Nonfiction Boot Camp discussion

Feel free to weigh in, even if you haven't had a chance to read. There's a lot going on, and it doesn't seem to be getting better any time soon.

I'm reading "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism" (Kevin Phillips). More this weekend...

First of all, since I'm an economic lightweight, I have to say "Bad Money" was one of those books where I had to read many paragraphs twice. Of course I've been helped by everything I've read and heard in the past year--before then, I would sit out any discussion that included words like credit derivatives or debt monetization. But pretending that it's too hard doesn't seem like a smart move anymore, and I think this book gives a good overview of the genesis of recent events. On the down side, it was published in April 2008, so it's already dated and doesn't take into account the disastrous past year, or the policies introduced by the new administration. However, the basic critique of the structure of the American economy still holds.

In a relatively short 340 pages, Phillips describes the consequences of the U.S.'s misguided economic policies, mounting debt, failing housing market, and dependence on oil, and the end of American domination of world markets. He begins with a very brief discussion of the decline of previous leading world economic powers—especially the Dutch and British--saying that the U.S. has the same hallmark of the end of those empires: an economy completely dominated by the financial sector (which he describes as "hubris driven") and the miscalculations and abuse that dominates this sector. (In the last 30 years financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%). He also discusses the role of individual debt in the current crisis, and in some really chilling passages describes how critical it is to the financial sector that individuals are ensnared in easy credit and debt.

Apparently, Kevin Phillips began his career as a Republican strategist, but he seems to have left that set of beliefs far behind. However, he skewers Bill Clinton as well as recent R presidents and policies, esp the law passed in 1999 which opened up competition among banks, securities companies and insurance companies (the Gramm-Leach-Bliley Act.) He also believes that all of the candidates in last year's presidential race--indeed, almost everyone in Washington--is so beholden to investment bankers and hedge fund managers that any effecting reform is unlikely.

There also is a good discussion of the collapse of the banking system (for non-economists!) on This American Life this week:

http://www.thisamericanlife.org/Radio...

Wow, Laurie, you're much more disciplined than I! I never finished my intended book "Devil Take the Hindmost" past the first few chapters. I got up to the South Seas Bubble of 18th century England and stopped becasue it was just tough to understand. Interesting to see concoction of financial instruments and human behavior has not changed in centuries.

I think I was the wrong audience - probably intended for people with some business background already. On the other hand, there are authors who are expert in their field but can't write well for a general audience.

The "Ascent of Money" is still checked out but it will get to me eventually. I guess I'll get another try later this year when we try basic economics.

If it's the same one, TAL's explanation of credit default swaps is excellent.