he is one of those nameless journalists who make that magazine what it is. Mr. Ip has taken his considerable skills, knowledge, and understanding of economics and the financial world and used them to research and write a delightful--hard to imagine anyone using that term to describe a book on economics--survey of the field and how it works in the real world. I finished its 237 pages in just under three hours, and I believe I am much better informed as a result. Mr. Ip's work is jargon-free, and his clear explanations of such esoterica as credit default swaps and collaterized debt obligations make them almost seem comprehensible to a non-economist. His strength also lies in the wonderful analogies that are sprinkled throughout the book: one is struck by their aptness and the way they convey the essential image. "A central banker with dovish tendencies," he says, meaning one who cares more about unemployment rates than inflation, "is like a wine critic who drinks Merlot out of a box. Nothing wrong with it, but best kept behind closed doors." The global capital market is like a cookie sheet filled with water. "Just the slightest trip," suggests Mr. Ip, "and water sloshes over the sides." Or, "The job market is a wonderfully chaotic Petri dish in which new jobs are constantly being created or destroyed as new firms grow and old firms die." Neither is Mr. Ip limited to the facility of his analogies. His discussion of the dangers of Chinese holdings of US Treasury bills should be of concern to anyone who thinks about US national security in its broadest sense. "In other words," says Mr. Ip, "if one day China takes a dislike to American foreign policy it may threaten to dump Treasurys, which would perhaps drive up American interest rates. Skeptics note that by hurting its biggest customer this would also hurt China. But then countries routinely put national security ahead of economic expedience: it's why the United States embargoes Cuba." Mr. Ip also explains less portentous concepts like The Economist magazine's Big Mac index (BMI), which uses the local price of a Big Mac hamburger to compare purchasing power parity. Using the BMI and comparing the price of a McDonald's product in the United States and Mexico, Mr. Ip concludes that the peso is 33 percent undervalued against the dollar. Reason enough to visit that country, despite the drug war violence (my suggestion, not his). There is much, much more to this slim volume than can or should be covered in an Amazon review, but this short paean might give some notion of how good I thought it was. All said, it is a book that is well worth anyone's time, especially if you are not a professional economist.

Greg Ip's "Little Book"
Greg Ip has made the dismal science available and attractive. His "Little Book" is a delightful contribution to the literature that packs a great deal into this bite-sized and entertaining walk through the essential ideas behind modern economic theory. Crisp and wonderfully unaffected, it will be useful to students but is appropriate for the business reader who wants to have fun while retaking Economics 101.
... Read more

Editorial Review

Over 100,000 sold! Now newly revised and up to date, with over 2,000 color photographs and illustrations.Anyone who wants to learn basic living skills—the kind employed by our forefathers—and adapt them for a better life in the twenty-first century need look no further than this eminently useful, full-color guide. Countless readers have turned to Back to Basics for inspiration and instruction, escaping to an era before power saws and fast food restaurants and rediscovering the pleasures and challenges of a healthier, greener, and more self-sufficient lifestyle.

Now newly updated, the hundreds of projects, step-by-step sequences, photographs, charts, and illustrations in Back to Basics will help you dye your own wool with plant pigments, graft trees, raise chickens, craft a hutch table with hand tools, and make treats such as blueberry peach jam and cheddar cheese. The truly ambitious will find instructions on how to build a log cabin or an adobe brick homestead. More than just practical advice, this is also a book for dreamers—even if you live in a city apartment you will find your imagination sparked, and there's no reason why you can't, for example, make a loom and weave a rag rug. Complete with tips for old-fashioned fun (square dancing calls, homemade toys, and kayaking tips), this may be the most thorough book on voluntary simplicity available. 2,000 color photos and 200 black-and-white illustrations ... Read more

Reviews

A traditional skills primer.
A primer on self-reliance and rural skills, this is a large-format book of 456 pages lavishly illustrated with photographs and drawings, about half in full color. Here are 57 subjects, many with subsets, as in gardening, which includes information on soil, cultivation methods, making and using a greenhouse, and specific information on many veggies, herbs, fruits. Some presentations are simplistic, like telling you how to find and evaluate a farm or can produce in only four pages. Building and using a smokehouse gets one page. Using dairy products butters ten pages. Woodworking and furniture making nail down thirty pages. Build and decorate a house and the chairs, tables, beds to furnish it. Build a springhouse, a dam, a well, a water system. Grow vegetables, fruits, grains. Raise bees, fish, chickens, ducks, geese, rabbits, hogs, sheep, goats, cows, horses. Make cheese, maple syrup, beer, wine, bread, soap, candles, baskets. Cook with wood. Spin yarn, use natural dyes, make cloth, quilts, rugs, hammocks. Learn tanning and leather work, tinsmithing, blacksmithing, toolmaking. Celebrate harvest and holidays with traditional decorations, recipes, toys, games, dances. Learn camping, hiking, fishing, canoeing, snowshoeing, skiing. Whew! This book will keep you happily occupied for several decades.

back to basics
i was given this book over 15 years ago. it has become my "bible" for basic skills. we refer to this book at least once a week for advice and instruction - and always manage to find what we're looking for! it does more than touch on subjects! you get in-depth instructions with pictures to guide you through such things as building a foundation and canning your own garden goods. my copy is well-worn from much use! i treasure this book and all the things i've learned from it. for those out there who wish to live more self-sufficiently, you must have this book.

The Best of Basics...
This was a really interesting book and I got a whole more than I expected. This book covers all kinds of traditional skills from chopping wood, building houses, plowing fields, food preparation, and so on. Just about anything you can imagine on everyday life skills from days long gone.

The bonus part to this was that it included a lot of modern day adaptations and applications for these skills. It could be a useful how-to manual for those that want to live a more simple life. It also includes a description of alternate eco-friendly fuel sources

A Wealth of Practical Information

My grandparents owned the first edition of this book years ago and I read it almost every time I was over at their house. When I saw it was updated, I bought my own copy. This is a how-to tome par excellence! In these pages you can learn to go far toward practical self sufficiency. Just about anything and everything you could ever seek to know regarding hands-on survival skills is explained inside this book. It's useful information for everyday life and a potential lifesaver in times of crisis. In here you can learn how to start fires under any weather conditions, make your own shoes from scratch, build furniture, houses, boats, find out how to raise animals, grow gardens and survive diasters. I feel more confident in my ability to get by in almost any situation than I did before I re-discovered this pragmatic classic. Knowledge, as they say, is power.

Great book
Not a step-by step guide, but usually has enough info on a particular subject to get you started. Some topic are covered in detail, like making braided rugs, while others understandably are only given a cursory review, such as building construction.

Tons of topics, with enough info to get you headed in the right direction for most, but you'll obviously want to get more detailed info on any of the more complex tasks they descibe. ... Read more

Editorial Review

A prominent British conservative warns Americans to stop President Obama from leading their country down the path to European-style socialism.

In March 2009, British conservative Daniel Hannan became a celebrity overnight when he assailed prime minister Gordon Brown on the floor of the European Parliament. The YouTube clip went viral, leading to whirlwind appearances on FOX News and other conservative media outlets. A thoughtful and articulate spokesman for conservative ideas, Hannan is better versed in America's traditions and founding documents than many Americans are. In The New Road to Serfdom, Hannan argues forcefully and passionately that Americans must not allow Barack Obama to take them down the road to European Union–style social democracy. He pleads with Americans not to abandon the founding principles that have made their country a beacon of liberty for the rest of the world.

Reviews

The GHOST of SERFDOM yet to COME
Like the Ghost of Christmas yet to come, Daniel Hannan comes to interrupt the American Dream. He spreads before us an image of what promise we had and enjoyed or what we may yet become if we are not vigilant and adopt the very ways of the world that progressives would have us follow. As he himself states, "I have been a Member of the European Parliament for eleven years. I am living in your future. Let me tell you a few things about it."

Hannan observes that the world is in danger of losing America as a shinning goal towards which to aspire because "the characteristics that once set America apart are being eliminated. The United States is becoming just another country."

The use of the word "Serfdom", as part of the title is quite telling. It is a word not common to the American lexicon, yet reveals the psyche of the European perspective from which Hannan's observations are made. "The New Road to Serfdom", as with F.A. Hayek's 1944 book "Road to Serfdom" is a timely warning to America of how the embracing of socialism and communism threatens to pull democracy and freedom back into a condition of serf and master.

The author would repair the crack in the Bell of Liberty and ring out "...that America stands for something. Your country actualizes an ideal" and should we shirk from the very ideals upon which our nation was founded, "all of us will be left the poorer."

Daniel Hannan clearly shows that while the Road to Serfdom is paved with liberal good intentions, it leads into a blind alley where prosperity is mugged and freedom is lost.

I just read this whole book in one sitting (6 hours)
Wow!

Daniel Hannan understands American politics better than our own politicians! Full of awesome facts. I love how he compares the American system to the UK Parliament. I'm shocked to learn brit's no longer able to vote for judges, sheriffs, school officials, etc. All appointed now, impossible to remove. A real eye opener. He cites hundreds of examples of failed socialist policies.

He makes many arguments by example why we do NOT want to turn into a European style government. He brutally and candidly points out the failings of the brit's system, and then shows how Obama and the socialist progressives are going right down the same dismal path. He's clear and to the point, reminds me of Gov. Chris Christie. A bold fresh view from across the pond.

I was surprised to hear the average brit has disdain for the American Christian Right. Liberals over there have been attacking conservatives and christians for much longer than in the states. They have taken entitlements to beyond extreme, destroying their country. Daniel will catch holy hell by his fellow brits for this book!

I'm taking this book to work tomorrow, to find somebody else that wants to read it. This is one of the best books I've read in years, and I read them all. I put this one up there with "The Great One's" Mark Levin "Liberty and Tyranny", another book I read in one sitting.

Brilliantly written. Flows excellent. The whole book is well thought out, continuously building one point upon the next. An easy read. Inspiring. I'm still smiling. I might read this again!

Excellent
I started the Kindle sample and was compelled to purchase the entire book when the sample ended. One would not expect a book of such a topic to be a page turner but I did not want to put this down. If you want to understand how socialism has failed Europe and where we are going if we continue on this path then read this book. One thing Hannon said of the EU leadership, "Public opinion is treated as an obstacle to overcome, not a reason to change direction'. This is precisely how Obama, Pelosi and Reid view the opinion of the American majority.

Timely Words of Wisdom
The New Road to Serfdom is an important 'must-read' for anyone concerned about where our great country is going under this administration. I would highly recommend Mr. Hannan's illuminating book. There is nothing so precious as the liberty that America has afforded us thus far. Educate yourself so you can make informed decisions, and do all you can to safeguard what must never be taken for granted.

Eloquent and persuasive arguments against centralized power
Daniel Hannan, whose blog for the British Daily Telegraph is always refreshing, has written an immensely persuasive book. Taking advantage of his unique perspective as a member of the European Parliament, he demonstrates that the distribution of power, as opposed to the centralization of power, offers huge economic advantages in additional to personal freedoms. This is an immensely refreshing perspective, well substantiated by factual material. Hannan argues persuasively that instead of remodeling itself on a quasi-European model, the United States would do better to go back to its constitutional roots.

Great perspective and focus
Excellent book. Short, but right to the point. Very helpful to me as I know little about how other countries are governed, so a comparison of our system to others gives good perspective. I found it to be a positive book overall, with the emphasis on the strong points of our U.S. system and why we should preserve the guarantees of liberty we now have, but could lose.

Outstanding...
A fantastic book. Heady yet concise-- not a difficult read, but you'll learn a lot.

This should be required reading for all elected to public office!

Outstanding.
Anything Hannan says is outstanding. He has appeared numerous times on Fox, for his incite. However, what he says is very depressing, namely that we are headed down a very bad road that europe took. He knows. He saw it happen in his native England. I wish there were many more like him.

A Must-Read
This is a must read for all Americans. Hannan calmly compares the direction the United States is heading with recent European history. He uses the history of the United States and Europe to show why the society established in the US has lasted as long as it has, and warns against giving up our freedoms in order to look more like Europe. While Hanna lays out a scary future for the United States if we continue along the path of big government and de-localization (as Europe has), he helps make it clear how we can correct this mistake: by going back to our roots. ... Read more

Editorial Review

Our relationship with the ocean is undergoing a profound transformation. Whereas just three decades ago nearly everything we ate from the sea was wild, rampant overfishing combined with an unprecedented bio-tech revolution has brought us to a point where wild and farmed fish occupy equal parts of a complex and confusing marketplace.We stand at the edge of a cataclysm; there is a distinct possibility that our children's children will never eat a wild fish that has swum freely in the sea. In Four Fish, award-winning writer and lifelong fisherman Paul Greenberg takes us on a culinary journey, exploring the history of the fish that dominate our menus---salmon, sea bass, cod and tuna-and examining where each stands at this critical moment in time. He visits Norwegian mega farms that use genetic techniques once pioneered on sheep to grow millions of pounds of salmon a year.He travels to the ancestral river of the Yupik Eskimos to see the only Fair Trade certified fishing company in the world.He investigates the way PCBs and mercury find their way into seafood; discovers how Mediterranean sea bass went global; Challenges the author of Cod to taste the difference between a farmed and a wild cod; and almost sinks to the bottom of the South Pacific while searching for an alternative to endangered bluefin tuna. Fish, Greenberg reveals, are the last truly wild food - for now. By examining the forces that get fish to our dinner tables, he shows how we can start to heal the oceans and fight for a world where healthy and sustainable seafood is the rule rather than the exception. ... Read more

Reviews

The Story of the Fish in Your Dinner

The limits of the sea

Should appeal to a wide audience

An Eye-Opening Look into the Complexity of our Present and Future Fisheries

"Why Did You Close the Season? We Haven't Caught Them All Yet."

A cautionary tale for our times

Editorial Review

A sharply critical new look at Franklin D. Roosevelt's presidency reveals government policies that hindered economic recovery from the Great Depression -- and are still hurting America today.

In this shocking and groundbreaking new book, economic historian Burton W. Folsom exposes the idyllic legend of Franklin D. Roosevelt as a myth of epic proportions. With questionable moral character and a vendetta against the business elite, Roosevelt created New Deal programs marked by inconsistent planning, wasteful spending, and opportunity for political gain -- ultimately elevating public opinion of his administration but falling flat in achieving the economic revitalization that America so desperately needed from the Great Depression. Folsom takes a critical, revisionist look at Roosevelt's presidency, his economic policies, and his personal life.

Elected in 1932 on a buoyant tide of promises to balance the increasingly uncontrollable national budget and reduce the catastrophic unemployment rate, the charismatic thirty-second president not only neglected to pursue those goals, he made dramatic changes to federal programming that directly contradicted his campaign promises. Price fixing, court packing, regressive taxes, and patronism were all hidden inside the alphabet soup of his popular New Deal, putting a financial strain on the already suffering lower classes and discouraging the upper classes from taking business risks that potentially could have jostled national cash flow from dormancy. Many government programs that are widely used today have their seeds in the New Deal. Farm subsidies, minimum wage, and welfare, among others, all stifle economic growth -- encouraging decreased productivity and exacerbating unemployment.

Roosevelt's imperious approach to the presidency changed American politics forever, and as he manipulated public opinion, American citizens became unwitting accomplices to the stilted economic growth of the 1930s. More than sixty years after FDR died in office, we still struggle with the damaging repercussions of his legacy. ... Read more

Reviews

Definitely a Raw Deal
Burton Folsom's New Deal or Raw Deal? is a timely, informative and captivating read on the destructive economic policies on the Franklin Delano Roosevelt Administration. This book is a valuable addition to the growing number of books on how government intervention, not free markets, plunged the United States deep into the Great Depression.

Folsom corrects many common misconceptions about the New Deal and the Great Depression in this book. The first misconception is that President Hoover was a principled advocate of laissez-faire capitalism. In fact, Folsom argues, Hoover was a big government Republican. Consider the Smoot-Hawley Act, which imposed unprecedented tariffs on thousands of imported items. Not only did this drastically increase the prices of U.S. imports (hurting U.S. consumers), but it also encouraged European nations to impose retaliatory tariffs on U.S. exports (hurting U.S. producers.) Furthermore, Hoover responded to the early onset of the Great Depression with disastrous economic regulations. He endorsed the Federal Farm Board, which issued over $500 million in cotton and wheat subsidies only to have the massive surpluses dumped on an oversaturated world market. Hoover also supposed the Reconstruction Finance Corporation, which spent over $1.5 billion on bailouts to failing banks and industries.

Another major point of Folsom's book is that many of FDR's programs were struck down as unconstitutional. These include the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA). The NIRA imposed economy-wide price controls and production regulations on domestic manufacturing. The AAA was similar in spirit, except it focused on price and production controls on agriculture. The extent of the controls evidently became so detailed where, for example, the purchasers of a live chicken were required by law to blindly reach into the coop to randomly choose a chicken. Customers were not free to choose whichever chicken they fancied. Recognizing the absurdity of this, one of the Supreme Court justices quipped "what if the chickens are all on the other side?" before the Supreme Court unanimously ruled the NIRA unconstitutional.

Folsom also emphasizes the crushing tax burdens imposed by the New Deal. Under FDR, the highest income tax rate was 79%, meaning that four out of five earned dollars was confiscated by the government! According to Folsom, FDR also seriously entertained the idea of imposing a 99.5% income tax rate on all who earned over $100,000 in income. Flippantly justifying this, FDR joked that nobody in his administration would ever make that kind of money. Under FDR, the national debt grew more in the 1930s than it grew in the previous 150 years of the existence of the United States. Putting it in other words, Folsom indicates that if $100/minute was deposited into an account the day Columbus discovered North America up until FDR took office, there would not be enough money in this account to fully defray the costs of the New Deal.

The last major point that I will reiterate is the extensive level of corruption of the FDR administration. According to Folsom's research, the Works Progress Administration (WPA) offered large government handouts to whichever lobbyists ingratiated themselves most with the administration. FDR used the WPA to make or break the careers of public officials, depending on whether they supported him. This corruption rose to such an overt and perverse level that officials at the WPA used to cheerfully greet callers with "Democratic headquarters!" The Hatch Act, which forbids government employees from using their office for political activity, was passed in response to these activities.

If you like FDR, reading this book will shock you. If you already despise FDR, reading this book will reveal how truly appalling his administration was and how in many respects, FDR was like a gangster. In addition to the above, you will learn about how FDR used the IRS to intimidate political opponents, such as the esteemed banker Andrew Mellon as well as FDR's unscrupulous court-packing scheme. You will learn about the sheer arbitrary nature of FDR's economic controls. This cannot be better exemplified than how, when advised to increase the unit price of gold from 19 cents to 22 cents, FDR proposed 21 cents since it was his "lucky number".

Anyone interested in politics and economic history should read this book, before history repeats itself.

Should be Mandatory Reading for Every Citizen!
I'll confess to not being a fan of big government so I was prepared to be receptive to a harsh assessment of the New Deal. However, I was not prepared for the scathing indictment armed with facts, logic, primary source quotes and data that constitute this powerful book.

The book is hard to put down even as you recoil in horror at the lunatic economic policies of the era and the blatant turn to fascism. If you tried to design a program to extend the Great Depression indefinitely, you could have done little better than FDR did. The economic incompetence and unintended consequences which are detailed in all their frightening glory is mind boggling, but it is only part of the story.

The book also demonstrates the endemic political patronage and vote buying that resulted from the concentration of money and power in the hands of the federal government. State and local politicians who supported Roosevelt were rewarded with a cascade of federal dollars, those who opposed him were frozen out and inevitably lost subsequent elections.

Citizens who opposed FDR were set upon by the IRS or the NRA. The use of government power to persecute and intimidate dissension is chilling. There are several quotes or diary entries from even Roosevelt's supporters and cabinet members that point out both the insanity of the policies and the dangers of FDR's abuse of power.

With our government setting out on what's been called the "New New Deal", this book should be required reading for every citizen so they can understand both the failure of the New Deal as an economic cure and the abuse of power and vote buying that the huge transfer of money and independence from the private sector to the public sector caused and will undoubtedly cause again.

PS- As of the writing of this review, it appears you either love this book or you hate it as there are only 5 star reviews and 1 star reviews. However, if you read the reviews, you'll notice that those who have given it 5 star reviews have clearly read the book as they either quote from it or recount specific stories or facts mentioned in the book. On the other hand (again, as of this writing) the 1 star reviews don't mention a single specific point in the book and attempt to refute it. It seems pretty clear that they haven't actually read the book. If they have read it (which I doubt), they choose to review it with ad-hominem attacks, claims of bias (a historian with a world view??!!...I'm shocked!)and irrelevant rants about Bush etc. Please, do us all a favor.. if you want to attack a book at least read it and make specific logical refutations, don't simply pile on trite cliches and emotional appeals that have nothing to do with the author's scholarship.

Please, no more new deals
Folsom has delivered a book that is tough to put down. While flying to a conference the other day, I was reading New Deal or Raw Deal and telling my friend (who was reading another book) how great Folsom's book is and talking about some key points brought up by Dr. Folsom. I left my seat for a moment; when I returned, my friend was reading Folsom's book, and I had a hard time getting it back.

Roosevelt helped create major rifts between those who were wealthy and those who were poor and middle class. He even indicated he did that to win the election rather than pursue what was best for the country. He tried to stack the Supreme Court and used the IRS to harass his major critics.

I've had to remind myself repeatedly that this is not a fictional work and that it is about a president in the USA rather than a dictator in some distant country. For example, the New Deal's birth of the National Industrial Recovery Act of 1933 was bizarre. "It allowed American industrialists to collaborate to set the prices of their products and even the wages and hours that went into making them. Leaders in all industries, from steel and coal to shoulder pads and dog food, were invited to sit down and write codes of fair competition that would be binding on all producers in their industry. Laborers were often allowed to organize, and anti-trust laws were suspended." (pp. 43-44) The result was that many big companies could easily take business from smaller companies because the larger companies controlled the price fixing. An example Folsom uses is Jacob Maged of Jersey City, NJ. After 22 years of running a successful small business pressing clothes, Maged's reputation was one of quality work at a reasonable cost. The NRA then demanded that he charge 40 cents to press a suit instead of 35 cents. He was sent to jail and given a $100 fine for refusing to increase his prices.

Folsom has thoroughly documented the facts in the book, including several pages of sources.

By the end of the book, it is no mystery whether Roosevelt orchestrated the New Deal or a raw deal.

This book is incredibly timely. The most disturbing part is it seems like we are headed in the same direction today.

About Time Someone Took on the New Deal
Burton Folsom, a Professor of History at Hillsdale College, already has one classic to his credit: "Myth of the Robber Barons." Now he offers a concise, yet detailed, revision of the Leuchtenberg-Schlesinger myth that Franklin Roosevelt "saved" capitalism. In both his introduction and concluding remarks, Folsom assesses why the legend arose that Roosevelt had "brought us out of the Depression." He engages in a brief analysis of what caused the Great Depression, frequently noting that the economists have left the historians in the dust: the majority of economists today neither think that business failures caused the Great Depression, or that Roosevelt's policies did much to temper it, let alone solve the crisis.

Folsom assesses adequate blame to Herbert Hoover, though not (as is commonly portrayed) as a wild-eyed laissez-faire capitalist, but as a meddling Progressive in the mold of Woodrow Wilson. Roosevelt in many ways merely continues, but greatly expands, Hoover's programs. One of the more interesting chapters deals with the NRA and its price fixing schemes. Here we had an agency of the federal government telling tailors what they could charge to hem a pair of pants! The NRA, thankfully, was brought down by a butcher who, in the process of selling chickens, allowed his customers to (imagine this!) select the chicken they wanted. The NRA goons attempted to force him to demand that they blindly take the first chicken that came within reach. In the subsequent court decision, the NRA was ruled unconstitutional. By that time, at least one businessman, who thought he couldn't charge the high prices demanded by the NRA or lose his customers, languished in jail, running his business from behind bars.

Folsom covers the better-known distortions of the New Deal---the minimum wage, Social Security, the banking regulations---but also reveals how Roosevelt used the IRS to smash political enemies, including editors whose columns he didn't care for. It's a chilling image, given talk of re-instituting the modern-day "gag rule" called the "fairness doctrine." Roosevelt used federal money as much to ensure his re-election as he did to stimulate a recovery, plastering wavering districts with cash until they arrived at the right ballot-box conclusions. Thus, as Folsom shows, the New Deal was not just an economic rebuilding program, but a political weapon designed to ensure the Democrat Party would hold power for much of the 20th century.

A good compliment to Amity Shlaes' "The Forgotten Man," Folsom sticks more to the specifics of how each piece of legislation retarded recovery. There is no question, when you finish, that Roosevelt stuck most Americans with a "raw deal" to ensure he remained in the White House for more than a decade.

Deja Vu all over again?
As the title suggests, Prof. Fulsom of Hillsdale College, challenges the popular perception of FDR and the New Deal.

He highlights the four points of this myth and logically challenges them:
1) 1920's was an economic disaster
2) New Deal programs corrected the 1920's
3) Roosevelt and the New Deal were popular
4) Roosevelt was a good administrator and a moral leader

Prof. Folsom utilizes little over a third of the book to analyze the cost and "benefits" of the numerous alphabet organizations and other programs.

The middle third looks at the manner in which FDR and his administration distributed the monies for these programs. Often they were utilized for political patronage rather than true relief.

The final third is devoted to what should have been done and what has been the current and future implications of these costly programs.

Even though the book is an economic history, I found it an interesting read. A person could not help but see the parallels to the current financial crisis.

Folsom uses a mix of anecdotes, personal quotes and a sparing use of statistics to make his point. He backs these up with numerous footnotes at the end of the book.

This book is a great addition to "The Forgotten Man" and "FDR's Follies" in debunking of FDR's socialist agenda that still haunts us today.

The quote by Santayana would be appropriate here but the better quote is by Morgantheau, FDR's close friend, in a 1939 testimony before the Ways and Means Commitee,
"We are spending more than we have ever spent before and it has does not work....I say after eight years of this administration we have as much unemployment as when we started...and an enormous debt to boot."

Hopefully in eight years we will not be saying the same thing.

Excellent book
(Note: I own and have READ all of this book) (...)
Interesting book.
This is a very well written and well researched book. A keeper.
It is not one I read cover to cover over two days. It's more a case of reading a chapter, digesting it, cross referencing it, and then moving on. The prose, to my taste, is a little on the heavy, slightly cumbersome side. It's not a novel. It's not a racy read, like perhaps Fleming writes. It's more of an economics history text book. What IS attractive is that the style is balanced, very fair, presenting BOTH SIDES of the arguments. That makes it a good research book. It avoids shrill indignation, or fatuous adulation. It is timely, with, on the one side, many advisers of Mr Obama, publicly touting some similar 'big government spending' policies and attitudes, whilst presenting them as excitingly new and original. That is historically simply not correct. Just read the book and see how intensely Roosevelt tried to wield the clout of Big Government. I believe this book gives a better insight into the arguments for and against the New Deal. I feel there was a well meaning idealism at work (former social workers Hopkins and Perkins et all meant well), Roosevelt indubitably (The First Hundred days, etc) was not a Coolidge, and put his back into it. But against that, this book raises again the shadow side of FDR and his policies, which today, only the true devotees choose to wholly ignore. The machinations, the sledge hammer political approach, the war on the "economic Royalists", the "court packing" fiasco, the cynical use of the IRS to persecute his detractors, the 'taxpayer dollar bombardment' of swing states, etc, etc. Many reasoned studies today attack FDR pretty furiously. Defenders of FDR mostly seem to just ignore such misguided babbling, and I'm always on the hunt for good, reasoned, New Deal apologies. However, let me say no matter which side you prefer, the extreme laissez faire minimalist Coolidge approach, or the heavy 'beneficient hand' of Big Government, you will find in this book many good summaries of the principle arguments, for and against.
Mr Obama himself, I suspect, knows more than some give him credit for, and is astute enough to know government stimulatory ('anti-cyclical')spending is a double edged sword, which needs very careful handling lest it cut the wrong way. The deficit economic theories of Keynes (who met with Roosevelt, and didn't get along too well) have been widely challenged. Many argue against them, saying "Tried, tested...and failed". However,others hold a polar opposite view, and argue that FDR should have spent more, not less, and that the same massive government spending today,in 2009, is the only way forward. Still others allege a common misconception exists today of what Keynes was actually saying!
However, read the book and draw your own conclusions. And enjoy, as I did, checking thoughtfully on the historic 1930's backdrop to today's intense economic debate. The stakes... are high.

I have a lot of areas highlighted. Some examples:
"Federal Aid encourages the expectations of paternal care on the part of Government and weakens the sturdiness of our national character".(p.77)
"This historic shift to using federal dollars for local relief profoundly changed the American work ethic" (p.81)
"Such a system tended to make liars out of everyone involved. Governors and mayors would shed abundant tears telling Hopkins and Roosevelt of their financial hardships; Hopkins and Roosevelt then listened and pretended to dispense FERA money solely on the basis of need, not on political considerations." (p.82)
(p.132) "Forbes magazine protested that "a fundamental motive of the New Deal is to wage war against bigness in business."
(p.132) Roosevelt encouraged this fight and tore into business in his State of the Union message in January 1936. He condemned the "selfish power" and the old 'resplendent economic autocracy' that was fighting his 'new instruments of public power.' Roosevelt added, "In the hands of a people's Government this power is wholesome and proper. But in the hands of political puppets of an economic autocracy such power would provide shackles for the liberties of the people."
Hm. You can imagine the raucous cheers. These are fighting words, unquestionably encouraging a class hatred. Was that good for America? If you love FDR, and many people do, I fully respect that, then you are however faced with the requirement to face the often heard complaint that the entrepreneurial class (ranging from small to big) was discouraged from launching new business ventures and investments, and creating employment. Uncertainty undermined confidence.
Next question might be: "Did that matter?" If you feel it didn't matter, then I would like to hear your reasoning, and your notion of what America stands for.
I hate to say it, but if you like FDR and his policies, then you will probably growl your way through this book. Folsom does not pull any punches.
(p.133) "Roosevelt's next step was to impose yet another tax on business - this one a tax on all undistributed corporate profits."
(P.133) "Businessmen may have been nearly unanimous in criticizing this new tax on profits, but Roosevelt believed it was a vote-getter in November, and throughout the election year he hammered away at "economic royalists" and "malefactors of great wealth".
I don't doubt it WAS a vote-getter. Good for Roosevelt. The question one might ask: Was it good for the country?
And one I really chuckled about, "With so much help from most reporters in so many areas, Roosevelt sometimes became careless in telling the truth." (p.228)
"So much help from most reporters in so many area" is a criticism, no, a devastating condemnation of the impartiality/objectivity of the media at that time. Many of course make the same somber assessment of today's trendy so-called 'liberal' media. Who, oddly enough, don't seem to be alarmed at the steady non-liberal (in the old, classic sense) erosion of freedom, and the ever growing boot print of bigger and bigger central government. This book illuminates some of the cynical,manipulative origins of this insidious, ongoing process. The unethical undermining of American democracy's (beautifully eloquent) founding idealism, and its replacement with a 'no holds barred', and 'the end justifies the means' approach to fooling and bamboozling the voting masses. (Many of whom were tragically desperate, and aching for the coming of a true savior.) How an elite, puffed up with hubris, arrogant and inflexible, dragged down the Old Jeffersonian America. If it ever existed?
But against that, I think it also shows the tragedy of good intentions, real problems, real hurt, real despair. I refuse to believe there was not a great deal of good in the motivations of many of the key New Deal players.Some led extraordinarily dedicated lives. Good did come out of it. As usual, nothing is black and white.

If you are considering this book, check out the "contents" page. It is laid out well, very clear, and it makes it very easy to leaf back and forwards afterward and look something up.
This is an excellent read. Now I need to go read another book which is more sympathetic to FDR, and once again contrast the arguments. I'm wide open to reading suggestions. I have several more FDR books on my wish list, and I shall review them all over time. Trying very hard not to be biased, and willing to sincerely weigh all counter arguments...
Peace. Enjoy the read.
PS: Please "comment" constructively if you feel I am missing the point, or if you can recommend further reading to illustrate positive New Deal accomplishments not properly brought out in this book.

History worth reading, will we repeat the past mistakes?
Great book for the times in which we live. If you're interested in the effect of government intervention in the free market this is your book.

The quote that best sums up the book is from Henry Morgenthau - FDR's Treasury Secretary after 8 years of increased government spending to help with the depression:

"We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"

I hope we learn from the past. ... Read more

Editorial Review

Reviews

The most thought-provoking recent book., May 23, 2010
I found this book a highly stimulating read. It represents possibly the most thought-provoking contribution in the aftermath of the crisis that started in 2007 and that yet engulfs us. Let me first summarize some of the most salient points it makes, then talk about its strengths, and finally, why everyone should read it.

The epilogue of the book summarizes the book best - "The crisis has resulted from a confusion about the appropriate roles of the government and the market. We need to find the right balance again, and I am hopeful we will." The book presents two important government distortions - the push for universal home ownership in the United States and the push for export-led growth in some countries such as Germany and China that have left to massive "global imbalances", with some countries such
as the United States, the United Kingdom and Spain persistently being in deficits and borrowing from the surplus, exporting nations. While pursuit for home ownership affordability and growth are nothing to complain about per se, the book makes sharp observations that they are occurring at the expense of something more, or as, important. In the United States, the book argues, there has been a growing income inequality, which combined with a relatively feeble safety net for the poor, has created pressure on politicians to bridge the inequality. Instead of improving the competitiveness of labor force in a global market with changing mix of industries and required skills, governments have adopted the option "let them eat credit" (Chapter One's title). The presence of government-sponsored agencies in the United States enabled exercising such an option readily through a push for priority lending to the low-income households (sub-prime mortgages). In case of surplus countries, the single-minded focus on exports has led governments to ignore the domestic sector, preventing sufficient redeployment of surplus for internal development and somewhat perversely, boosted domestic savings rates significantly due to lack of adequate safety nets (at least in case of China, if not in case of Germany). The savings have thus had no place to go but to outside and ended up resulting in massive capital inflows that fueled the housing sector expansion in the US, the UK and Spain.

While these government "failures" are themselves pretty interesting to have observed and highlighted, what is fascinating is how they interacted with each other - and with the financial sector - in fueling the expansion to levels that can be called massive housing bubbles. The idea here is that the invisible hand operating through the price when the price is distorted can lead to massive distortions in allocation of capital also. The financial sector in developed world is so sophisticated and amoral (a great choice of word by the author) that its dispassionate pursuit of profits leads it to direct capital to wherever there is a relative mis-pricing. So if governments are subsidizing home ownership, efforts will be made to deploy pretty much all available free capital of the world to that sector. If some governments are finding it cheap to borrow because savings are seeking them out, the financial sector will grow at a sufficient rate to absorb and support expansion through the capital inflows. While clearly there are some incentive-based distortions, especially short-term nature of accounting-based compensation that ignores true long-term risks, the book takes the stand, and explains it well, that the bigger issue was that the imbalance of capital flows and the ease of pushing sub-prime home ownership - both due to government distortions - meant the financial sector was essentially the conduit to make happen what the rest of the world was seeking to achieve. In the process, it made a ton of bad loans (but the governments were happy with that till it all really blew up). And some parts of the financial sector pursued this role even more aggressively than one could have imagined due to the steady entrenchment of too-big-to-fail expectations --- large banks being repeatedly bailed out through government and regulatory forbearance and enjoying Central-Bank monetary stimulus each time markets turned south. In essence, one walks away with an explanation of what brought about the perfect storm.

Some may question the basis of this argument by saying - why did we see credit expansion across board and not just in low-income households. There are two important points the book makes. One, that once risk is mispriced for one investment (by governments for sub-prime lending), financial sector must demand similar return elsewhere. That is, there will be mispricing of risk across board. Second, the book focuses on a rather fascinating recent phenomenon that recent recoveries from recessions, especially in the United States, have remained "jobless" for extended periods of time. Perhaps as a subconscious response to this (or due to ideologies in other cases), Central Banks have tended to provide massive monetary stimulus to get the financial sector to push the real sector hard through greater lending and intermediation. Such stimulus, unfortunately, again serves to transfer rents from households to the financial sector (by keeping interest rates low) and produces mispriced risk and the economy moved "From Bubble to Bubble" (Chapter Five title), until the most recent bubble could not be mopped up by anyone, in spite of the efforts to do so.

Those who have read Raghu Rajan's earlier book and research would recognize that his writings are always cogent and based in sound set of facts. But this book is more special in the sense that here he paints on a much larger canvas, covering bases from distributional issues within income strata of society, to the persistent capital imbalances across large countries of the world, and the power and ruthless profit-maximizing incentives of modern market-based financial sector. The point of Fault Lines is that these are slow-moving tectonic plates, neither movement might seem dangerous by itself, but that when these plates come together and collide, global economy can get badly shaken. To most minds that are focused narrowly on their own positions, let alone the movements of the plate they stand on, the earthquake - like this crisis - may seem sudden. The beauty of the book is in explaining that when viewed carefully, the crisis was not a pure accident and that more may arise in future unless the root causes are addressed sufficiently soon.

While the book is worth it even just for its explanation of why we had a crisis now rather than at some other points of time in the past, it goes the extra mile and proposes valuable reforms - once again focusing on all three issues - building a better safety net in the United States (see in particular, the suggestions to improve education access to all), reducing the global imbalances, and improving the regulation of the financial sector so that they (and their financiers) pay for mopping up of "bubbles" that they create, rather than governments and Central Banks passing on these costs to taxpayers.

As you can tell from this review, there is a lot going on here. But it is written with great examples and cases - almost allegorical at times (even has a fascinating poetry recounted in the chapter "The Fable of the Bees Replayed" ), and should be accessible to one and all. Not all may find it easy to agree with every single point (as it will certainly question some long-held biases about different countries and societies), but it is hard to not take a deep breath and ponder once you have read it all. In many ways, it shows that when economic conditions so demand or induce, developed world behaves much the same way as developing world: they are both after all driven by choices of human beings and the book lays out some common patterns of global economic behavior - in households, markets and governments.

In summary, I recommend the book extremely highly and comment and thank Raghu Rajan for putting together this brilliant painting of global economy and finance, surrounding the arena of the recently witnessed crisis.

- Viral Acharya, Professor of Finance, New York University Stern School of Business
([...])

Rajan's Reply to Krugman Re: Fault Lines, September 20, 2010

In the Sept 2010 issue of the New York Review of Books, Paul Krugman & Karen Wells reviewed Fault Lines. Below is Rajan's reply to their review:

Paul Krugman and Robin Wells caricature my recent book Fault Lines in an article in the New York Review of Books.

First, Krugman starts with a diatribe on why so many economists are "asking how we got into this mess rather than telling us how to get out of it." Krugman apparently believes that his standard response of more stimulus applies regardless of the reasons why we are in the economic downturn. Yet it is precisely because I think the policy response to the last crisis contributed to getting us into this one that it is worthwhile examining how we got into this mess, and to resist the unreflective policies that Krugman advocates. The article, and their criticism, however, do have a lot to say about Krugman's policy views (for simplicity, I will say "Krugman" and "he" instead of "Krugman and Wells" and "they") which I have disagreed with in the past. Rather than focus on the innuendo about my motives and beliefs in the review, let me focus on differences of substance. I will return to why I believe Krugman writes the way he does only at the end.

My book emphasizes a number of related fault lines that led to our current predicament. Krugman discusses and dismisses two - the political push for easy housing credit in the United States and overly lax monetary policy in the years 2002-2005 - while favoring a third, the global trade imbalances (which he does not acknowledge are a central theme in my book). I will argue shortly, however, that focusing exclusively on the imbalances as Krugman does, while ignoring why the United States became a deficit country, gives us a grossly incomplete understanding of what happened. Finally, Krugman ignores an important factor I emphasize - the incentives of bankers and their willingness to seek out and take the tail risks that brought the system down.

Let me start with the political push to expand housing credit. I argue that in an attempt to offset the consequences of rising income inequality, politicians on both sides of the aisle pushed easy housing credit through government units like the Federal Housing Administration, and by imposing increasingly rigorous mandates on government sponsored enterprises such as Fannie Mae and Freddie Mac. Interestingly, Krugman neither disputes my characterization of the incentives of politicians, nor the detailed documentation of government initiatives and mandates in this regard. What he disputes vehemently is whether government policy contributed to the housing bubble, and in particular, whether Fannie and Freddie were partly responsible.

In absolving Fannie and Freddie, Krugman has been consistent over time, though his explanations as to why Fannie and Freddie are not partially to blame have morphed as his errors have been pointed out. First, he argued that Fannie and Freddie could not participate in sub-prime financing. Then he argued that their share of financing was falling in the years mortgage loan quality deteriorated the most. Now he claims that if they indeed did it (and they did not), it was because of the profit motive and not to fulfill a social objective. Let me offer details.

In a July 14, 2008 op-ed in the New York Times, Krugman explained why Fannie and Freddie were blameless thus:

"Partly that's because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn't do any subprime lending, because they can't: the definition of a subprime loan is precisely a loan that doesn't meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income. So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works."

Critics were quick to point out that Krugman had his facts wrong. As Charles Calomiris, a professor at Columbia University and Peter Wallison at the American Enterprise Institute (and member of the financial crisis inquiry commission), "Here Krugman demonstrates confusion about the law (which did not prohibit subprime lending by the GSEs), misunderstands the regulatory regime under which they operated (which did not have the capacity to control their risk-taking), and mismeasures their actual subprime exposures (which he wrongly states were zero)."

So Krugman shifted his emphasis. In his blog critique of a Financial Times op-ed I wrote in June 2010, Krugman no longer argued that Fannie and Freddie could not buy sub-prime mortgages.v Instead, he emphasized the slightly falling share of Fannie and Freddie's residential mortgage securitizations in the years 2004 to 2006 as the reason they were not responsible. Here again he presents a misleading picture. Not only did Fannie and Freddie purchase whole sub-prime loans that were not securitized (and are thus not counted in its share of securitizations), they also bought substantial amounts of private-label mortgage backed securities issued by others.

Of course, one could question this form of analysis. Asset prices and bubbles have momentum. Even if Fannie and Freddie had simply ignited the process, and not fueled it in the go-go years of 2004-2006, they would bear some responsibility. Krugman never considers this possibility. When these are taken into account, Fannie and Freddie's share of the sub-prime market financing did increase even in those years.
In the current review piece, Krugman first quotes the book by Nouriel Roubini and Stephen Mihm:

"Clearly, Fannie and Freddie did not originate sub-prime mortgages directly - they are not equipped to do so. But they fuelled the boom by buying or guaranteeing them. Indeed, Countrywide was one of their largest originators of sub-prime mortgages, according to work by Ed Pinto, a former chief credit officer of Fannie Mae: "The huge growth in the subprime market was primarily underwritten not by Fannie Mae and Freddie Mac but by private mortgage lenders like Countrywide. Moreover, the Community Reinvestment Act long predates the housing bubble.... Overblown claims that Fannie Mae and Freddie Mac single-handedly caused the subprime crisis are just plain wrong."

For instance, consider this press release from 1992, and participated from very early on in Fannie Mae's drive into affordable housing:

"Countrywide Funding Corporation and the Federal National Mortgage Association (Fannie Mae) announced today that they have signed a record commitment to finance $8 billion in home mortgages. Fannie Mae said the agreement is the single largest commitment in its history...The $8 billion agreement includes a previously announced $1.25 billion of a variety of Fannie Mae's affordable home mortgages, including reduced down payment loans...

"We are delighted to participate in this historic event, and we are particularly proud that a substantial portion of the $8 billion commitment will directly benefit lower income Americans," said Countrywide President Angelo Mozilo..."We look forward to the rapid fulfillment of this commitment so that Countrywide can sign another record-breaking agreement with Fannie Mae," Mozilo said.

"Countrywide's commitment will provide home financing for tens of thousands of home buyers, ranging from lower income Americans buying their first home to middle-income homeowners refinancing their mortgage at today's lower rates," said John H. Fulford, senior vice president in charge of Fannie Mae's Western Regional Office located here.

Of course, as Fannie and Freddie bought the garbage loans that lenders like Countrywide originated, they helped fuel the decline in lending standards. Also, while the Community Reinvestment Act was enacted in 1979, it was the more vigorous enforcement of the provisions of the Act in the early 1990s that gave the government a lever to push its low-income lending objectives, a fact the Department of Housing and Urban Development (HUD) was once proud of (see the HUD press releases below).

Perhaps more interesting is that after citing Roubini and Mihm, Krugman repeats his earlier claim; "As others have pointed out, Fannie and Freddie actually accounted for a sharply reduced share of the home lending market as a whole during the peak years of the bubble." Now he attributes the inaccurate claim that Fannie and Freddie accounted for a sharply reduced share of the home lending market to nameless "others". But that is just the prelude to changing his story once again; "To the extent that they did purchase dubious home loans, they were in pursuit of profit, not social objectives--in effect, they were trying to catch up with private lenders." In other words, if they did do it (and he denies they did), it was because of the profit motive.

Clearly, everything Fannie and Freddie did was because of the profit motive - after all, they were private corporations. But I don't know how we can tell without more careful examination how much of the lending they did was to meet government affordable housing mandates or to curry favor with Congress in order to preserve their profitable prime mortgage franchise, and how much was to increase the bottom line immediately. Perhaps Krugman can tell us how he determined their intent?

Interestingly, before the housing market collapsed, HUD proudly accepted its role in pushing low-income lending through the various levers that Krugman now denies were used. For instance, in 2000 when it announced that it was increasing Fannie and Freddie's affordable housing goals, it concluded:

"Lower-income and minority families have made major gains in access to the mortgage market in the 1990s. A variety of reasons have accounted for these gains, including improved housing affordability, enhanced enforcement of the Community Reinvestment Act, more flexible mortgage underwriting, and stepped-up enforcement of the Fair Housing Act. But most industry observers believe that one factor behind these gains has been the improved performance of Fannie Mae and Freddie Mac under HUD's affordable lending goals. HUD's recent increases in the goals for 2001-03 will encourage the GSEs to further step up their support for affordable lending."

And in 2004, when it announced yet higher goals it said:

"Over the past ten years, there has been a `revolution in affordable lending' that has extended homeownership opportunities to historically underserved households. Fannie Mae and Freddie Mac have been a substantial part of this `revolution in affordable lending'. During the mid-to-late 1990s, they added flexibility to their underwriting guidelines, introduced new low-downpayment products, and worked to expand the use of automated underwriting in evaluating the creditworthiness of loan applicants. HMDA data suggest that the industry and GSE initiatives are increasing the flow of credit to underserved borrowers. Between 1993 and 2003, conventional loans to low income and minority families increased at much faster rates than loans to upper-income and nonminority families."

If the government itself took credit for its then successes in expanding home ownership then, why is Krugman not willing to accept its contribution to the subsequent bust as too many lower middle-class families ended up in homes they could not afford? I agree there is room for legitimate differences of opinion on the quality of data, and the extent of government responsibility, but to argue that the government had no role in directing credit, or in the subsequent bust, is simply ideological myopia.

Let me move on to Krugman's second criticism of my diagnosis of the crisis. He argues that the Fed's very accommodative monetary policy over the period 2003 to 2005 was also not responsible for the crisis. Here Krugman is characteristically dismissive of alternative views. In his review, he says that there were good reasons for the Fed to keep rates low given the high unemployment rate. Although this may be a justification for the Fed's policy (as I argue in my book, it was precisely because the Fed was focused on a stubbornly high unemployment rate that it took its eye off the irrational exuberance building in housing markets and the financial sector), it in no way validates the claim that the policy did not contribute to the manic lending or housing bubble.

A second argument that Krugman makes is that Europe too had bubbles and the European Central Bank was less aggressive than the Federal Reserve, so monetary possible could not be responsible. It is true that the European Central Bank was less aggressive, but only slightly so; It brought its key refinancing rate down to only 2 percent while the Fed brought the Fed Funds rate down to 1 percent. Clearly, both rates were low by historical standards. More important, what Krugman does not point out is that different Euro area economies had differing inflation rates, so the real monetary policy rate was substantially different across the Euro area despite a common nominal policy rate. Countries that had strongly negative real policy rates - Ireland and Spain are primary exhibits - had a housing boom and bust, while countries like Germany with low inflation, and therefore higher real policy rates, did not. Indeed, a working paper by two ECB economists, Angela Maddaloni and Jos�-Luis Peydr�, indicates that the ultra-low rates by both the ECB and the Fed at this time had a strong causal effect in relaxing banks' commercial, mortgage, and retail lending standards over this period.

I admit that there is much less consensus on whether the Fed helped create the housing bubble and the banking crisis than on whether Fannie and Freddie were involved. Ben Bernanke, a monetary economist of the highest caliber, denies it, while John Taylor, an equally respected monetary economist insists on it. Some Fed studies accept responsibility while others deny it. Krugman, of course, has an interest in defending the Fed and criticizing alternative viewpoints. He himself advocated the policies the Fed followed, and in fact, was critical of the Fed raising rates even when it belatedly did so in 2004.

Then, as he does now, Krugman emphasized the dangers from a Japanese-style deflation, as well as the slow progress in bringing back jobs.

Finally, if he denies a role for government housing policies or for monetary policy, or even warped banker incentives, then what does Krugman attribute the crisis to? His answer is over-saving foreigners. Put simply, trade surplus countries like Germany and China had to reinvest their financial surpluses in the United States, pushing down long term interest rates in the process, and igniting a housing bubble that eventually burst and led to the financial panic. But this is only a partial explanation, as I argue in my book. The United States did not have to run a large trade deficit and absorb the capital inflows - the claim that it had to sounds very much like that of the over-indulgent and over-indebted rake who blames his Then, as he does now, he advocated more stimulus. Then, as he does now, Krugman ignored the longer term adverse consequences of the policies he advocated.

creditors for being willing to finance him. The United States' policies encouraged over-consumption and over-borrowing, and unless we understand where these policies came from, we have no hope of addressing the causes of this crisis. Unfortunately, these are the policies that Krugman wants to push again. This is precisely why we have to understand the history of how we got here, and why Krugman wants nothing to do with that enterprise.

There is also a matter of detail suggesting why we cannot only blame the foreigners. The housing bubble, as Monika Piazzesi and Martin Schneider of Stanford University have argued, was focused in the lower income segments of the market, unlike in the typical U.S. housing boom. Why did foreign money gravitate to the low income segment of the housing market? Why did past episodes when the U.S. ran large current account deficits not result in similar housing booms and busts? Could the explanation lie in U.S. policies?

My book suggests that many - bankers, regulators, governments, households, and economists among others - share the blame for the crisis. Because there are so many, the blame game is not useful. Let us try and understand what happened in order to avoid repeating it. I detail the hard choices we face in the book. While it is important to alleviate the miserable conditions of the long-term unemployed today, we also need to offer them incentives and a pathway to building the skills that are required by the jobs that are being created. Simplistic mantras like "more stimulus" are the surest way to detract us from policies that generate sustainable growth.

Finally, a note on method. Perhaps Krugman believes that by labeling other economists as politically extreme, he can undercut their credibility. In criticizing my argument that politicians pushed easy housing credit in the years leading up to the crisis, he writes, "Although Rajan is careful not to name names and attributes the blame to generic "politicians," it is clear that Democrats are largely to blame in his worldview." Yet if he read the book carefully, he would have seen that I do name names, arguing both President Clinton with his "Affordable Housing Mandate" (see Fault Lines, page 35) as well as President Bush with his attempt to foster an "Ownership Society" (see Fault Lines, page 37) pushed very hard to expand housing credit to the less-well-off. Indeed, I do not fault the intent of that policy, only the unintended consequences of its execution. My criticism is bipartisan throughout the book, including on the fiscal policies followed by successive administrations. Errors of this kind by an economist of Krugman's stature are disappointing.

Best book on current economics, May 30, 2010
Fault Lines is the best book to appear so far on current economic challenges. While the author is very focused on US policy, good and bad, he offers the lay reader a very solid understanding of how the global system has responded to this crisis. His "fault lines" are not American problems alone but rather deep fissures in the international banking and finance systems. Europeans will be espeically interested and provoked by Rajan's arguments for a stronger American saftety net. Yes, he believes that it is morally correct to protect workers and their families who are displaced by economic turmoil. But, his primary argument is that a stronger safety net would dampen political pressure for short-term and often poorly targeted stimuli. In addition, he believes that larger, longer unemployement benefits would also make it less likely that policy makers would use easy credit as a mechanism for addressing increasing economic differences within American society. Fault Lines is a thoughtful introduction to macroeconmics, a critical analysis of current policies and a compelling call for major reforms in how the US and the world manages the global economic system.

Saving Capitalism From the Politicians, June 18, 2010
In his previous book, Raghuram Rajan wanted to save capitalism from the capitalists. As he and his coauthor described, market forces can be annihilated by those bent on rent seeking and monopoly power. A few years after this first book, and in the midst of a world financial crisis, there is still ample proof that capitalists hold predatory views on capitalism, and that they want to hijack the system for their own private interest. But instead of distributing the blame for the crisis that befell upon us, Rajan argues that our post-crisis world economy needs to be saved from a new kind of threat: a combination of populist-driven politics and of geopolitical power shifts that create deep and lasting imbalances. These are the areas where he situates the fault lines that lie at the origin of the current world crisis and that, if unattended, may well provoke the next one.

In geology, fault lines are breaks in the Earth's surface where tectonic plates come in contact or collide. In using a geological metaphor, the author suggests that the cracks and imbalances in the world economy cannot be easily mended, and that they are almost beyond our control. But if mankind cannot prevent tectonic moves and earthquakes, we can build resistant buildings and improve the resilience of our economic systems. This is what Rajan proposes, in a set of recommendations that goes well beyond the usual fix in the financial sector that is now commonly discussed.

As Raghu Rajan emphasizes, his proposals are neither from the right nor from the left. They derive from his long experience as an academic originator of cutting-edge economic research, and as a decision-maker who, during three years, occupied the number-two seat at the IMF in Washington. His personal background as a US non-resident Indian also shows throughout the book. He mentions in passing that he is the director of a company, Heymath, that is based in Chennai in India and that helps teachers around the world to create teaching materials for math lessons and homework assignments. More generally, he insists that economists should analyze the US economy with the same tools and frameworks that they use for emerging countries. US policy-makers could also learn a thing or two from developing economies. For instance, health management practices in India could show the way to making US healthcare more affordable. Or conditional cash transfers in Mexico could encourage poor parents in American urban ghettos to pay more attention to their children's nutrition, health, and education by making welfare payments conditional on parents meeting certain milestones. Neither left nor right, many of his prescriptions are from the South.

It is unlikely that people from the radical left will read this book, but they should. For a start, the metaphor of "fault lines" is close to the Marxist concept of contradiction. For Marxists, capitalism is branded by an immanent want of balance, of crippling contradictions. This is exactly why it changes and develops incessantly: constant development is the only way for it to resolve and come to terms with its constitutive imbalance. Contradictions and fault lines are not digging capitalism's grave; on the contrary, they highlight its flexibility and adaptability, and also show the amount of work required in sustaining it. Similarly, Rajan's own explanation of the financial crisis comes close to the concept of overdetermination. For psychoanalysts, a phenomenon is overdetermined if it is caused by a combination of multiple factors, which taken in isolation cannot account for the effect alone. The financial crisis originates in the follies and excesses of the financial sector, but also in the "other scene" of growing domestic inequalities and global imbalances.

Although he quotes neither Marx nor Freud, Rajan shows up as a skilled dialectician. For him, politicians are part of the problem, and yet they are the ones that we must rely on to provide the solution. Likewise, our current predicament derives from the planet's growing interdependence, but the way out is to be found in more globalization, not less. Or to take another example, fixing finance from the consequence of financial engineering gone wild requires more financial innovation, albeit of a different, more inclusive kind. The art of the dialectical reversal is also displayed in the author's disregard for conventional ideas and political party lines. In Saving Capitalism, he argued that capitalist rent-seekers' best friends were the trade unions and antiglobalizers pushing for trade protection and anticompetitive practices. Likewise, he argues in Fault Lines that the IMF and the World Bank should seek their best supporters among the civil society organizations and media outlets that are so often found vociferating against the dictates of the Bretton Woods institutions.

I will not try to sum up the argument or reproduce some of the reasoning, because all chapters seem equally worthwhile. In every book I read, there are parts that deserve less attention and that I tend to read in a more cursory way, taking less notes and time to ponder the reasoning. Not so in Fault Lines: my scrapbook was full of notes, and there was not one passage where I felt left out or in need of additional explanation. The writing is never dull or technical, and there are real gems in style and composition. The author has a real talent for catching the attention of the reader head on and keeping him alert until the very last page. This is not only the best book on the financial crisis I have read so far, but also one of the most stimulating and readable economic volume that I have had the opportunity to review.

Well Done Presentation with Good Suggestions, May 17, 2010
Fault Lines by Prof. Rajan is one of an ever increasing number of books recounting the financial collapse of the past few years. Unlike many of the others, Prof Rajan is both knowledgeable and experienced having been at the IMF in a senior role during a portion of this period. Thus this book is written from the perspective of a highly credible professional as well as a hands on operative.

Overall it is well written and avoids the finger pointing polemics that we are forced to endure from the journalist types who have their points to make. Rajan writes in a clear and well structured manner and details the problems, as well as recommending solutions. As the title says the system has certain enduring fault lines that need to be avoided rather than rebuilding upon.

Chapter 1 is the introduction and he lays out the history well. Especially he has a balanced position on who should take the blame and on p. 42 he calls the Government and its actions as the "elephant in the room". He does not take the Progressive's stance and blame the lack of regulation as the sole cause and he does not take the Conservative cause agreeing that all regulation is an anathema. Like any complex system which we will never really understand there must be circuit breakers, and that means some form of balanced regulation. Rajan states on p 43 at the end of Chapter 1:

"Growing income inequality in the United States stemming from unequal access to quality education led to political pressure for more housing credit. This pressure created a serious fault line that distorted lending in the financial sector."

I would strongly disagree with this statement. The US has one of the most open educations systems in the world and despite the less than stellar grammar and secondary systems the university systems are without equal. The problem here was demanding that credit be given to anyone on the part of the Government. Frankly when the Government opens the faucet to individuals who have no idea what responsible lending even means it is in and of itself a recipe for a disaster.

Chapter 2 discusses the whole issue of exports and Rajan's personal recollections regarding the controlled economy of India are telling. India was and to some degree is still a socialist centrally controlled state. It is a window to what can go wrong in an economy centrally controlled. On p 50 he states: "The great Austrian economist Joseph Schumpeter argued that capitalism grew through innovation, with newcomers bringing creative new processes and techniques that destroyed the business of old incumbents." This is creative destruction. The Progressive movement of the early part of the 20th century rebelled against the railroad tycoons but understanding Schumpeter one could have just as easily said, "this too shall pass". Namely in a Hegelian sense each action has a reaction and a resolution. Rajan on pp 54-55 discusses the sometimes success of the old Soviet system. As I was wont to tell my Russian employees that I was trained in the Joe Stalin school of management, never fail, the results would be tragic!

Chapter 4 discusses the US and its "weak safety net" which is a double edged sword. We in the US have limited unemployment benefits. It is in many ways Darwinian in that it is also a force to drive people back to work or seek other alternatives. In Germany, where I ran one of my companies, you cannot fire anyone. It is impossible. That frankly is a barrier to entry for an entrepreneur. Only the large incumbents can work in such an environment. Rajan seems to vacillate between the benefits of the US approach and the need for more social benefits. He discusses the discretionary stimulus approach of the US where the Government chooses who to pay and who not to pay. These he alludes may be seen as political payoffs and may not in any substantial manner truly stimulate.

Chapter 7 is quite interesting. He opens the chapter, pp 124-125, with a simple explanation of the reasons for the collapse of the derivatives. Let me paraphrase:

Consider a company which buys a pool of ten mortgages, all most likely subprime. Now the chance of any one going under is 10%. That means on average only one of the 10 will not pay back. This does beg the question of what factual basis was used to determine this but alas that was left to Wall Street and the rating agencies. Now we create two tranches, bundles, one which get a great interest rate but bears the losses, and second which gets a lower but still good interest rate and has its losses hedged by the first tranche. This works well except that the model is wrong!

What really happens is a Markov chain where when the first guy goes bankrupt, then the probability of another going is not the same but higher, and when a second goes bust it goes even higher. This means that instead of the first tranche bearing all the risk, the risk is moved to the second tranche which never thought it would have any! And then an AIG insures the second, and we know that there is a high probability of at least a 50% loss, a number AIG would never have imagined. Dumb quants! Yes, and on pp 142-143 Rajan details the Trillin conjecture that the changes in Wall Street over the past 30 years resulted in the dumbest guys moving upward relative to the Merlin's mixing their brews in the quant rooms. Rajan rejects that conjecture somewhat but there is considerable truth in it...just look at some of the folks who left and ended up in Government.

Chapter 8 discussing the reforming of the financial world. On p 164 he details a suggestion which should be adopted, the altering of compensation to reflect the risk over time. In Chapter 9 he returns to how to improve things in the US and on p 189 he speaks of the major problem in secondary education, the lack of competent instructors. To teach in a public school you need an education degree. Even if you had a PhD, held faculty position in a half a dozen universities and taught for over twenty years you still needed to learn how to operate an overhead projector and prepare a lesson plan. Thus the lack of educational advantage he posits in Chapter 1 is in many ways a result of the teachers unions barriers to entry of competent folks. Yet he never takes that leap. On pp 192-193 he posits the expansions of unemployment and benefits. Here I would disagree. Just look at the results in Germany, Greece, and other countries. In Russia I could fire a bad employee in Greece he was there until the return of Homer!

Rajan overall does a superb job at presenting the problems, the continuing faults and discussing solutions and safeguards. He deals with facts and logic and he does not tell stories as is typical of the wandering journalist. This is worth a read and for some worth a detailed study.

Hoping for More, August 4, 2010
Having read Rajan breathtaking paper from the Fed's Jackson Hole Conference, I rushed to buy his book when it was finally published expecting insightful in-depth analysis of the leading banking proposals. Instead, what he gives us are brief summaries of the existing laundry list of proposals - hardly the in-depth analysis I expected that carefully considers the unintended secondary repercussions of each proposal. When he strays from his expertise - banking - his analysis grows even more superficial.

Even worse, the most important issue - how can the US best recycle short-term debt into its most productive uses - never hits his radar. Instead, he simply asserts that exporters like China should stop subsidizing exports, reduce savings and encourage domestic consumption - presumably to reduce the offsetting supply of cheap capital to the US. He also proposes reducing government guarantees of banks and deposits to discourage banks from taking tail risk - tail risk that is only created by utilizing short-term debt. Ok, but at what cost? This central issue never seems to cross Rajan's mind. But we saw what happened when short-term debt withdrew from funding US borrowing and sat idle to avoid risk. The economy contracted, unemployment rose and growth slowed - some now predict for a decade. That appears to have been a very high price to pay, especially so relative to the estimated once-in-75-years (less than) $100B net cost of crisis-induced government guarantees. How can he leave that central tradeoff wholly unaddressed?

It's clear that Rajan believes the use of short-term funds predominately affects only an unsustainable increase in household consumption. Perhaps, but he recognizes rising levels of debt without acknowledging that the market values of assets grew faster than debt and household net worth rose, even at post recession asset values. From the narrow focus of his discourse - discourse that never once mentions the acceleration in US productivity - one can only infer that he believes that monetary policy is the predominate driver of asset values even though post-recession asset values including real estate have remained surprisingly high by historical standards despite a dearth of credit. I found his monetary argument unpersuasive although others might not.

Rajan is one of the first writers (along with Reinhart and Rogoff and I'm sure others) to rightly link the rising trade deficit and its effect on the supply of short-term credit to the financial crisis when those short-term funds panicked and withdraw from financial intermediation. He also acknowledges the role of the government - through Fannie and Freddie - in distorting mortgages market credit standards that were critical to banks given the growing self-funding of business (an alternative use for the funds), which many demagogues surreptitiously ignore. But from a macro perspective - the chosen emphasis of his book - I believe he completely misses the major shift in US production to intangible investment to discover innovation (mistakenly counted as the intermediate cost of production) and its real effect on productivity, assets values, growth, wages, and employment (including the employment of Mexico and China). As a result, he doesn't see any link between business using domestic employment for increased innovation instead of households selling assets (to each other in a more close economy) and competing with business to buy domestic goods and services for increased consumption rather than borrowing offshore funds against the increased value of their assets to buy offshore goods. Said differently, in the face of capacity constraints, he fails to see the value of the US offshoring less valuable production for consumption in order to continue growing more valuable intangible investment domestically and the resulting effect that tradeoff necessarily has on debt AND assets. Had we simply borrowed from offshore exporters to consume their goods as Rajan seems to assert, household net worth would have declined steadily. As such, he sees little if any cost to discouraging the use of short-term funds. It's ok to disagree after thorough analysis; it's not ok to completely overlook alternative hypotheses central to the issue - issues, no less, that explain the slow recovery of employment, which leaves him scratching his head.

Nevertheless, when Rajan sticks to what he knows - banking and finance - he provides a fairer portrait of the issues than the many diatribes of demagogues masquerading as pundits. Me, I still think moral hazard is an unpersuasive explanation of the crisis - an explanation upon which Rajan relies heavily - but at least he presents it and other banking-related issues maturely. I only wish he would have stuck to banking and used his 230 pages to dig a lot deeper into what he knows instead using 40% of the book to address issues outside the scope of his expertise where I would describe his understandings as pedestrian at best (although that has no bearing on my rating). Still, the book is superior to most.

Extremely well thought out and thought provoking, August 15, 2010
Fault Lines is a remarkable book. The recent crisis that was experienced and is being worked through has brought forward a library of books on the causes and consequences of it. Many of these books add valuable perspective to the mechanics of what happened whether it be trade imbalances or leverage increase or incentive misallignment at the micro economic level etc etc. This book stands out in its analysis by trying to analyze the real roots of the issues. It discusses the housing bubble as an outgrowth of increasing wage disparity in the US, it discusses the reason why many export led growth economies have under developed domestic consumption markets, it discusses why arms length financial transactions lead to the deterioration in due diligence and finally it goes into the policy fixes. Ill discuss the major themes a bit to give some clarity.

The author attributes the housing bubble to be at its root, a product of the growing disparity in wages between the 90th percentile and 10th percentile in the US over the last 25 years and the Fed's dual mandate of low inflation and full employment. In particular, he argues that the easiest way to deflect attention to growing divergence between economic classes is through easy credit as it normalizes purchasing power in the absense of real economic normalization, this manifisted itself in politics pushing easy credit to homebuyers of lower income status. This in combination with the fact that the post internet bubble recession/recovery was a jobless one and a jobless recovery allowed the Fed to justify keeping rates too low for too long given its dual mandate which led us to a bubble in housing credit. The author discusses the fact that perhaps, the philips curve doesnt drive the relationship between the two anymore and we need to rethink the dual mandate goal. The author is extremely well thought out in his analysis of the structure of the economy and where foundational stresses lie. The interpretation of easy credit as an outgrowth of political will to renormalize purchasing power is a deep and intriguing thought.

The author discusses the structural issues at the heart of export economies as well with great precision. In particular he believes that export led growth economies funnelled preferential credit/subsidies to chosen businesses which has led to lack of investment to consumption dominated parts of the economy. The deposit rates relative to lending rates and the lack of investment options by depositors leads to reallocation of a populations savings to these export businesses and thus feeds on itself at the expense of other parts of the economy. Looking at japan and the rates and modus operandi of consumer finance businesses is a strong example of how a banking system without a focus on consumer credit can lead to lending networks at both extremely high rates and low transparency, stifling consumption.

The author also does a very good job discussing the financial sector and what has been going on there for the last 2 decades. He discusses the repurcussions of arms length finance and discusses the behavioural finance repurcussions of what it can do to people. At the heart of it the author argues that we are a product of our environment and arms length transactions removes us from the end results of our actions and thus makes dollars and cents (on short time horizon) the only measurable quantity of productivity and value add. This part of the book is less "unique" to the extent that incentive problems in finance and allignment of interest in arms length financial systems is discussed frequently by many authors.

The author then goes into the solutions to the fault lines that he sees as being the reason we are where we are. The auhor is very disciplined in distancing himself with popular fixes and restrictions that dont address the causes of the issues. I wont go into too many specifics but the local fixes for the US economy are a combination of reworking the safety net that the US provides, being all too minimal right now, and incentive reallignment in the financial sector. In the global setting, it is a broadening of mandate and audience of the World Bank and IMF to discuss the required policy changes through more grass roots communication. People are willing to sacrifice something immediate for something long term when there is mutual discussion and more importantly trust, right now the IMF talks to leaders who's terms are shorter than the required policy thus making allignment of interest more difficult/impossible. People need to understand the need for policy for politicians to be able to push through the legislation and the need for the experts at the IMF to be able to communicate with the population directly, the author sees as a means to effect greater change. All in all this is a must read. I havent read a book so insightful and eye opening in a while and I think if more people thought and communicated the way the author does, we would have far fewer problems. This is an excellent an highly memorable work.

Good, but A Bit Off Center -, June 4, 2010
Raghuram Rajan is a Professor of Economics at the University of Chicago, and former Chief Economist at the IMF. Rajan warns that it wasn't just greedy bankers taking irrational risks that caused the recent global financial crisis. Other factors included over-dependence on the indebted American consumer, growing inequality, and a weak safety net. These latter factors created political pressure to encourage easy credit and keep job creation robust. Rajan also contends that unequal access to quality education and health care acerbated the situation. Sounds good at first, but the book makes a weak and inconsistent case to support these conclusions. Regardless, "Fault Lines" still adds up to what most everyone has already concluded - that the Federal Reserve kept rates too low for too long, trying to dig out of the prior recession, and the government further acerbated problems by trying to increase the proportion of home-owners.

Rajan's book, does however, report important data involving the top 1% of households, accounting for 8.9% of income in 1976 and 23.5% in 2007. This change represented a growth of 32.2% in real dollars. The data come from a paper authored by Atkinson, Piketty, and Saez, "Top Incomes in the Long Run of History," published in the 1/2010 "Journal of Economic Literature." The authors conclude that the top 1% of income earning families during this period captured 58% of the real income growth between those two periods. During the Bush years this proportion grew to 65%. A second important piece of data concerns the lengthening time required to recoup jobs lost in recessions. From 1960 until 1991, this average about 8 months, measured from the trough of the recession. In 1991, however, the time required became 23 months, and 38 months in 2001. Returning to prior GDP was much faster, requiring only 9 months in 1991 and 3 in 2001. Rajan offers no explanation for the difference; I contend we simply boosted imports faster than hiring. My opinion: The 58%-65% of real income growth going to the top 1% is a major economic, political, and moral problem; Rajan believes it is also responsible for the growth of political polarization. Also important - the increasing times required to restore prior employment levels, coupled with our fragile, compared to other nations, social safety-net.

Meanwhile, those at the 90th income percentile are also gaining on those at the 10th. In 1975, incomes for the former were about 3X those at the latter; by 2005, this had risen to about 5X. Rajan contends this is due to computers displacing former low-paying jobs, accompanied by the lack of improvement in our high-school drop-out rate. I would suggest the influx of millions of illegals also contributed. Rajan then tries to explain why some groups are less likely to graduate than others, and recommends more/better education for reducing income inequality - however, in doing so the author only succeeds in revealing how little he knows about education and the billions, perhaps even trillions, spent on innumerable, sustained, and unsuccessful efforts to affect improvement. As for Rajan's desire to boost access to health care, that problem has already been addressed in the "Health Care and Education Reconciliation Act of 2010" that expands care, without addressing the need to cut costs by 50%+ and improve outcomes.

Author Recommendations: On 'too big to fail,' Rajan points out that simply breaking up big banks, without taking other actions, is likely to simply recreate the same outcome via many smaller banks taking the same unwise actions. He also suggests ending deposit insurance, except for the smaller banks. Another recommendation is to extend unemployment benefits and make them more generous - reducing political pressure to take quick action leading to long-term problems (eg. cutting interest rates and taxes). He also suggests allowing Medicare and Medicaid to pay for health care delivered cheaper in other nations.

Bottom-Line: The biggest lesson from "Fault Lines" is that jobs recovery after a recession is now taking much longer - a serious factor for the present. Rajan fails to adequately examine the key question - "Why has wealth become much more concentrated?" He also assumes we should continue as a trade-debtor nation while building a cumulative trade deficit approaching infinity, instead of trying to mimic at least Germany, if not China. Nonsense - Rajan should read IMF critiques by Stiglitz, Klein, and others. Rajan's data about the top 1% make a compelling case for increasing tax rates on the very top. I'd also suggest sharply reducing the 47% that pay no federal taxes - that also encourages poor decision-making and is unfair to everyone else. Finally, let's get serious about illegal immigration and require either a legitimate 'green card' or U.S. citizenship for employment - this would help those in the U.S. at the bottom of the pyramid.

A must-read book on the financial crisis, June 28, 2010
Fault-Lines is one of a handful of must-read books on the recent financial crisis. What makes this book a tour de force is that it goes beyond the surface-level explanations of the sources and origins of the crisis- such as the greedy bankers and inept regulators- to describe the interplay between the economic and political forces that brought about the crisis. The central thesis of the book is that the fissures that led the world economy to the brink of collapse still exist and will- unless the world's leading nations enact fundamental reforms- continue to pose a grave threat.

The first fissure that Rajan identifies is the growing income inequality within the US. Since the 1980s, the wages of workers with advanced education- for instance, workers with a college degree- have grown rapidly while the wages of workers without advanced education- for instance, college dropouts- have remained stagnant. Add in the emergence of off-shoring, the sharp decline in the pace of job creation and the weak-safety nets and the result has been an anxious middle and working class. Rajan observes that politicians of all stripes responded to the growing income inequality- if, for different reasons- by encouraging government-sponsored agencies (such as Fannie Mac and Freddie Mac) to provide the working classes with easy access to housing credit. Throw in the private sector- which saw an opportunity to originate and securitize housing loans- and the result was a boom in sub-prime lending. Inevitably, the good times could not last and the result was a surge of defaults by sub-prime borrowers that ultimately led to the sharp decline in value of a whole range of assets. Rajan notes that improving access to better schools and colleges for the middle and working classes is the only direct solution to rising income inequality but acknowledges that this solution is only a long-term fix and, importantly, does not address the predicament of the current generation of workers without adequate education. One lesson I take from Rajan's book is that in a less than ideal world (in the parlance of economics, a world of second-best) a modest level of (direct and indirect) fiscal transfers to the working classes may not be so bad after all.

The second fissure that Rajan identifies can be traced to the growth strategies of the world's largest economies. Germany, Japan and, most recently China, have relentlessly pursued an export-oriented growth strategy and have been unwilling (or unable) to stimulate domestic consumption. In contrast, the US (and the UK) have relied on a consumption-driven growth strategy and have been all too willing to tolerate an increase in household and government indebtedness. One consequence of the inevitable build-up in trade (and current account) deficits in the US, etc., and the trade (and current account) surpluses in Germany, etc., is the surge in economic and political pressures directed at both sets countries to correct these imbalances. Marshalling evidence from the experience of other countries- most notably, Indonesia, Mexico and South Korea- Rajan asserts that in the absence of serious economic and political reforms, the end result is usually an economic crisis. To avert such crises, Rajan proposes that the IMF go beyond its role as a lender of last resort to engage in a debate with the citizens of nations (with serious economic imbalances)-a-la Oxfam- on the economic and political compromises necessary to avert such crises. While such debate could alleviate the economic and political pressures that lead to a crisis, it is unclear whether the IMF is prepared for such a role.

Fault Lines is a beautifully written book that traverses through history, geography (and literature!) to describe the complex economic and political relationships within and across nations. I highly recommend it.

worthwhile, November 17, 2010
I spent some time considering whether to give this book four or five stars, but decided on four to balance some of the unreasonably favorable reviews here. I give the book a five for quality - the author is erudite and wise, and conveys this through his language and content. However, the book is thickly written in what unfortunately has become the standard style for academic monographs, and his arguments are equivocal almost to a fault. Also, his prescription for change is so abstract and lofty to almost be laughable (basically a sermon on the mount by the reinvented IMF to the people of the world). I don't disagree with the intent, but there is little consideration of the path from A to Z - I think a forceful and convincing argument of what A to B should be, and how to get there, would be a more relevant contribution.

The good news is that he gives one of the best explanations that I've seen of the background to the 2007-2009 crisis, with general dismissal of the idea that nefarious actors or plots were behind the problem. He provides powerful arguments that implicit support of the private sector by government, whether acknowledged or not, which has been tested and generally found to be there, has been and remains a critical problem and driver of behavior. He also gives repeated cogent explanations of the good original motivations behind the policies of export-driven emerging economies, and how these shrivel as the economies develop and thus should lead to policy changes that in many actual cases have not come to be. Finally he makes a strong case that the lack of support for education and education reforms in the U.S. are big problems, which have not been properly addressed because there is politically little current upside but large downside in these efforts.

You can't go wrong by reading this book, it's just that I think it could have been something more. In any case some of the material isn't going to have a long shelf life, so read it sooner rather than later. ... Read more

Editorial Review

Never before have we read such jarring headlines, distressing news analyses, or dire predictions concerning the world's financial future. The American housing market -- or, more sentimentally, the American dream -- began to collapse in 2006, taking with it large chunks of the global financial system. Millions of jobs worldwide have vanished forever. Did Bible prophecy predict this catastrophe? Are there biblical clues to how soon, if ever, a viable, long-term recovery can be sustained? Is the financial collapse just one of several signs that we are living in the final days of Earth's history In THE COMING ECONOMIC ARMAGEDDON, David Jeremiah says we can know the meaning behind what we see in the daily news -- and understand and prepare for living in the New Global Economy. ... Read more

Reviews

Completes Trilogy of Books on Recent Events, October 1, 2010
This third book in a recent series may form a trilogy of sorts. The other two recent books [What in the World is Going On? and Living with Confidence in a Chaotic World] spoke of current events and how to navigate through them as this book does. Essentially this book covers four areas: the coming New World Order, the President of the Order (AntiChrist), the coming collapse of currency and present financial system, and finally Biblical hopes to navigate through it. Not a book that pursues subjects to an extreme depth, but more a book that gives the most recent information (and some of it is very helpful and interesting) and when I finished I had a lot to think about and wanted to re-read the book. My understanding is David J. worked exceptionally long researching this book and it shows. Rarely lags. Carries some occasional familiar traditional evangelical endtime theology, but not to the point of interference, only making points. An excellent primer for those new to the subject as well as those wishing current information. David Jeremiah is never lost time when you read or listen to what he has to say.

Closer to home, October 4, 2010
Dr. Jeremiah does a fantastic job of unpacking how Bernie Madoff and other crooks like him set up the Global Economy for an armageddon. It is very sobering to realize the financial mess that we are in, and heart-breaking to realize how we got there. Wait until you learn about the 'Debt Iceberg' that has America crippled. It is unbelievable.

I know from reading the news that this stuff is too real. If there is a positive to come out of all this, I guess I am at least glad that Bible prophecy has spoken on these issues. It is comforting to know that God is ultimately in control.

Here are all the chapters in the book:
1. The Fall of the American Economy
2. The New World Order
3. The New Global Economy
4. From Crisis to Consolidation
5. Satan's CEO
6. The Mark of the Beast
7. Financial Signs of the End Times
8. The Collapse of the Global Financial Market
9. God's Ultimate New World Order
10. Keep Your Head in the Game and Your Hope in God

The Coming Economic Armageddon, October 5, 2010
Dr. Jeremiah writes from a wealth of research and Biblical knowledge. Although he presents facts not easily found in the traditional media, he does not write to scare but to inform the reader. The economic crisis in this country, in fact in this world, is frightening. It is a subject that I try to leave to those who truly understand the economy and give me tidbits of information that I can handle, or ignore. I was interested in what Dr. Jeremiah had to say because of his scholarly approach to the subject, and because without exception, every book that I have read by Dr. Jeremiah always speaks of hope, something that the economists of today don't seem to have. It is evident that there is unrest and fear in this country for many reasons, but the media would have us believe that the economy is one issue, a difficult issue, better left to the "experts", or to a two minute blurb on the evening news. I don't want to be an expert. I do want to be better informed, and I found that through reading this book, even I could understand some of the issues and know that there is a plan. More importantly, I felt that by having the information presented in this book, I now have a resource to encourage friends and family.

Incredible Resource, October 5, 2010
Dr. David Jeremiah's riveting book is an incredible resource to everyone--especially to families as we raise children during this economic crisis. His financial counsel teaches how to wisely manage our money and keep our homes in order for the difficult days ahead. Dr. Jeremiah's extensive research brings clarity to the news reports we hear/read every day, which helps us explain to our children what's happening in the world around us from a biblical perspective. He explains advanced technology that sets the stage for the One World Government predicted in the Bible so we are not caught unaware of the advancing threats to our society.

THE COMING ECONOMIC ARMAGEDDON gives crucial facts about present and future economic changes in our world that we need to understand from the Bible's perspective. Dr. Jeremiah's book powerfully reminds us that God is the only One to give shelter in this world's chaos, and He gives the biblical counsel we need to stand firm with our hope in God.

Sobering Analysis of Economic Conditions, October 4, 2010
Dr. Jeremiah is a good writer and does a great job of explaining, in sobering terms, how we ended up in the economic mess that we are in; and, more importantly, where we are going. He does so via the science/art of economics and, of course, by understanding God's infallible prophetic Word. My degree is in Business Management and I read a lot about economics (in fact, Peter Schiff's recent book entitled "Crash Proof 2.0" is a great book from a secular author that echoes much of what Jeremiah says--though I think Jeremiah's is better since it approaches the subject from a Christian worldview). I have also studied Bible prophecy for many years (and wrote a book that is becoming increasingly popular). I say that to hopefully explain that I especially enjoy the subjects of economics and Bible prophecy and, thus, can write with reasonable authority that David Jeremiah addresses both of those topics exceptionally well.

He explains how the world economy is more interrelated than ever. There is also a good presentation of how the Social Security System is, more or less, a grand "ponzi scheme" on the brink of collapse. He also explains how the economic health of a "superpower" can impact many other areas of a nation, such as it's international political and military influence. A good explanation of how debt at either an individual or national level eventually leads to serious financial problems and that pumping "fiat money" into an economy at the rate we have will lead to inflation is provided. We know that scenario (inflation, wherein it will take a day's wages just to buy food) is predicted to happen in the end times according to Revelation 6:6.

Further in the book Jeremiah turns to what he knows best: end times prophecy. As a result, the reader will find a rock solid discussion of how a "new world order" will play a role in the end times, how the Antichrist will be able to control who may buy and sell, the mark of the beast, and other important topics. Readers of his previous books, such as "What in the World is Going On?", will find a good bit of redundancy; but they will also see it being explained from a more economic angle. If you haven't read a previous book by Dr. Jeremiah, I think one could jump right into this one and not miss much and, thus, since this one is most current, I would say get this one.

In the end, Dr Jeremiah delivers a good book well worth reading and, once again, makes a valuable contribution to the idea that Christians should now, more than ever, learn as much as possible about end-times Bible prophecy given the times in which we live.


Jeffrey R. Camino, Author
Pray That You May Escape

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Can This Really Happen To Us?, November 20, 2010
Most of us have difficulty imagining huge changes drastically altering our lives; those are what happen to someone else, not us. In this country we have been greatly blessed in that our lives have not been directly impacted by most of the major events that have changed the lives of people in other parts of the world.

As a boy I remember watching the newsreels about the Second World War and its impact on people in remote places like England, Japan, France and Germany. Although we had rationing and collected waste paper for the war effort we always had our homes, safe and secure from the ravages of war.

Dr. Jeremiah describes in this book a scenario in which that immunity from change no longer exists; people all over the world, including us, will be involved this time in events that will change the face of the globe forever. These events are too big to even imagine and are so far reaching that really nothing can be done to prevent them or even alleviate their impact on our lives.

This book is the story of the end of the world as we know it told from a Biblical, Christian perspective. As a Christian I found it both disturbing and inspiring; I long for the return of the Lord Jesus Christ and know that terrible things will have to happen first; it doesn't make the thought of those terrible things any less disturbing to know that they too will come to pass.

Because I have believed in the Lord Jesus Christ as my personal Savior, I believe I will be removed in an event called "the Rapture of the church" before the most serious events described take place. Dr. Jeremiah points out that this is the next event on God's prophetic calendar and could happen at any time. What the Lord does not tell His church is how bad it will get before the church is removed.

The Lord condemned the Pharisees for not knowing the signs of the times; this stands as a warning to us today to observe the signs of the times that are being manifested all around us. This book is an effort to describe events today and show how they fit in to the prophetic scenario described in the Bible for the end of the age.

The book points the reader to Christ as the answer. I join Dr. Jeremiah as I too believe there is no safety net that will deliver us out of the troubles that are coming; there is, however, a safety person, the Lord Jesus Christ, that can deliver believers through the events happening now and will deliver them from the judgments to come.

The book is an excellent warning that change is coming and now is the time to prepare! I recommend it to all who have a concern about what they see happening in the world today.

A Refresher for Some; a Must-Read For Others, December 1, 2010
Many prophetic scholars (including me, though I'm more of an armchair "scholar") have predicted a catastrophic financial meltdown for decades. Today, many observers inside and outside the Church are grudgingly admitting that we're not crackpots, after all. At least not for that prediction.

In fact, an astute observer who has never cracked a Bible open--but has merely made an honest effort to inform themselves despite the disinformation from government, media and popular culture--understands that the seed of economic destruction for America was planted long ago. That seed has been nurtured, sometimes by a trickle, and sometimes by great spurts. It has been slowed somewhat a couple times, but never stopped. The harvest is almost upon us.

Dr. Jeremiah, whose radio program I've partially caught from time-to-time, has written a book that repeats the warning about this pending harvest given 2,000 years ago.

The first part of the book presents samplings of evidence, from mostly secular sources, about the bitter pill we will soon be forced to swallow. His research has mined some very enlightening quotes to support his other evidence.I appreciated his courage in calling one particular skunk a skunk: Social Security has been transformed into a compulsory, government-run Ponzi Scheme. Politicians and most talking heads are far too cowardly to ever admit this out loud. But while Dr. Jeremiah explains what a Ponzi Scheme is, citing examples, the informed reader will likely come to the same conclusion about Social Security even before he ties it together in black & white. It's also refreshing that he diverges from the ubiquitous "prosperity preachers" in honestly admitting that inflation in particular, and man-made financial calamities in general, widen the chasm between rich and poor while decimating the middle class. Another nice nugget is his analysis of Joseph's management of the Egyptian economy. Some people use this story in Genesis to imply that government-controlled, centralized (socialist) economies are Biblical, effective, or resistant to disaster. David Jeremiah politely takes exception to that notion.

From there, The Coming Economic Armageddon takes us over familiar territory (for those who have read other books about prophecy). Nobody who reads Bible prophecy for themselves is likely to agree 100% with someone else's interpretations, and that was my experience here. But Dr. Jeremiah has a well-grounded education of the matter, in general, and doesn't try to expound upon aspects of end-times prophecy he doesn't yet understand. (Yes, others have, and do, including some of the "big name" prophecy teachers.) He concentrates on the financial aspect of the end times, and the thrust of this is intended as a warning for those who still fail to appreciate the magnitude of this coming disaster.

People who have never read a single verse from the Bible have heard of "the mark of the beast," and perhaps even some contextual speculation about a cashless society, bar codes, RFID chip implants, etc. But they don't appreciate how these developments were assumed 2,000+ years ago in the Bible, and like similar assumptions in Revelation and the other prophetic books, were scoffingly dismissed until the development of satellite communications, the Internet, 3G, streaming webcasts, podcasts, etc., etc., etc.

Perhaps the best treat in store for the prophetically literate is Dr. Jeremiah's chapter on the Millennium. I don't know about others, but I've never heard teaching on this subject, and never read more than perfunctory paragraphs here and there touching on it. It's a pity this period goes unnoticed by prophecy teachers. It is important, fascinating, and painfully revealing about human nature.

TCEA wraps up with a chapter about preparation for the rider of the black horse (look that one up, haha). Dr. J doesn't give investment advice, but advises practical application of the spiritual advice Jesus evidently considered more important than any earth-bound financial strategy.

For those who already have a grasp of end-time prophecy, this is like a review, with a few fresh tidbits thrown in. For those who don't, it's a must-read.

economic prophecy, October 13, 2010
Very good and comprehensive explaination of world view of United States and world economy and its relationship to biblical prophecy.

Highly Recommended, October 4, 2010
Dr. Jeremiah's most recent book is very well researched and relevant to the economic times we are living in.

Some of the questions that are answered are:
-How did we get to this place?
-Can the American economy really recover?
-Is a New World Order on the horizon?
-Are the last days of Earth's history fast approaching?
-How can we weather this storm with hope and confidence?

A FASCINATING BOOK, October 19, 2010
What a fascinating book and the information presented is up to date. I have never read any of the author's books but after reading this book, I will definitely read some of his other books. The book was easy to read and helped to explain the economic problems that we are all facing in our lives biblically. I really enjoyed the section of the book (Page 244) when he talks about comfort zones and how devastating it can be when we fall out of those zones.This is a must read to help you prepare for the future economically.(Reviewed by Eileen Melissa's mom.)
... Read more

Editorial Review

Reviews

Spurring on Energy Creativity, September 8, 2008
Friedman writes on world population, the increase of the global middle class, and the growing energy crisis. All of this has contributed to a world that is in desperate need of an energy solution. The thing I like about Friedman's approach is he's optimistic and he's practical. His major points are...

-- The battle over green (energy) will define the first part of the 21st century, just like the battle over red (communism) defined the last half of the 20th century.
-- Everyone needs to accept that oil will never again be cheap...
-- Off-shore drilling may be a temporary fix, but it's not the long-term solution.
-- The fossil-fuel age will end only when we invent our way out of it...
-- The last big innovation in energy production was nuclear power half a century ago, which is an important component to solving our energy problem, but we need additional solutions...
-- In order to further real innovation we need people "throwing crazy dollars at every idea, in every garage, that we have 100,000 people trying 100,000 things, five of which might work, and two might be the next green Google."
-- Friedman emphasizes the practical side of green - "It's the incredible sense of opportunity here. It's not just about saving the polar bears. It's not just about saving three generations from climate change. It's also about rising to the greatest economic opportunity that's come along in a long, long, time."

In the end, he is asking for collaboration and innovation. Of course that begs the question - where does the money come from for all of this? It's always easy to point at the government, but when we look at where real economic solutions have come from it's most often private industry. I wish Friedman would have written on how governments can create environments were private industry is incentivized to create, invent, and discover. Even so, Friedman's book is a needed wake-up call.

A useful book on energy and climate change, September 8, 2008
Overall it's a good thing that Tom Friedman has taken up the cause of renewable energy. This book is a useful contribution to the national debate over energy policy.

The cause of renewable energy should not be a "political" issue. It's an issue that liberals and conservatives should work together on. Many conservatives concerned about our country's national security are already becoming strong supporters of renewable energy here in America. I don't agree with some of Tom Friedman's past views on economics but this book quite frankly is truly inspiring (particularly the last chapter) and sets a positive tone for people to work together.

A key part of the book is the last part, specifically the last two chapters. Here's where he gets to the heart of the problem, political leadership and government policy. On page 375 he states that the needed energy revolution "will never go to the scale we need as long as our energy policy remains so ad hoc, uncoordinated". On page 407 he again emphasizes the need for a major concentration of federal government power to meet the challenge.

In his interviews with top business executives such as the CEO of General Electric Friedman makes it very clear that America is not going to be able to unlock the power of private industry in an adequate manner unless there are major changes in U.S. government energy policies.

Some say this is "tampering with the free market" but people should be aware that in energy as in all too many aspects of global environmental policy, there really is no purely "free" market. There are already huge subsidies for various industries.

It's very encouraging that the cause of American energy independence is becoming a mainstream political goal. People might also be interested in the fact that legendary oil man, Boone Pickens, is now investing huge amounts of money in renewable energy and is running ads on TV on U.S. energy policy. He has set up a web site too. Part of his energy vision can be read in his new book The First Billion Is the Hardest: Reflections on a Life of Comebacks and America's Energy Future.

I don't share a lot of Friedman's economic views but he is an intelligent journalist who previously wrote some excellent books on the Middle East. Friedman understands the disastrous geopolitical aspects of America's current addiction to foreign oil. He deserves credit for seeing that major government action is needed to reverse this.

Along with this book I would recommend Lester Brown's Plan B 3.0: Mobilizing to Save Civilization, Third Edition. I have other relevant books in the lists on my profile.

Friedman's high visibility makes this book relevant even if you don't agree with him. He has access to many important people, and their comments are in the book. Thus, the book is also a way to see what certain leadership elements think about the subjects at hand.

I would recommend buying this book.

A Doable Win-Win Plan, September 8, 2008
In Hot, Flat, and Crowded: Why We Need a Green Revolution--and How It Can Renew America, Thomas Friedman presents an irresistible opportunity for Americans--one that can save the planet and increase our wealth.

The world is flat because of globalization--which is good, as ideas and practices can spread effectively. What is not so good is that our world population is exploding and countries like India and China are seeing an increase in wealth and subsequent buying power, which puts more strain on the world's resources and increases global warming.

Friedman begins the book with a discussion of how America has changed post 9/11. He uses the example of the US consulate built in 1882 in Istanbul. The consulate was built in the heart of the city: "it was an easy place for Turks to get a VISA, to peruse the library or to engage with an American diplomat."

Following the 9/11 terrorist attacks, the building was closed and a nearly impenetrable consulate was built. This all but stopped visitors from visiting. Although the new building does protect against attacks, it isolates Americans and impacts on how we are viewed and how we see ourselves.

Friedman writes that he wrote the book because: "An American living in a defensive crouch cannot fully tap the vast rivers of idealism, innovation, volunteerism, and philanthropy that still flow through our nation. And it cannot play the vital role it has long played for the rest of the world--as a beacon of hope and the country that we can always be counted on to lead the world in response to whatever is the most important challenge of the day."

That challenge is global warming. He proposes we begin a massive project called "code green."

Friedman identifies three broad trends in our society:
1. The post 9/11 building of walls around us to protect Americans from foreigners.
2. Since the 1980's, politicians acting "dumb as we wanna be," meaning we will get to fixing the roads, global warming and other issues when we get around to it. This includes politicians like Bush "protecting us" from gas taxes and other unpleasantries to keep our standard of living, or the fact that we are in war and don't have to make any sacrifices (save the soldier's lives.)
3. Nation building at home. This is the one good trend Friedman sees and he writes about the plethora of innovative, imaginative souls who devote their energy to finding green solutions.

Friedman considers what is now called the green movement to be more like a green party. He cites several "green" books that include the words "easy" or "lazy" in the titles. The authors write books where: "everyone is a winner, nobody gets hurt and nobody has to do anything hard." I have read several of these books and agree--much of the advice is fluff.

However, I do see the recent deluge of books and articles on sustainability as changing the consciousness and buying habits of the country. Many people who begin by making "painless changes" get serious about the environment and one or two of them may be the next inventor of the solar-run car. I also believe that when millions cut down on the use of plastic and other nonrenewable resources, that it does make an environmental difference.

The increase in population and wealth and buying power all tax our already limited supply of petroleum, coal and gas--all substances that cause global warming and pollute our planet. Even if you didn't "believe" in global warming, it is a fact that petroleum--now needed in unprecedented amounts--is rapidly becoming an increasingly difficult product to procure. If you think spending $5.00 a gallon for gas for your car is a hardship, that price will be considered nothing in a few years. Folks, we are running out of time and oil.

Friedman gets that Americans can use the diminishing supply of nonrenewable resources as a means for an economic boom, for bridging the widening gap between Americans and the rest of the world and for drawing us together as a nation. Americans are an innovative and smart bunch of people and we need to get working on devising clean alternatives to fossil fuels. This will create more jobs, strong economic times and raised spirits.

Friedman presents a doable, win-win plan to raise wealth and to save the planet. A must-read.

By the author of the award winning book, HARMONIOUS ENVIRONMENT: BEAUTIFY, DETOXIFY & ENERGIZE YOUR LIFE, YOUR HOME & YOUR PLANET.

Top-down vision that avoids some fundamental issues, September 12, 2008
If you're not yet convinced that climate change is real or needs urgent and radical attention, this vision of a flat world -- with America on top -- may be able to change your mind. Maybe, thanks to huge sales, this book will able to open a lot of minds that needed opening; and that would be a good thing. Unfortunately, it won't open them quite far enough. While faulting others for not confronting the tough issues around climate change, Thomas Friedman (TF) avoids many of them himself.

Other reviews summarize some of the book's main themes. This long review will deal with some of TF's more striking arguments, good and bad, that most others have not yet commented on.

A. GOOD POINTS

Some points I especially liked: It's great that TF is so explicit about his exasperation at magazine articles and books offering glib solutions like "205 easy ways to go green." He'd prefer our leaders "propose the one or two hard ways that could actually make a difference" (@ 400). His proposal for how a Presidential candidate might defend the idea of a carbon tax (@265f) is what we ought to be hearing now, instead of "Drill, baby, drill!" His description of why the US military is enthusiastic about going green (@ 317-322) is fascinating. And he bravely makes strong arguments that government regulation can be a good thing in appropriate circumstances.

B. THE POINT OF GOING GREEN IS ... REGIME CHANGE?

One curious feature of TF's argument is its emphasis on America's going green as a means of promoting change in other countries. TF's "Laws of Petropolitics" (Ch. 4) purport to show how "freedom" (or sometimes "the pace of freedom" (@96)) in certain oil-producing countries waxes and wanes inversely with the price of oil. (I won't dwell on the speciousness of the graphs, which use undefined units and misleadingly truncated axes for "freedom," which is sometimes political and sometimes economic.) America should reduce its demand for oil because of our "need to drive reform in the Arab-Muslim world" (@108; I suppose that means we think non-Arab Iran is OK as is).

Moreover, new American technologies will reduce "energy poverty" in poor countries and enable the next Thomas Edison or Sally Ride who may be living there (Ch. 7 & @164). And the Chinese leadership will give its people freedom of speech because of our threats to "outgreen" that country (Ch. 16, esp. @ 367). Aside from these notes of noblesse oblige, TF's vision of other countries is only as competitors to America, not people with whom we should be cooperating (e.g., "America wins! America wins! America wins!" @ 242).

What does America get out of this? The first chapter promises to show how going green will lead to "nation-building in America" (@9). But TF never returns to that topic; the impacts on America that he describes all seem to be economic. He also promises we'll get "more and more knowledge-intensive green-collar technology jobs - which are more difficult to outsource" (@23). What do these turn out to be? Construction jobs installing solar panels and retrofitting buildings (@338).

C. GREEN'S IMPACT ON INCOME INEQUALITY

TF seems blind about the issue of income inequality, especially within nations. Only four pages of the book (< 1% of the text) even come close to talking about income inequality in America; these take the form of an interview with a community activist from Oakland, CA (@335-339). Those construction jobs are the punch line, presented as a boon to the urban poor. How about the rest of the book?

(1) TF regales us with a long utopian fantasy about the snazzy technology and perfectly working markets (unlike any in real life) of the "Energy Internet" (@224-236). He imagines "you" as having a real estate development job that you can telecommute to most days of the week. Too bad for folks who have manufacturing or minimum wage jobs, like the folks who flip your burgers; I guess he expects they won't read the book. Moreover, TF is excited by the idea that someday we'll all lease our household appliances instead of owning them (@71). A society of a few who own and the many who rent, even at the most basic levels of daily life? Sounds less like science fiction and more like a Charles Dickens novel.

(2) TF enthuses about imposing a $5-$10 per gallon tax on gasoline, and using that money to offset payroll taxes (@262). Let's check the math. When I lived in Silicon Valley, I went through about 20 gallons of gas per week - and I had a home office. TF's gas tax would have cost me $5K-$10K per year (to say nothing of higher pre-tax prices per gallon). Plenty of folks commute more than 1 hour per day, because their jobs don't pay them enough to afford to live in the communities where they work; but let's assume they use only as much gas as I did. According to the 2008 US tax tables, a head of household earning even $43K won't have $10K of tax to offset. Even a married couple filing jointly with income over $60K won't have that much payroll tax - but they might have to pay the gas tax for two cars.

(3) How about the day-trading class? According to TF, stock bubbles "have actually been a key driver of America's remarkable record of economic growth and innovation" (@259). The "overinvestment of billions of dollars in fiber-optic cable" left the infrastructure for low-cost Internet services after the bubble's 'pop'(@258). BTW, as I recall, that pop also resulted in a huge wave of job loss. It also wiped out the small investors who didn't have privileged access to IPOs, or the inside information to lead them to bail out ahead of the game. I suppose TF likes neutron bombs, too. And despite this, Americans' Internet access speeds are still way slower than those enjoyed in Japan and Korea.

(4) To be fair, TF is almost as blind about the poor in foreign countries. His fantasy beneficiary of green technology in the developing world is "Senhor Verde" (a Brazilian 'Mr. Green'), who has a 1,000 acre farm, with high-tech tractors and sprinkler system. But the mean size of a farm in Brazil is < 150 acres; and as a mean, that number is inflated upwards by some megafarms. Roughly 40% of Brazilian farms are under 10 (ten) acres. In Africa and many Asian countries, that percentage is closer to 80%-90%. See, e.g., the paper "Farm size" by Eastwood & al. of University of Sussex (2004), available in draft online. Bottom line: when TF talks about Mr. Green, he's talking about a rich dude.

TF's vision for the foreign poor is data centers set up by outsourcing companies, such as one he saw in a village in India (@166-169). One of his interviewees tells him, "[I]n the village, no one gives up these jobs." I'll bet. But keeping their jobs isn't necessarily up to them. Outsourcing work is especially vulnerable to being moved around the globe, according to the whims of the market forces that TF extols. See, e.g., Andrew Ross's outstanding "Fast Boat to China: Corporate Flight and the Consequences of Free Trade" (2006).

D. UNASKED QUESTIONS AND UNPURSUED CONCLUSIONS

The deepest problem is that TF doesn't question his key assumptions or pursue his arguments to their logical conclusions. Especially, he doesn't question whether American-style market capitalism might be part of the problem, beyond the fact that it relies on heat-based energy sources.

(1) GROWTH & GDP: "I start from the bedrock principle that we as a global society need more and more growth, because without growth there is no human development and those in poverty will never escape it" (@186). Growth in what? "Economic growth" usually means growth in GDP, and TF never indicates he means something else (see also his discussion of China @ 345f). The usual assumption (not stated by TF) is that higher GDP per capita (GDP/C) is associated with higher "welfare" or "well-being".

TF says "Too many environmentalists oppose *any* growth, a position that locks the poor into poverty" (@194). This is painting with a broad brush. First of all, GDP/C numbers don't tell you anything about how wealth is distributed. As Warren Buffett gets richer, our mean GDP/C goes up, but that doesn't mean your income goes up. In fact, check Wikipedia on "Median household income": although US GDP/C grew 67% since 1980, median real household income went up by only about 15%. Real median income is lower now than in 1999 - i.e., at least half of us are worse off since then, despite growth. Second, TF's blind eye overlooks that income inequality has been growing within nations, including the US. Based on US Census Bureau's computed Gini Index for 2007 (46.3), we're by far the most unequal of all developed countries. So it's not obvious exactly what growing GDP or GDP/C does for the poor.

Moreover, TF doesn't mention that GDP/C can grow because of bad stuff, such as the costs of treating disease and cleaning up pollution - not really well-being at all. Or that the supposed relationship between GDP/C and happiness as measured in surveys is at most a correlation -- not a causation, as TF's comment suggests. (Or that whether such a correlation exists at all is highly contested among researchers, and that even the papers arguing most strongly for it ignore other obvious factors, such the relationship between happiness and recovery from a devastating war.) Or that despite growth, income inequality can lead to unhappiness because of perceived relative differences, even if everyone's income is improving in an absolute sense.

Since so much of the book's attention is on America, not a "global society," you'd think that TF might specifically address the question of how growth benefits Americans. But aside from mentioning that to turn off growth would be "political suicide" for politicians (@64), he's mum on the issue. Bottom line from TF: growth is good for poor people somewhere, and for politicians in the US (or maybe everywhere).

(2) GROWTH & CONSUMPTION: TF is a fan of consumption. He argues, through the mouths of interviewees, that consumption is necessary to grow the economy (@194), that we can "consume more and conserve more at the same time" (id.), and that with the right carpet design, "not only would you be able to change your carpet as often as you wanted without guilt, but you'd be producing massive amounts of jobs in America" (@71). As for energy, he wants to see "huge demand - *crazy, wild, off-the-charts demand*" for clean power technologies (@244; emphasis in original). His Energy Internet technotopia is a paradise for consumers who love to choose service plans.

An interesting irony is that TF sees the main obstacles to changing America's energy mindset as lobbyists and failed political leadership (Ch. 17). Some American scholars of politics have observed that the same market forces that maximize our opportunities as consumers have sapped our power to effect political change as citizens, especially in the past 40 years or so. See, e.g., R. Dahl's "On Political Inequality" (2006) and "On Democracy" (1998), and R. Reich's "Supercpitalism" (2007). TF never questions whether the ultra-consumerism for which he cheerleads could be contributing to the political problem he complains about.

But considering that TF's theme is energy, it's also ironic that he ignores economists like Nicholas Georgescu-Roegen and Herman Daly, who have pointed out that unbounded growth and consumption run afoul of the laws of thermodynamics. Economic processes aren't different from any other kind of activity, in that they all produce physical waste, in the form of heat or stuff. Just as you can't have a perpetual motion machine, you can't recyle all of that heat or stuff. The more stuff you consume (or produce), the more waste that results. (Note that Communism, which emphasizes unlimited production, is no less dumb than gonzo capitalism in this regard.)

Yet while TF often stresses the urgency of addressing our energy problems -- e.g., quoting Dana Meadows, "We have exactly enough time, starting now" (@170) -- he doesn't want us to "opt for the drastic" by make any "radical changes in lifestyle" just yet (@194). Though he mocks others for their "easy" ways of going green, his prefers to stick his head in the sand rather than to ask whether our lifestyle has any physical limits.

(3) ARE WE REALLY GROWING ANYWAY?: I was very happy to see TF criticize economists' use of the word "externalities" to describe pollution, waste and CO2 emissions (@260). That terminology disguises such problems as trivial annoyances. Farther down the page TF says "We have been fooling ourselves with fraudulent accounting by not pricing those externalities. ... We rack up stunning profits and GDP numbers every year, and they look great on paper `because we've been hiding some of the costs off the books'. Mother Nature has not been fooled" (@260). Right on.

But now, as the Talmud says, let your ears hear what your mouth is saying. If our growth figures are "fraudulent" because we don't consider the true costs of pollution, biodiversity loss, etc., who's to say our economy is truly growing anyway? Or that the American versions of market capitalism and consumer lifestyle, both of which TF so staunchly defends, are really defensible?

E. CONCLUDING COMMENTS

I won't dwell on the many small quirky things that none of the zillions of people thanked at the end of the book were able to persuade TF to change, such as a mistake about when the current millennium began (@47) or an overly exuberant reference to "10,000 inventors working in 10,000 companies and 10,000 garages and 10,000 laboratories" (@ 244 - each of these people has a garage AND a lab AND a company?). But it's interesting that among those zillions of names the only Europeans seem to be some folks from a Dutch oil company.

Interesting because many of the questions TF doesn't ask are being asked in Europe. And not just from the political left. TF mentions French President Sarkozy as an admirer of America (@ 177). That same rightist politician has asked two US-based Nobel laureate economists to come up with an alternative to GDP, in order to get a better measure of well-being and happiness. Moreover, many European thinkers on issues of energy, economic growth and ecology (among them Andr� Gorz, Dominique M�da, Alain Gras) often start from a deep analysis of the nature of human work, and its spiritual meaning. TF's approach, in contrast, is entirely materialistic and technocratic. [UPDATE 2009/09: Two pertinent reports available online are the March 2009 report "Prosperity without growth?" from the UK Sustainable Development Commission, and the September 14, 2009 final report of the Stiglitz Commission appointed by Pres. Sarkozy. While the Stiglitz Commission focused more on measurement issues than on policy, the UK SDC report questions the policy of growth in great detail.]

The problem of human survival in the face of global climate change seems to call for cooperation, and some reflection about what we really want life to be. TF's proposal instead is for America to overwhelm other countries in international competition, with the help of market forces and smart appliances. Are "out-greening al-Qaeda" and "America wins!" really the best attitudes with which to approach this challenge facing all humanity (and, thanks to us, much of the rest of life on earth)? It's not clear to me that this is even good for Americans. We're humans, too, not just consumers and innovators.

I hope TF will win over some skeptics about climate change. But if we don't think more deeply, critically and globally about the solutions than he has, we could end up in a world that's hot, flat, crowded, hostile and lost.

Too much book, too little value, September 27, 2008
Tom Friedman has a great vision of future economic growth driven by energy technology. I enjoy reading his columns and watching his interviews. However, this book is far too long to get his message across clearly. I feel like have the book is him quoting experts to make an obvious point. For example, do we really need a whole chapter on biodiversity loss and his travels around the world to be convinced that there is a biodiversity problem? He takes far too long to get to his original (and valuable) ideas. I can read long books, but by page 150 (out of 400) I felt like I had read a lot but not gotten a lot that was new to anybody paying attention to climate change/environmental news at all. My advice to readers is to save their money and simply take a look at Friedman's past interviews and op-eds (all available online) to get his message.

Deeply Intriguing Ideas Buried by Breezy Style, November 20, 2008
Thomas Friedman's writing is new to me, and from the glowing reviews of this book I expected a little bit more. [Update to review: Deserves 4 stars.] I'm a climate change professional and one of those "revolutionary bureaucrats" that he praises in his book for doing the real work in protecting human health and the environment (thank you, Mr. Friedman), and I agree with 95 percent of his ideas and solutions - especially placing the true price of dirty fuel back onto the consumer (only then will people choose clean energy over dirty fuels). I originally gave this book three stars mostly because it felt like a review of things I've already read, and it could have been written a little better. However, the book earns five stars if it's one of your first three books on the impacts of global warming.

Although the book puts together important ideas, my primary disappointment with the book is that it reads like one especially long newspaper article, very light and breezy, and almost glib in tone at times. A much better book if you want more on climate change and its impacts upon human societies is "Hell and High Water - Global Warming, the Solution and the Politics - and What We Should Do" by Joseph Romm.

I've also read thousand-page compendiums on climate change, so to me, the science of global warming is incontrovertible. That part of his book didn't require convincing for me. I'm not an economist, so I could not evaluate his economical solutions to the degree I'd like, although I do agree that externalities should be included back into the price of everything, especially chemicals, fuels, or processes that are harmful to the environment. One of my main disagreements I have with Mr. Friedman is that growth in the third world is necessary or good. Even the author admits that the world can't sustain any more Americas.

At least Mr. Friedman is exactly spot on about how the "green revolution" is more of a "green party", where everybody gets to feel good without actually accomplishing anything. If we want to keep the world livable for us humans, I'm certain that big changes, painful changes will have to take place.

I am also fairly certain that voluntary behavior change will not be enough to limit carbon dioxide emissions into the air. Which do you think is easier?
1): Convince the average motorist that high-mileage hybrid vehicles are the best vehicle to buy (even though they cost more upfront); or
2): Mandate higher minimum fuel efficiency standards that all vehicles must meet.

Personally, I know fuel efficiency standards work, because they worked in the 1970s very well. As for voluntary behavior, what is the market penetration of hybrid vehicles? A lot less than 5 percent. I'm an environmentalist, but I will not buy a hybrid until the price of gas becomes very, very, expensive.

Stay tuned, I think climate change is the most important story of our times. In a few years, the economic downturn (in late 2008) will be in the past, gasoline will be at $7 to $8 per gallon, and we will still be trying to keep the planet from turning into a desert - only the later we start to make meaningful change, the more difficult it becomes.

Hugely disappointed, June 20, 2009
I was expecting this book to start talking about some solutions at least at the half way mark but it goes on and on giving examples after examples of how each part of the world is now hot flat and crowded. I think most of us got that point very early on in the book but the repetition was just not necessary unless there was a word or page target that Thomas Friedman was aiming for. By the time I reached to the solutions part, I was taken straight into this futuristic place where you had the intelligent grid that would reduce our energy consumption and solve all our energy problems. As I said earlier I was expecting to see varied solutions but was disappointed to go through so much repetitive info that i had no patience at the end to finish the last part.

A manifesto for our times, November 17, 2008
What a timely book! Following an election in which the future of the planet was hotly debated, the market is ripe for this accessible yet information-packed treatise on the perilous state of the environment, how we got here and how we must proceed if we are to avoid catastrophe.

Thomas L. Friedman, the Pulitzer Prize-winning foreign affairs journalist for the New York Times, is known for his ability to synthesize information from diverse sources. He uses the first half of the book to thoroughly convince us that we do indeed have a problem, and a very grave one. In his past books, Friedman has argued that globalization is "flattening" the world, making competition between countries more possible and more fair. China and India's booming economies are giving millions more people opportunities to move up to the middle class. These millions feel they deserve a better life --- better being defined as more comfortable, consuming more resources like their American brothers and sisters.

The problem is that we are quickly running out of the cheap, dirty fuel that allowed the first world countries to develop. But increasing carbon dioxide emissions from dirty fuels like oil and coal are contributing to what Friedman terms "global weirding." Add to this mix burgeoning population growth, and you get a world that is hot, flat and crowded. Friedman provides plenty of scientific support to back up his claims that life as we know it (cheap gas, cheap energy, a human-friendly climate) is endangered, one way or another. As he puts it, "if we don't make the hard choices, nature will make them for us."

The second half of the book is a guided tour through what some of those "hard choices" may be. "Green" must be more than a fad, he argues, and every magazine article that touts "easy" ways to save the planet does a disservice by trivializing what may in fact be deadly serious. Yet Friedman believes we are up to the task and that America must lead the way in both innovation and conservation. He describes a new Energy-Climate era in which information technology meets energy technology. In his vision, our washer, dryer and refrigerator become smart appliances that communicate with a revolutionized energy grid to buy electrons when they are cheapest. No matter whether our cars are plugged in at home or in a parking lot, they can both buy and sell electricity, depending on whether they need it or have it.

But to get to this sustainable utopia, our government and culture need to make investments now. We have to engineer our economy so that alternative energy innovations are made because industry knows they will be competitive. If that means keeping gasoline prices above $4/gallon in order to do so, so be it. If we doubt that will work, we need only look to Europe, where gas prices are astronomical and small, energy-efficient cars are the norm.

America must lead, Friedman argues, or we'll be forced to play catch-up with China and India. He introduces us to some American companies and universities already innovating toward a clean, sustainable future and examines what other countries are doing as well. We need a course correction, and with HOT, FLAT, AND CROWDED, Friedman has provided a manifesto for our times.

--- Reviewed by Eileen Zimmerman Nicol

Hot, Flat, and Crowded, February 15, 2009
The central argument in this book is that the market does not efficiently allocate investment to cleaner alternative fuels because of externalities associated with use of "dirty" fossil fuels. Externalities, in this context, are costs that are not paid by fuel consumers but rather by society as a whole (pollution) or even by future generations (climate change caused by CO2 emissions). Market participants don't factor these costs into their decisions because they don't have to pay them. This market failure creates an opportunity for the government to increase efficiency by raising the price of carbon-based fuels so that the price paid by consumers reflects their full cost to society. When alternative fuels are more price competitive, R&D will increase, and advances in technology will bring down the cost of alternative fuels. This is an eminently reasonable argument, and Friedman also does a good job of explaining how high oil prices strengthen authoritarian leaders in oil-rich states.

Much of the rest of his book is not as valuable. Friedman is highly critical of market processes - he sees market failures everywhere - but he seems to lose his critical judgment when he looks at government processes. He wants "revolutionary bureaucrats" to assume a much larger role in shaping investment decisions, but he blithely assumes that regulators are farsighted technocrats rather than self-interested political actors. Elsewhere, Friedman laments the need to obtain the support of citizens for initiatives that they will pay for. An entire chapter is dedicated to a fantasy that a benevolent dictator - whose views are identical to Friedman's - might dramatically increase environmental regulation over fossil fuels while weakening environmental regulation over nuclear power, electricity transmission lines, and the other infrastructure that Friedman needs to achieve his vision for a United States powered by "clean electrons."

Many of his arguments might also be criticized as poorly supported or unbalanced. Friedman is a popularizer and explainer, and the standard of evidence in a popular book need not be as high as in a book aimed at specialists. Still, his standard does not rise much above "I think that ..." or "someone I interviewed thinks that ...." This might not be such a big problem except that Friedman only interviews people that he agrees with. For example, in advocating that the news media should more actively promote the link between human activity and climate change, he cites the views of former Clinton administration official Jospeh Romm, who thinks that the news media underplay the link because they are overly concerned with their role as "honest brokers" of information. Maybe Romm and Friedman believe this, but I would guess that most people take a more skeptical view of our news media. Elsewhere, Friedman asserts that the "worst" fossil fuel companies "know their products are as harmful to society and the planet as cigarette smoking." This is a surprising statement, and it might even be true, but Friedman does not present any evidence for it. As a final example, Friedman calls Hurricane Katrina a "flashing red light" alerting us to global warming. Maybe Friedman is right, but in the absence of any evidence, readers might well conclude that the link he draws between climate change and this specific storm is speculative.

can the laggard lead?, November 11, 2008
When my family was in Germany in 1990, our friends pulled up to a stop light and obeyed a traffic signal that instructed them to turn off the engine to save fuel and spare the air. Brazil and Denmark have already attained energy independence from Middle East oil. Japan and Europe have fuel economy standards of 35 miles per gallon; the United States won't match that until 2020. In 2004, demand for scrap metal in China was so strong that manhole covers started disappearing from around the world; thieves stole them, chopped them up, and sold them to China. 150 covers went missing in Chicago. Every mile you drive your car you emit a pound of CO2 into the air (and China is adding 14,000 cars every day to its roads). Welcome to what Thomas Friedman calls Code Green.

Friedman has his critics. His breezy style, jingoistic cheerleading, and free market optimism about profit-motives can be irritating. Others haven't forgiven him for supporting the Iraq war or for his rosy prognosis about globalization. He has a whole chapter in his newest book about why going green will never be easy, but he specifically denies that Americans need to cut their consumption habits because he believes that capitalism can grow a bigger and cleaner pie for all. Everyone knows that America is by far the biggest eco-laggard, but he insists that we can be the world's leader. In a critical review in The New York Review of Books (November 6, 2008: http://www.nybooks.com/articles/22027), Bill McKibben describes Friedman's vision as a "green fantasia." In the New Yorker (November 10, 2008), Ian Parker contrasts Friedman's carefully crafted persona as your Average Neighbor with his own eco-footprint, namely, the 11,400 square foot mansion he and his wife built a few years ago.

Still, if our country has any hope for mobilizing the general public in an environmental movement that would match the urgency of the civil rights movement, Thomas Friedman is probably as good as it gets. He's won three Pulitzer Prizes, and his books have been translated into thirty-four languages. He's done his homework and traversed the globe. For many readers, whatever Friedman writes deserves careful attention, and with the current crisis that's a good thing.

The "flattening" of the world that he described in The World is Flat (which has sold four million copies), global warming, and the population explosion all converge, says Friedman, to create five key problems -- energy and natural resource supply and demand, petrodictatorships, climate change, energy poverty, and biodiversity loss. His book describes these problems with a blizzard of anecdotes, facts and figures, and then proposes how we can address them. Friedman sees both a global obligation but also a national opportunity for America to renew itself. There are many moving parts that must act in concert toward the same goal -- governments, international treaties, free market and profit-motivated innovators, laws and legislators on the international, national and local levels, industry regulators, NGOs, personal virtue, civic activism, and bold leadership. Friedman describes himself as a "sober optimist," but he admits that there's a very thin line between dire pessimism that we've reached an irreversible tipping point due to apathy and inaction, and optimism that human ingenuity can rise to the occasion. ... Read more

Editorial Review

Life is getting better—and at an accelerating rate. Food availability, income, and life span are up; disease, child mortality, and violence are down — all across the globe. Though the world is far from perfect, necessities and luxuries alike are getting cheaper; population growth is slowing; Africa is following Asia out of poverty; the Internet, the mobile phone, and container shipping are enriching people’s lives as never before. The pessimists who dominate public discourse insist that we will soon reach a turning point and things will start to get worse. But they have been saying this for two hundred years.

Yet Matt Ridley does more than describe how things are getting better. He explains why. Prosperity comes from everybody working for everybody else. The habit of exchange and specialization—which started more than 100,000 years ago—has created a collective brain that sets human living standards on a rising trend. The mutual dependence, trust, and sharing that result are causes for hope, not despair.

This bold book covers the entire sweep of human history, from the Stone Age to the Internet, from the stagnation of the Ming empire to the invention of the steam engine, from the population explosion to the likely consequences of climate change. It ends with a confident assertion that thanks to the ceaseless capacity of the human race for innovative change, and despite inevitable disasters along the way, the twenty-first century will see both human prosperity and natural biodiversity enhanced. Acute, refreshing, and revelatory, The Rational Optimist will change your way of thinking about the world for the better.

Reviews

A History of Progress, May 22, 2010

Will our future be 2,000 more years of immanent apocalypse?, May 8, 2010

The Future is Rationally Bright, July 14, 2010
Differentiation of individual activity, specialization and trade are the activities that have enabled humankind to overcome obstacles in the past and advance at a rapid pace. The future should be no different.

According to Matt Ridley, trade was and is the essential element in human progress. He suggests that the first farmers were already traders and used their static location and accumulated inventory to meet hunter-gatherer demand. He also credits the farmer as the creator of property rights. Hunter-gatherer societies are egalitarian sharing the hunt and enforcing non-compliance. A farmer who plants a field expects to harvest it and store or trade the surplus. This, Ridley posits was the origin of private wealth.

Ridley maintains that progress is dependent on idea sharing. As population density increases, the availability of new ideas and differentiation of occupation allows those with extra time to make use of these ideas.

Twentieth century collectivist bias leads one to ask "who was in charge" looking for a central initiator of policy. Ridley suggests that the world is a complex adaptive system, where trade and progress emerged from the interaction of individuals. It was an evolutionary rather than a planned process.

He recounts historical examples of institutional and industrial stagnation from the Bronze Age to British Rail and the U.S. Postal Service. What Ridley says they have in common is an attitude that rewards caution and discourages experiment. A planned economy requires perfect knowledge. The possibility of new knowledge makes a steady state or economic equilibrium model invalid.

He says the Dark Ages were a massive back to the land hippie movement minus the trust funds, similarly the Maoist Cultural Revolution.

Ridley thinks that governments tend to be good initially, but increasingly bad the longer they last. `Government brings inefficiency and stagnation to most things it runs.' Governments `employ ambitious elites who capture an increasingly greater share of the society's income by interfering in peoples lives and creating rules to enforce until they kill the goose that lays the golden eggs'

African poverty, hunger, climate change, resource depletion, and disease are all challenges that an intellectually evolving human race will conquer.
Individual creativity within a bottom-up political structure and a free-market economy will increase our individual wealth, health, and longevity according to Matt Ridley.

A Landmark and happily subversive book, May 26, 2010
I can't do better that repeat Steven Pinker's endorsement from the dust jacket:
" A delightful and fascinating book, filled with insight and wit, which will make you think twice and cheer up."

It's also filled with historical insights into human psychological and social evolution from prehistory through the present day.

This book is in fact the latest in a long line of lonely books explaining why spontaneous order (unconscious and unplanned) works so amazingly well, and bravely speaking out against the dominant pessimism that always reigns. Ridley cites these authors liberally: Adam Smith, Charles Darwin, Friedrich Hayek, Julian Simon, Bjorn Lomberg. Since all these men are heroes of mine, I needed little convincing. I am already a committed optimist.

But a part of me is deeply pessimistic. That's because as always, the dominant view of the elites and the media everywhere is global pessimism. Political "leaders" everywhere believe the opposite of what this book teaches. And they mostly push for well intended but misguided policies that will guarantee that bad outcomes occur. John Holdren, Obama's chief science advisor, will not read this book, but he believes passionately the exact opposite of everything it explains.

Matt Ridley understands all this, and his frustration with counterproductive policies (like Biofuels) is clearly stated. But the question is "Why are humans so intent on pessimism?" As someone fairly expert in evolutionary psychology, I was hoping Ridley would shed some light on this. A related question is "Why do humans prefer top down hierarchies to spontaneous order."

My own hypothesis goes something like this:
For hundreds of thousands of years, (and before trading occurred) our prehistoric ancestors evolved in small tribal bands, in desperate scarcity, and in constant total war with other tribes, deadly animals, and a harsh environment. In such a situation, a tribal band must operate with the discipline of a combat army. Survival was completely dependent on rigid conformity, obedience to authority, and the assumption that everything that moves is a potential threat motivated by conscious intent.

Only in the last few hundred years have some civilizations allowed the spontaneous order of billions of individual decisions to generate far greater benefit than top down systems do. But our primitive past is so deeply imbedded in our mental genes, that most people still believe in gods, "great" leaders and/or socialism.

My only other quibble with Ridley concerns his bias for markets but against financial markets which he sees as corrupt or exploitative. He is correct to see a difference, but he needs to read more Hayek to understand why. The answer is that financial markets are built on anti market foundations: fiat money printed by governments to serve political ends and price fixing of interest rates by central banks which loan money to banks at favored rates not given to others. This leads to markets distortions, mispriced risk, malinvestment, fraud and periodic bubbles.

Optimism is better than pessimism, July 22, 2010
Wonderful to be regaled with positive things that humans have achieved and are capable of.
We hear and see too much doom and gloom and sometimes I wonder if humans are programmed to be negative or are just fascinated with disaster and failure and predictions of the 'bad'.
Good news does not seem to sell so I hope this wonderful book succeeds.
Certainly has given me some insights which were in hindsight, intuitive, but of course without foresight, are generally not.
it's a bit like saying, "yes we can"!
Highly recommended.

Adam Smith Meets Charles Darwin, May 24, 2010

Optimistic view on the global economy, not so optimistic about our future, July 6, 2010

Fun, fascinating, controversial, July 18, 2010

Rational Optimist, July 16, 2010
The world's innovation rate makes us all Luddites! Mat Ridley gives perspectives on understanding the current ferociously changing times. He is the recipe for overcomming vogueish Malthusian 'end of the world' 'expert' views (ie. static vs dynamic). A terrific read - especially comments regarding evolutionary links to free trade, Botswanna and global warming. Great historical examples of both wealth creation/destruction. I submit to his "Name a Phoenician emperor" taunt!

Good writing; Devastating Case for Things Looking Up, June 9, 2010
An extended argument that human intelligence and the well-being it allows is created, collected, maintained, distributed and extended by trade. Trade is "ideas having sex." Ridley builds his case with point after point then examines all the usual counterexamples and objections, taking them out one by one. It's a wonderful book. Of course it helped that he was preaching to the choir with me. What's most delightful is Ridley's goodhearted skewering of pessimists -- the technological and environmentalist Jeremiahs in particular -- with the most obvious of weaknesses is their flimsy cases. He's almost embarrassed for them. Ridley is a bit repetitive at times, but maintains a wry humor and lighthearted tone throughout, which makes his writing all the more effective. He's a good writer and he's right about everything. ... Read more

Editorial Review

Reviews

Unfortunately, Reruns Are Already Starting!, November 4, 2009
Reinhart and Rogoff's book provides a quantitative history of financial crises derived from over 600 years and 66 nations. The basic message from all their data is that there are remarkable similarities in today's financial crises with experience from other countries and nations. The common theme is that excessive debt accumulation by government, banks, corporations, or consumers often brings great risk. It makes government look like it is providing greater growth than it is, inflates housing and stock prices beyond sustainable levels, and makes banks seem more stable and profitable than they really are. Large-scale debt buildups make an economy vulnerable to crises of confidence - especially when the debt is short-term and needs to be refinanced (the usual case).

Reinhart and Rogoff go on to conclude that most of these booms end badly. Outcomes include sovereign defaults (government fails to meet payments on its debt), banking crises (heavy investment losses, banking panics), exchange rate crises (Asia, Europe, Latin America in the 1990s), high inflation (a de facto default), and combinations of the preceding (1930s, today).

What did the authors learn from their data digging? Severe financial crises share three characteristics: 1)Declines in real housing prices average 35%, stretched out over six years, while equity prices fall an average 56% over 3.5 years. 2)The unemployment rate rises an average of 7 percentage points during the down phase (average length = four years). Output falls more than 9% over a two-year period. 3)Government debt tends to explode, an average 86% in real terms. The biggest driver of this debt explosion is the collapse in tax revenues; counter-cyclical fiscal policy efforts also contribute, as well as spiking interest rates.

Reinhart and Rogoff also identify what they find to be the best and worst (pronouncements from the Federal Reserve, U.S. Treasury heads, and more than a few 'successful' academics and stock-pickers) early warning indicators of crises. Finally, the authors warn that premature self-congratulations on early successes in correcting a banking crisis may lead to complacency and an even worse state of affairs.

The 'good news' is that Reinhart and Rogoff have provided a detailed and credible accounting of past experiences. The 'bad news' is that despite the authors' scholarly and intense efforts, "This Time is Different" is not likely to sway many minds for two reasons. 1)The book is too much of a scholarly tome to become widely read, and there are too many self-serving 'think-tanks' offering contrarian opinions. Others, more data-driven, will point out that most of "This Time Is Different" is drawn from earlier days and non-U.S. nations, and thus of limited applicability to the U.S. today. 2)Despite recent disproof of claims that government has mastered the economic cycle via Federal Reserve fine-tuning and counter-cyclical government spending, and that 'the old rules of valuation no longer apply,' we're back blowing bubbles. Today's MSNBC headline reads 'New Market Bubble May be Brewing,' the 'Greenspan Put' (government will bail out falling markets, while allowing soaring ones) continues, no action has been taken to rein in Wall Street gambling and unwarranted bonuses, financial institutions believed 'too big to fail' are bigger than ever, and 2010 election pressures will undoubtedly auger for continued easy money, inflating ourselves out of debt, and increased debt at all levels.

Prodigious and full of gallows humor, October 3, 2009
Rogoff and Reinhart, two very substantive (and, I might add, earnest) economists, have produced a prodigious work which will be read and studied for years. They have gathered mountains of data from primary and secondary sources and reduced it to dozens of charts and graphs, a heroic work in its own right. Their intention, God bless 'em, is to lay out the follies that have led to economic/financial crises over the last eight centuries. Their findings: humans have not learned from past mistakes. The title is ironic and is worthy of Peter DeVries.

The authors say it is "almost comical" that no governments reveal their true financial condition today, nor have they done so in the past. The lack of transparency and the shenanigans that go on behind the curtains contribute, of course, to the human suffering that ensues in crisis after crisis.

One needs to find this book comical if one is not to slip into a permanent depression about the utter failure of national leaders to address shortcomings in national domestic and foreign economic policies in order to avoid systemic crises. No one has, from the 13th century onward, anywhere in the world.

The authors persist in saying that they hope their monumental effort will lead to an examination by policymakers of past mistakes and help them avoid future mistakes. I say, "Good luck with that." In my opinion, this book ranks with the complete works of Shakespeare in illuminating the human condition. Or Bruegel, or Beethoven. It will not bring about change, but it will entertain in a deeply satisfying way.

Explaining the Second Great Depresson and Its Potential Aftermath, October 24, 2009
Be prepared for a very sobering and complete review of eight centuries of financial crises, complete with charts and graphs that even those who fell asleep in the Macro 101 in college should be able to understand. This book is worth reading in its entirety, but chapters 13 to 17, in which the authors draw important lessons from the 800 years of financial folly for the present course of the "Second Great Contraction of 2007" and its aftermath, make this volume well worth the price.

Also, be prepared for some sobering analysis of the effectiveness of central banks and government policymakers in addressing economic crisis (yes, regrettably, still not very effective even with the benefit of 800 years of history and analysis to draw on). You will learn why This Time is Ultimately Not That Different in so many ways. Ken Rogoff worked at both the Fed and the IMF so he is in a unique position to evaluate the global scope of the 2nd Great Depression in modern history, and it is the very global nature of this event that leads him to conclude that the aftermath with be long-lasting and have profound effects on the global economy for many years to come.

While documenting the fiscal policy response to the Second Great Contraction of 2007, including the massive global government bailouts in the banking sector, Rogoff points out that the size and long-term impact of these measures, while profound, may be dwarfed by the effects on the U.S. national deficit and national debt of reduced Federal tax revenues during the global downturn. With such high levels of debt and limited means to reduce government expenditures to compensate for sharp reductions in tax revenues, the ultimate effect may be a debasing of the U.S. dollar by the Fed, producing a period of increased inflation or stagflation.

The earlier chapters describing periods of hyperinflation, bank and sovereign defaults throughout history are fascinating, leading up to the payoff in the final chapters, in which one can draw one's own conclusions about what course this most recent crisis will take and just as importantly, how policymakers are liable to miscalculate once again. The Federal money-printing presses around the world are in high gear once again, more automated and sophisticated than ancient regal sovereigns clipping coins and extracting gold and silver from the royal coinage to finance their realms.

Proving once again that history doesn't always repeat itself, but it does rhyme.

less than what I hoped for, November 15, 2009
I have little to add to previous reviews of book contents. However, my take away was different than that of prior reviewers. The book provided less than I expected. I had hoped for an attempt to relate the various crises in a holistic manner by considering interplay between banking, currency, internal and external political pressures including war, markets and flaws and excesses therein, debt, inflation, greed of the ruling class, competition between societal classes, etc. I expected to receive the benefit of the authors' experience, wisdom and insight. I imagine such an effort would have required focus on one or perhaps a few comparators for the present situation. That was not the purpose. Instead the book is a vehicle for showcasing an extensive new economic data set developed by the authors of 800 years of economic crises. One receives a birds-eye statistical analysis of that data.

That is not to say that the work was poorly written or uninformative. A number of insights were provided and supported through cogent argument and readable graphics. The text was quite readable though redundant in places. Good effort was made to provide two reading tracks - one for those who wanted to know details behind the analysis and one for those focused on findings and conclusions. Important, recurring themes were demonstrable through the data, and considerable useful and interesting information was certainly provided.

Nevertheless, only a few general and cursory allusions were provided to the "why and wherefore" factors noted above; i.e., context was studiously avoided. Absent consideration of the larger picture including motivations of significant players, the authors' concluding recommendations for avoiding future crises were produced with blinders and appear real-world unrealistic at best.

This is a readable economics text which provides historical economic data that are likely to be relevant to the course of the present crisis. Its weakness is that beyond statistical delineation of selected historical economic markers of risk (which were mostly intuitive in any case) it does not provide insight into the nature of past, present or future difficulty. Perhaps my expectations were misguided but I was not prepared for the measured, academic tone of the book with steadfast refusal to venture beyond the central data set. As such I was disappointed and found the effort sterile and overly long.

An Academic Abstract, December 9, 2009
When I purchased this book I was expecting to learn about the various financial crisis through out history and the psycholgy that lead up to the crisis. Instead I read a book that was mostly data. Half of the book consists of tables and graphs, another 25 percent explains how the data was collected, and the last 25 percent explains what the data means. The main points I took away from the book are the following:

1. Devaluing a currency is a form of default.
2. Countries in their initial and middle stages of development frequently default on their debt, while advance countries rarely, if ever default on debt, but if they do default they will devalue their currency, which will cause inflation.
3. Banking crisis are usually cased by large drops in home values.
4. It takes years for a country's economy to recover from a banking crisis.
5. During a banking crisis government debt will usually grow on average by 86 percent.

If you are an economics professor who loves to look at data you may enjoy this book, but the average reader will not.

an important and timely book held back by terrible, terrible graphics, December 30, 2009
Don't be fooled by the (suberb) Mad Men-style cover art -- this is essentially an academic text, descriptions of Reinhart and Rogoff's compilation of data on domestic and external debt defaults for dozens of countries over hundreds of years. The papers they have circulated and/or published based on this data have received extensive attention in the last year, and this book contains little that will be new to those who have read them. I think that Reinhart and Rogoff were, originally at least, most impressed with the data on domestic defaults but in the aftermath of the 2008/2009 "great contraction," the work on banking crises will probably be of interest to many readers as well.

The book is repetitive, which reflects its origin as a series of independent papers, but which can be viewed as an advantage in that it makes it easier to read (or assign to students) a single chapter, without reading all that has preceded it in the book. The book's great weakness is the terrible design of its numerous time series graphs. Many of these show multiple data series on a single set of axes, with no clear indication of which line represents which data series. I suspect that in whatever software Reinhart and Rogoff used in their original analysis, these lines had different colors, or perhaps one was dashed, but in the rush to publish these details were lost. They can be decoded through a close reading of the accompanying text but, if you can understand a graph only through a close reading of the text describing it, why have a graph at all? Perhaps this will be addressed in later editions.

The book is copiously footnoted, as you would expect for a work of this sort. It's not fun reading but it is authoritative and important. If you're not sure whether or not it will be of interest, google for a copy of one of Reinhart and Rogoff's recent papers on the same topic; several are available freely online. If the paper is interesting to you, the book probably will be too.

A must read, October 11, 2009
As Martin Wolf from Financial Times has written... "A MASTERPIECE"

One of the most interesting things about this books is that it combines a very rigorous research on the topic while keeping it accessible to a large audience. The book is self-contained, with definitions provided along the way, which makes it easy for people with no previous knowledge in economics to enjoy and understand it.

The authors also put together a database without precedents in the area which not only makes their statements much stronger, but also makes a great contribution to the field.

The empirical counter part to Kindleberger's Manias,Panics,and Crashes:A History of Financial Crises, October 4, 2009
The authors do a good job in demonstrating the highly repetitive,ergodic nature of financial crises over the last 800 hundred years.This book can be regarded as providing additional amounts of empirical support for the conclusions originally arrived at by Adam Smith in 1776 in his The Wealth of Nations (1776,pp.260-340 of the Modern Library (Cannan) edition with the foreward by Max Lerner) , by J M Keynes in 1936 in chapters 12,17,and 22 of his General Theory and by Kindleberger in his original 1978 book,titled Manias,Panics,and Crashes.Smith, Keynes and Kindleberger all concluded that private banker or financier financed/backed speculation was the major culprit in producing the standard process of a bubble,inflated bubble,mania,panic,crash,and then a recession,depression,or economic downturn.
The authors do acknowledge the role of speculation.However,they appear to be trying to downplay this cause while emphasizing the role of government, as far as apportioning blame for the great economic damages that result from allowing the speculative process to proceed unhindered.This makes sense only if it is first recognized that private interests often take control of the government regulatory apparatus.Rogoff is a past supporter of the efficient market hypothesis(EMH).The EMH,now completely rejected ,except by economists who have built their academic careers promoting this Ptolomaic type,artificially created,model , essentially concludes that bubbles are not possible.The EMH directly contradicts not only just the historical record of the last 800 hundred years,but of the last 3,500 years where the main source of speculation was in land and precious metals.

A reader,who has read any of the authors mentioned above, will not learn anything new.However, the additional technical analysis performed by the authors does allow one to conclude that the EMH is simply false,although this conclusion appears self evident from the historical record provided in past works other than this one.Only economists ,concentrated mainly in the economics and business departments at the University of Chicago,were able to delude themselves into believing that bubbles were impossible.The authors should have recognized the vast empirical work of Benoit Mandelbrot who had proven the EMH false back in the late 1950's-early 1960's.

One criticism of the book is that ,while Kindleberger is covered,neither Keynes,Smith ,or Mandelbrot is adequately acknowledged.Another is that the current ,severe theoretical shortcomings in financial economics should have been at least mentioned in the introduction,footnotes,or conclusion of the book.

A very timely reminder that no country is "too big to fail", October 29, 2009
When one reads the book, the first impression is the incredible amount of work the authors put into collecting the most comprehensive, as of today, dataset on financial crises and key economic variables for not only developed but also developing countries. This dataset will most definitely be at the heart of future empirical work on financial crises.

It will discipline economists to strive to build more realistic models that are able to reproduce the systematic trends and fluctuations of economic variables around the period of financial crises. As the authors admit to be surprised themselves, not only such systematic relationships abound across time but also across developed and developing countries.

The book is an important reminder that it is easy to live under the illusion that "this time is different" and that developed countries have outgrown severe financial crises. However, as the current financial crisis reminded us the more we lie to ourselves, the less vigilant we are as to potential worst case scenarios.

Finally, speaking of vigilance, the book is not only a thorough description of the past but also hints at a very serious problem many countries including the US would most likely face in the future; namely, the issuance of unsustainable levels of government debt which could have tremendous negative medium and long run effects at a global level.

Analyzing the Commonalities in Causes and Consequences of Centuries of Financial Crises., June 18, 2010
"This Time Is Different" presents a quantitative history of financial crises -debt crises, bank crises, currency crises, inflation crises- with an eye to commonalities in the run-ups and aftermaths of these crises. Of course the authors' point is the reverse of the book's title: this time is never different. Economists Carmen M. Reinhart and Kenneth B. Rogoff demonstrate that financial crises have a lot in common, regardless of when and where they take place, by showing us the data. The obvious conclusion would be that financial crises are predictable. Although they state that "it is beyond the scope of this book to engage in a full-fledged analysis of early warning systems," the authors present much of the information that would be required to develop a predictive model.

Whether it's predictive value is fool-proof or not, I was fascinated by the data and analyses. The authors have pulled together an unprecedented amount of data for various types of financial crises over a period of centuries. They found it particularly difficult to find reliable data on domestic debt, which they call "an exercise in archeology", but managed to uncover enough to claim that domestic debt is the vital piece of missing information in understanding debt intolerance. Reinhart and Rogoff use data on 66 countries that account for 90% of world GDP over nearly 8 centuries, with an emphasis on the past 2 centuries, for which they have the most data (and which had the most crises).

"This Time Is Different" has 6 parts but it effectively has 3 topics: sovereign and domestic debt and default, banking crises with some forays into inflation and currency crises, and the current global financial crisis, otherwise known as the Second Great Contraction. Looking at the charts, it's clear that serial default is historically the norm. And, though advanced economies may outgrow patterns of default, they never outgrow banking crises, which are surprisingly similar in their causes and duration in advanced and emerging market economies. Up to this point, the authors generally use data from the past 2 centuries. It is only in the chapter on default through debasement that they include the past 8 centuries.

The chapters dedicated to the US subprime crisis and Second Great Contraction draw on data since 1900 only. The authors attempt to develop benchmarks for gauging the severity and duration of a crisis based on data from past crises. This is the most opinionated section of the book, even though the authors' views are empirical. They present both sides of the argument for and against the housing boom and large US account deficits, but Reinhart and Rogoff conclude that rising asset prices, slowing productivity, large current account deficits, and sustained public and private debt build-ups create, if not a looming crisis, an accident waiting to happen. They admit, however, that it would have been difficult for policy makers to act in time even if they had seen it the current crisis coming.

"This Time Is Different" seems to have been written both for economists and interested laypeople. It's packed with data, easy to understand, but sometimes repetitive or more verbose than necessary. It looks like each part was intended to be relatively self-contained so that readers may study them separately, but this makes for repetition. I found this mildly annoying. Then again, the repetition may be helpful when I use the book as a reference later. The style is a quibble, but the information within is engrossing. I was not even tempted to give any of the graphs a quick glance. I was interested in every one. ... Read more

Editorial Review

The intimate, fly-on-the wall tale of the decline and fall of an America icon
 
With one notable exception, the firms that make up what we know as Wall Street have always been part of an inbred, insular culture that most people only vaguely understand. The exception was Merrill Lynch, a firm that revolutionized the stock market by bringing Wall Street to Main Street, setting up offices in far-flung cities and towns long ignored by the giants of finance. With its “thundering herd” of financial advisers, perhaps no other business, whether in financial services or elsewhere, so epitomized the American spirit. Merrill Lynch was not only “bullish on America,” it was a big reason why so many average Americans were able to grow wealthy by investing in the stock market. 

Merrill Lynch was an icon. Its sudden decline, collapse, and sale to Bank of America was a shock. How did it happen? Why did it happen? And what does this story of greed, hubris, and incompetence tell us about the culture of Wall Street that continues to this day even though it came close to destroying the American economy? A culture in which the CEO of a firm losing $28 billion pushes hard to be paid a $25 million bonus. A culture in which two Merrill Lynch executives are guaranteed bonuses of $30 million and $40 million for four months’ work, even while the firm is struggling to reduce its losses by firing thousands of employees.

Based on unparalleled sources at both Merrill Lynch and Bank of America, Greg Farrell’s Crash of the Titans is a Shakespearean saga of three flawed masters of the universe. E. Stanley O’Neal, whose inspiring rise from the segregated South to the corner office of Merrill Lynch—where he engineered a successful turnaround—was undone by his belief that a smooth-talking salesman could handle one of the most difficult jobs on Wall Street. Because he enjoyed O’Neal’s support, this executive was allowed to build up an astonishing $30 billion position in CDOs on the firm’s balance sheet, at a time when all other Wall Street firms were desperately trying to exit the business. After O’Neal comes John Thain, the cerebral, MIT-educated technocrat whose rescue of the New York Stock Exchange earned him the nickname “Super Thain.” He was hired to save Merrill Lynch in late 2007, but his belief that the markets would rebound led him to underestimate the depth of Merrill’s problems. Finally, we meet Bank of America CEO Ken Lewis, a street fighter raised barely above the poverty line in rural Georgia, whose “my way or the highway” management style suffers fools more easily than potential rivals, and who made a $50 billion commitment over a September weekend to buy a business he really didn’t understand, thus jeopardizing his own institution. 

The merger itself turns out to be a bizarre combination of cultures that blend like oil and water, where slick Wall Street bankers suddenly find themselves reporting to a cast of characters straight out of the Beverly Hillbillies. BofA’s inbred culture, which perceived New York banks its enemies, was based on loyalty and a good-ol’-boy network in which competence played second fiddle to blind obedience.

Crash of the Titans is a financial thriller that puts you in the theater as the historic events of the financial crisis unfold and people responsible for billion of dollars of other people’s money gamble recklessly to enhance their power and their paychecks or to save their own skins. Its wealth of never-before-revealed information and focus on two icons of corporate America make it the book that puts together all the pieces of the Wall Street disaster. ... Read more

Reviews

INCOMPETENCE RICHLY REWARDED, November 8, 2010

Until the many recent revelations on the causes of our financial institutions almost total capitulation when faced with difficult trading conditions, many, including myself, held those running these businesses in great respect bordering on awe, believing them to be superior to most other mortals. This conviction was reinforced by the fact that they were paid large basic salaries, were given huge annual bonuses almost as a matter of course, had pension funds of unimaginative magnitude, and were beneficiaries of a multitude of perks from chauffeured limousines, almost limitless expenses through to personal use of corporate aircraft. If these people were not outstanding business leaders surely the supposedly 'wise' members of the Remuneration Committees of these companies would not be irresponsible enough to rewards them so extravagantly?

Wrong. It is quite evident from this outstanding book on the last desperate efforts of Merrill Lynch to avoid the ignominy of 'going down the tube' and the ill-conceived and clumsy efforts of The Bank of America when buying what was considered to be a 'trophy purchase' without exercising much care and due diligence, at a price that was at a considerable premium over its real value, that the senior executives of both companies were 'thrashing' around in the dark, displaying all the signs of 'lemming' management and not living up to the level of expertise that they were being paid for.

Greg Farrell's account of these manic times is excellent. Although fairly long in terms of pages, it holds ones interest throughout and gives both the uninitiated and more financially experienced reader, a 'fly-on-the-wall' perspective into the dire repercussions of banks operating 'casino' type operations on their own accounts, and throwing the dice on the 'Credit Derivatives' Table especially as it transpires they had little or no appreciation of the downsides.

A really good book which I believe is Mr Farrell's first and it is hoped not his last.

Good Insight into the Merrill Meltdown & the BOA Merger, November 18, 2010
This book doesn't try to explain the definition of a CDO or how the housing bubble built, popped, etc like every other book on the crisis does

This book assumes you have read a few other books on the crisis & have the basic knowledge of the housing market Boom & Bust and how it happened and what caused it... so if you are looking for an Introductory Book on the 2007 crisis there are lots of others that would be much better

However, if you want to know what went into some of the behind the scenes decisions that brought Merrill Lynch to the brink on non-existence and the factors that lead Bank of America to pay such a huge price for a company that was imploding... this book is great. Goes into the background and personalities of Stan O'Neal, Ken Lewis, John Thain and the other major players and gives a good picture of what each person did to result in the 2008 Merger

Plenty of books have been written on the crisis, What caused it, who is to blame etc. But all of those Books focus on Bear Stearns or Lehman Brothers or Goldman Sachs... and the Merrill/BAC merger is only mentioned in passing. This is the first book I have read that focused on the crisis from Merrill's perspective

An Absolutely Magnificent Story, December 12, 2010
An absolutely magnificent story.

It's a tough position for another book on the U.S. financial crisis to be released on November 2, 2010 (Crown Business NY, NY) --- if you have read as many great books about the crisis this year as I have.

Don't be fooled. Don't let the 454 pages of this volume dissuade you from considering this magnificent story from Greg Farrell (correspondent for the Financial Times - BA Harvard and MBA from Columbia).

What Crash of the Titans is, in my opinion, is evidence of simply phenomenal storytelling, supported by a depth and breadth of investigative journalism that is both unique and unparalleled. Farrell is a pro - truly a master story teller. The 454 pages flew by based upon the prowess of Farrell's ability to keep the reader engaged on a page-turning journey. His character development is amazing. The tension, innuendo and intrigue are simply fantastic and lend to the credibility of this work as a truly unique, non-fiction financial thriller for 2010.

In the spirit of full disclosure, I worked at both NationsBank and BofA during my career as a regional manager of a commercial lending group (during the years when BofA was acquired by NB and adopted the Bank of America brand). I was with NB at the time of the acquisition and stayed on for several years thereafter with the BofA logo on my business card. Farrell's ability to capture the "culture clash" that occurred during this merger was uncanny - spot on target.

This book is, in my opinion, an eminently fair characterization of the story and the people. Frankly, John Thain did his best - and his performance could not likely be outperformed by comparably capable Wall Street executives who may have been thrust into the situation Mr. Thain was.

Greg Fleming - wherever you are - you are my hero! I'll work for your team any day. I'm waiting for your call Mr. Fleming.

From the sheer excellence of the story telling, supported by the research and investigative journalism...I rate this work as FIVE STARS.

Buy it. You'll truly enjoy it. This book ranks right up there with the works of Lowenstein, Michael Lewis and Scott Patterson's published in 2010.

Insider Story, November 30, 2010
This is a well written portrait of how Merrill Lynch collapse. There are many explanations but the one that stands out in reading this is how it is possible for a CEO not to know where the increased earnings are coming from. The total failure of risk management is remarkable. It shows that O'Neil was so blinded by growing Merrill and his own bonus that he did not pay attention.

Thane came in to try to save the company he seemed to lack the ability to see what was happening. It all becomes a tragic story. One wonders if there is not a need for a separate disclosure statement by the chief risk officer of a firm certifying the bonuses of all senior employees before a board approves bonuses.

I worked in a large corporation for many years and I was impressed how real the dialogue was. I could hear the players speaking in the same manner.

The last point is how poorly Bank of America was managed. I was amazed.

Count the life boats!, November 8, 2010
Crash of the Titan's takes the next step beyond books of it's genre, opening as it does after the financial ship has already hit the iceberg. Without sacrificing gory business detail, Farrell creates an extraordinary psychological study laced with the menace of a Soprano's episode. The fall of Merrill and the closing of the capital markets to the common investor, the abandonment of a vision of building value for high stakes gambling, and the willful blindness and wolfish greed of flawed personalities -- Neal, Thain, Lewis and Alphin -- are breathtaking. But what's truly chilling is that we read this disaster tale seated on the deck of the Titanic.

A Blue Chip Book - Triple A Rated!, December 14, 2010
If you have any interest in the inner workings of a major Wall Street firm, how certain people make it to the top of a cutthroat, backstabbing business, and how they manage to stay on top; then this is the book you must read. I have read several books about the 2008 financial crisis and this was the most thought provoking, thrilling and enjoyable one of them all. It is jam packed with insightful, unique details that the author has tightly woven into an exceptional page turning narrative.

I first became familiar with the author, Greg Farrell, when he wrote for USA Today covering major white collar crime stories and I was an FBI agent in New York City. I was always amazed at how he could condense a very complicated business story into a few paragraphs and still convey an accurate and comprehensive report. After reading several of his articles I always wondered what Mr. Farrell could do if he was ever given the freedom to write a detailed, lengthy story. Now I know! Mr. Farrell has knocked the cover off the ball, and also the arrogance, overconfidence and hype out of these two financial institutions.

The author often writes about "the smartest person in the room". The irony of this book is that halfway through reading this book, it occurred to me that maybe the "smartest person in the room" was the person writing the book itself. While he does have the benefit of 20/20 hindsight, the Harvard educated, Columbia MBA trained author displays a firm grasp and total understanding of the issues involved in running BoA and Merrill Lynch at a time when both firms had to keep up their earnings to match their competitors.

Mr. Farrell has written an amazing book that not only explains how these titans crashed, but reveals in accurate, factual detail why they crashed. I absolutely loved this book!

Greed is Not Good, But This Book Is, November 17, 2010
I read an excellent review in Salon a few weeks ago (link below) and picked up the book shortly after. The book lived up to its promise, and then some.

I have to say that when I was younger, I often found myself jealous of people I knew who worked on The Street. But time, perspective and now this book have pretty much wiped all that away.

[...]

Shows how Stan O'Neal killed Merrill Lynch and almost Bank of America too., November 27, 2010
An excellent study how Stan O'Neal messed up Merrill Lynch via its hitherto unknown heavy reliance on sub prime mortgages & CDOs after a distinguished career where he did just about everything else right. O'Neal had steered Merrill since the early 90's into a power house, almost challenging Goldman, only to fall into Ken Lewis' hands at Bank of America. A great addition to the books about the 2008 crisis that is well worth reading. Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America, Merrill Lynch: The Cost Could Be Fatal: My War Against Wall Street's Giant, The Tumultuous History of the Bank of America.

Librarian's review: less than average, November 5, 2010
It takes 300 pages to get to the main point: BAC paid $29 per share for ML. Along the way, you learn that Ken Lewis cheered for the Carolina Panthers during the negotiations for Merrill? Or that someone stopped at Starbucks? What was revealed here that wasn't already known?

It puts you on the subway holding yesterday's newspaper.

The narrative lacks the can't-put-it-down traction weaved by other business journalists like Roger Lowenstein (When Genius Failed), Andrew Sorkin (Too Big Too Fail) and Michael Lewis (The Big Short). In comparison, Greg Farrell falls short telling a story about how Merrill Lynch was sold to Bank of America.

Phrases are overused and repeated ad nauseam as though the author struggled to fill pages: CDO's are repeatedly referred to as "radioactive waste" and Merrill Lynch's financial advisors "the thundering herd" and Ken Lewis as "Bank of America's CEO Ken Lewis." After the first reference, you can ditch the titles, we know who he is. The weak narrative wears the reader down.

It is not a "fly-on-the-wall" account of what happened. For that, please read Sorkin's "Too Big Too Fail."

I may have added a star if the book included photos of some of the characters in the book, Thain, Fleming, Lewis, O'Neal, Paulson, etc. It should have included some key court or business documents related to the sale and photos of a meeting. The book painstakingly describes in detail the paintings of former BAC CEO's lining the wall of headquarters facing "northeast." Why no photos of these?

I also did not like the sourcing notes. For example, Farrell says he interviewed 120 people for between 250 and 300 hours. But 15 people gave him 150 hours of their time. Question: How did he interview the balance of 105 people in the remaining 100 or so hours? I don't classify this as in-depth reporting. Do you?

Most of the books I read end up highlighted, taped and book marked to sections I might want to refer to again later. Not this one.

Theo Karantsalis, librarian ... Read more

Editorial Review

Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Reads like a detective story — which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island will change the way you view the world, politics, and money. Your world view will definitely change. You'll never trust a politician again — or a banker. ... Read more

Reviews

Must, MUST read.
Think you know anything about the dollar bills in your wallet?
Think you know who runs this country?
Think that we live in a "free market" economy?

Think again.

Griffin piles up facts and analyzes them with relentless, cold logic. The picture he paints isn't pretty. The Federal Reserve System is a legal cartel expressly designed to create riskless profits for member banks, while simultaneously turning our entire financial system into the legal and moral equivalent of a Las Vegas casino. Yeah, you might get lucky for a while, but the house will always win. Our monetary system is a pyramid scheme that only functions as long as debt is being created at an accelerating rate.

This all sounds crazy, but Griffin has the facts to back it up. The challenging part about Griffin's arguments is that he explicitly states that the foundation and perpetuation of the Federal Reserve System was a conspiracy. Whenever the "C"-word is mentioned, it is an unfortunate truth that many people get turned off. But as Griffith himself says, if a group of people, operating in secret, create a system that explicitly benefits themselves at the expense of others, what else can you call it but conspiracy? Heck, I guess you could call it a "peanut" or a "canteloupe" but it would still add up to the same thing--a system expressly designed to reward failure and punish diligence and honesty. Kinda explains all the crookedness and incompetence behind all the wall street and corporate shenanigans of the last decade, doesn't it?

And if you keep an open mind and pay close attention to his arguments, you'll see that the best place to hide a conspiracy is in plain sight.

If you care about free markets, and your constitutional rights, you will read this book today.

An Evil Of MONSTROUS Proportions!

What is The Creature From Jekyll Island? Well, first of all, it's uglier than The Creature from the Black Lagoon; it's more densely wrapped in deception than the Mummy is in cloth; it sucks the lifeblood of America more ravenously than Dracula does his victims; it reeks worse than the Werewolf; and it's stronger and more dangerous than Doctor Frankenstein's miscreation!

The Creature from Jekyll Island is the PRIVATE Federal Reserve that holds America and Her People hostage with an astoundingly perverse and "criminal" economic system that is an evil beyond your worst monster-infested nightmare. But the Creature comes in a guise to mislead the people, like a Wolfman in sheep's clothing.

Why is the system "criminal"? Because the U.S. Constitution proclaims itself to be the "supreme Law of the Land" (see Article VI), and Article I, Section VIII of the Constitution states that "The Congress shall (Constitutionally speaking, "shall" has been legally defined as "must")...coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Why Congress? Because it is answerable to the People it represents! Remember, our Constitutional Republic was meant to be representational government! We're a long way from that now! The Federal Reserve is NOT Congress; it is unelected, meaning nonrepresentational, and being therefore unconstitutional, it is illegal, hence "criminal."

I first read G. Edwrd Griffin's magnificent study, 'The Creature From Jekyll Island' eight years ago. I had read plenty of political books prior to this one, and countless since, but Mr. Griffin's tour de force has yet to be equaled when it comes to educating the reader in wide-ranging topics that coalesce most of the geopolitical mysteries of our time into the diabolical scheme known as the Federal Reserve System.

Don't make the mistake of letting the sophisticated subject matter drive you away as forcefully as the intriguing title beckons you. Despite the complexity of the topic, G. Edward Griffin masterfully organizes the material and lays it out, not only in a very readable manner, but he actually fashions a carefully researched, extensively footnoted nonfiction tome into a spellbinding journey that reads nearly like a page-turning mystery novel.

In the process of explaining and demystifying the history, the stated goals of the Federal Reserve, and the real agenda behind it, Mr. Griffin necessarily enlightens the reader about myriad conspirators who occupy positions in a variety of social engineering organizations. Without this understanding, one could not possibly grasp the full scope of the problem, nor fathom how such a demonstrably evil entity could have remained cloaked and in power since 1913. (Indeed the thirteenth year of the Twentieth Century represented an unlucky number for America and eventually the world.)

You will find some reviewers here complaining that Mr. Griffin has unfortunately polluted his 600+ page study with John Birch Society style conspiracy theories. What you WON'T find is where any of those same reviewers have proven any errors in fact committed by Mr. Griffin. They challenge the idea of a conspiracy, but not any of the abundant and overt evidence that clearly points to it. I myself don't like little yapping dogs, but I'm not prepared to say that they don't exist simply because I'd prefer not to even think about them. And I can hear those yapping quadrupeds as clearly as I can see the indisputable evidence of underhanded collusion in high and influential places when it comes to this country's monetary system.

"You are a den of vipers!" President Andrew Jackson thundered at a delegation of supporters of the central Bank of the United States in 1834. "I intend to rout you out, and by the Eternal God I will rout you out!" Jackson succeeded in ridding this country of the inherent perniciousness that a central bank levels on a nation. But President Jackson's hard-earned victory for his countrymen was sadly overturned in 1913, when a corrupt privately owned central bank was again foisted on the sleeping people of this once free nation in the form of The Federal Reserve cartel. As Griffin states on page 573, "The Federal Reserve is the world's largest and most successful scam."

I will tell you plainly that regardless of what you think you know about the political spectrum, Democrats and Republicans, liberals and conservatives, civil rights and corporate greed, socialism and capitalism -- regardless of how well informed you may think you are by reading mainstream news magazines and newspapers, listening to NPR and talk radio programs and watching political debates on nightly news TV shows -- until you have read and digested G. Edward Griffin's, 'THE CREATURE FROM JEKYLL ISLAND', you will never really understand contemporary American and global politics. But afterwards, the political puzzle will come together before your eyes, and never again will you follow the red herring into the brainwashing house of mirrors which is our current political milieu.

If you're inclined to read only one political book, be sure it's this one, as it will make sense of your world like nothing else. 'THE CREATURE FROM JEKYLL ISLAND' belongs in the personal library of every American who truly cares about his or her country (regardless of political party affiliation); by rousing the people of this nation from the ignorance of deep sleep, it has the potential to be the silver bullet or the stake through the heart of America's worst monster! Read it now or the Wolfman's gonna getcha!

A Bechmark In The Realm Of Civic Knowledge!
Author G. Edward Griffin's book "The Creature From Jekyll Island: A Second Look At The Federal Reserve" is a most well researched and written historical text. Griffin presents the background with almost an air of mystery that the reader must peel away, like layers of an onion, to reveal the truth.

The book provides, in great detail, the time, place, and manner in which the groundwork for the Federal Reserve was laid, and more importantly, the reasons why. Griffin explains why even the name is misleading. The Federal Reserve is not a federal or governmental administration, and it is not a reserve, such as a bank.

Also provided is great historical detail about the commerce and industry in our nation during the Nineteenth and early Twentieth Centuries. This book will not disappoint the reader looking to expand his or her knowledge of how the collective financial machinations of our country are run.

I read this book during my undergraduate years and once presented the book in defense of a historical argument I had with one of my history professors. Needless to say the professor looked at my reference (the book is so well researched), acceded to my contention, borrowed the book "for his own enrichment" and never gave it back! I gratefully let him keep it so maybe he would soften his ascribed "socialist democrat" leanings. Unfortunately I am sans the book this day. Oh well, we march on.

As the topic of Civics is not really taught in public schools, or even required in undergraduate studies anymore, this book will serve to "illuminate" the reader into the background of how private finances and politics are inseparable. My only criticism of this text is the highlighted aspect of a government conspiracy at work. Not that Griffin's arguments have no merit, they certainly do, as Lord Acton so aptly is quoted "Power corrupts and absolute power corrupts absolutely!" However, the mere aspect of "a conspiracy notion" is all the extremists on all sides need to "debunk" a truly great piece of historical research and writing.

I rate this wonderful book five stars. It is well worth the money and deserves a place on the library shelf of every institution and the home of every student of history.

An Evil Of MONSTROUS Proportions!

What is The Creature From Jekyll Island? Well, first of all, it's uglier than The Creature from the Black Lagoon; it's more densely wrapped in deception than the Mummy is in cloth; it sucks the lifeblood of America more ravenously than Dracula does his victims; it reeks worse than the Werewolf; and it's stronger and more dangerous than Doctor Frankenstein's miscreation!

The Creature from Jekyll Island is the PRIVATE Federal Reserve that holds America and Her People hostage with an astoundingly perverse and "criminal" economic system that is an evil beyond your worst monster-infested nightmare. But the Creature comes in a guise to mislead the people, like a Wolfman in sheep's clothing.

Why is the system "criminal"? Because the U.S. Constitution proclaims itself to be the "supreme Law of the Land" (see Article VI), and Article I, Section VIII of the Constitution states that "The Congress shall (Constitutionally speaking, "shall" has been legally defined as "must")...coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Why Congress? Because it is answerable to the People it represents! Remember, our Constitutional Republic was meant to be representational government! We're a long way from that now! The Federal Reserve is NOT Congress; it is unelected, meaning nonrepresentational, and being therefore unconstitutional, it is illegal, hence "criminal."

I first read G. Edwrd Griffin's magnificent study, 'The Creature From Jekyll Island' eight years ago. I had read plenty of political books prior to this one, and countless since, but Mr. Griffin's tour de force has yet to be equaled when it comes to educating the reader in wide-ranging topics that coalesce most of the geopolitical mysteries of our time into the diabolical scheme known as the Federal Reserve System.

Don't make the mistake of letting the sophisticated subject matter drive you away as forcefully as the intriguing title beckons you. Despite the complexity of the topic, G. Edward Griffin masterfully organizes the material and lays it out, not only in a very readable manner, but he actually fashions a carefully researched, extensively footnoted nonfiction tome into a spellbinding journey that reads nearly like a page-turning mystery novel.

In the process of explaining and demystifying the history, the stated goals of the Federal Reserve, and the real agenda behind it, Mr. Griffin necessarily enlightens the reader about myriad conspirators who occupy positions in a variety of social engineering organizations. Without this understanding, one could not possibly grasp the full scope of the problem, nor fathom how such a demonstrably evil entity could have remained cloaked and in power since 1913. (Indeed the thirteenth year of the Twentieth Century represented an unlucky number for America and eventually the world.)

You will find some reviewers here complaining that Mr. Griffin has unfortunately polluted his 600+ page study with John Birch Society style conspiracy theories. What you WON'T find is where any of those same reviewers have proven any errors in fact committed by Mr. Griffin. They challenge the idea of a conspiracy, but not any of the abundant and overt evidence that clearly points to it. I myself don't like little yapping dogs, but I'm not prepared to say that they don't exist simply because I'd prefer not to even think about them. And I can hear those yapping quadrupeds as clearly as I can see the indisputable evidence of underhanded collusion in high and influential places when it comes to this country's monetary system.

"You are a den of vipers!" President Andrew Jackson thundered at a delegation of supporters of the central Bank of the United States in 1834. "I intend to rout you out, and by the Eternal God I will rout you out!" Jackson succeeded in ridding this country of the inherent perniciousness that a central bank levels on a nation. But President Jackson's hard-earned victory for his countrymen was sadly overturned in 1913, when a corrupt privately owned central bank was again foisted on the sleeping people of this once free nation in the form of The Federal Reserve cartel. As Griffin states on page 573, "The Federal Reserve is the world's largest and most successful scam."

I will tell you plainly that regardless of what you think you know about the political spectrum, Democrats and Republicans, liberals and conservatives, civil rights and corporate greed, socialism and capitalism -- regardless of how well informed you may think you are by reading mainstream news magazines and newspapers, listening to NPR and talk radio programs and watching political debates on nightly news TV shows -- until you have read and digested G. Edward Griffin's, 'THE CREATURE FROM JEKYLL ISLAND', you will never really understand contemporary American and global politics. But afterwards, the political puzzle will come together before your eyes, and never again will you follow the red herring into the brainwashing house of mirrors which is our current political milieu.

If you're inclined to read only one political book, be sure it's this one, as it will make sense of your world like nothing else. 'THE CREATURE FROM JEKYLL ISLAND' belongs in the personal library of every American who truly cares about his or her country (regardless of political party affiliation); by rousing the people of this nation from the ignorance of deep sleep, it has the potential to be the silver bullet or the stake through the heart of America's worst monster! Read it now or the Wolfman's gonna getcha!

Warning: This book will change your life
Here is a quick overview of how I figured out the monetary system to the point of being confident that my understanding is reasonably correct and being able to explain the basic scam in about 45 minutes.

First I became convinced that if I am ever going to understand how the world works I should probably figure out an answer to the question "what is money?" Surprisingly, a search on Amazon.com did not return very many books on the topic. Like any good college educated liberal I chose the one book which garnered praise from all my favorite trusted sources such as the New York Times and the Washington Post. I didn't see how I could possibly go wrong spending $12.92 for the 800 page book "Secrets from the Temple: How the Federal Reserve Runs the Country", which The Nation said, "May be the most important political book of the decade."

Unfortunately, after reading William Greider's 10 year, day by day account of Federal Reserve Chairman Paul Volker's back and forth decisions on raising and lowering interest rates, I still did not have the foggiest clue as to what money is or how it is created. I'm sure most people would have given up at this point but I was not ready to throw in the towel. For some reason I was not convinced by the book's conclusion that it was critically important to maintain the money mystery because "Taboos uncoded lost their power to persuade...The mystery was necessary, therefore, to sustain social faith. Knowledge was disturbing. Not knowing the secrets was reassuring."

I needed another book, however the only ones that the New York Times seemed to recommend were all described as condensed versions of "Secrets of the Temple." I had no choice but to bite the bullet and for the first time in my life order a book which was not recommended by the New York Times. I ordered "The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin. At least Willie Nelson seemed to like it. Actually, I wasn't quite sure if Willie Nelson was wholeheartedly endorsing the book in his review which simply read, "Scary. It's the story of the world banking system. Enough said."

I was quite pleased that Jekyll Island contained a pretty good description of the money creation process. However, the book contained a lot more than that. All I can say is that I often see my life as divided into two main periods; before reading Jekyll Island and after reading Jekyll Island. I finally knew what Willie Nelson meant by "scary."

Now that I was starting to really get somewhere in figuring out how money is created, I needed to find more information to clear up some of the details. My wife even got involved in the search for truly academic and scholarly information. I will be forever indebted to her for discovering a free downloadable copy of a book entitled "The Mystery of Banking" by Murray Rothbard. This was exactly what I had always been looking for. It clearly explained the process without dumbing it down in any way or obfuscating the details in order to "sustain social faith."

That is essentially how I got started in learning about money. I have found this to be the most fascinating field I have ever encountered and I am very glad that I didn't take William Grieder's advise to remain blissfully ignorant.

Beware! This book is an expose on truth in lending.
This book will make your hair grisle up on the nape of your neck when you read it. This is a non fiction horror story of how the federal reserve came to be the controlling factor in our everyday lives. It chronicles history in such a fantastic way that when you research it and find it TRUE, it makes your guts wrench in utter dispair at the situation we have gotten into by entrusting financiers to our monetary system. If you want to know ANYTHING about the economy, this is the book to read. Though I must say that it is not for the faint of heart in the predictions it makes.

Given enough readers, this book could save the country.
"The Creature from Jekyll Island" shows you the greatest fraud in history: the Federal Reserve System. You will read what it has let its creators do to our country. And you will learn how we, the people, can get rid of it.

"Creature" says what many Washington and Wall Street insiders know, but would never say: that through the Federal Reserve System, powerful men use inflation to rob us blind.

G. Edward Griffin does not stop there. He visits remote continents and distant times to show how rulers have used their control of money to control their peoples. And, he relates how, at considerable risk and cost, Andrew Jackson returned to our people a great deal of economic freedom by refusing to renew the charter of the Second Bank of the United States.

This book's information shines a light on current events that is stark, strong, and new. It will affect not merely how you see financial or business news, but all sorts of news relating to domestic and foreign developments. You will understand much more about the "New World Order," the Kyoto "Global Warming" treaty, the latest adjustment of Federal Reserve interest rates, and why your children's history textbooks leave out so much.

You may find yourself discussing this book with your friends and neighbors. You may change your political registration. You may even try to elect candidates whose ideas reflect knowledge of the history Mr. Griffin describes.

Do yourself a favor: please read this book.

The Most Comprehensive Book Written on the Federal Reserve
This book is without a doubt the best book written on the "Federal" Reserve (which is about as "federal" as Federal Express). The book's four chapters explaining what money is (and isn't!) are the best I have ever read (and that includes the late, great economist Murray Rothbard's "What Has Government Done to Our Money"). My only qualm with this book is that Mr. Griffin should have left out the "C" word (i.e., conspiracy) from the text. He should just tell the history of the "Fed" along with his excellent economic analysis and let the reader figure out for him or herself what is going on. It becomes difficult to recommend this book to anybody outside of the John Birch Society (for which Mr. Griffin is a writer). But all in all, Mr. Griffin has done an admirable job. This is the true story of the monstrosity we affectionately call "The Fed" -- not like that Establishment whitewash on the "The Fed" by Rolling Stone writer William Greider called "Secrets of the Temple." For those of you who are skeptical about reading Mr. Griffin's long tome, you might want to start with Murray Rothbard's much shorter "The Case Against the Fed," before moving on to the Griffin work. ... Read more