Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
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Book Summary Information
Author: Kevin PhillipsEdition: Hardcover
Published: 2008-04-15
ISBN: 0670019070
Number of pages: 256
Publisher: Viking Adult
Book Reviews of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
Book Review: A tough read but a timely and truly urgent one
Summary: 4 Stars
Kevin Phillips' latest book - Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism - is not an easy read and not an easy book to review. To properly review it would take more space than is practical in this format. What I truly want to do with this review, then, is to convince people how very important this book is and, as other reviewers have noted, how important it is for anyone willing to tackle its complex subject matter to read it _now_. It will truly change your perception of what is happening in the US economy and in the US political scene. And, also as other reviewers have noted, it is in the end quite depressing as to how bad our current situation and how bad our prospects for the immediate future are.
Reading Phillips' books, I often get the feeling that I have walked
into a classroom where the professor is delivering his third lecture on
the subject and I must scramble to follow what he is saying. Bad Money is
no exception. I wish his editor(s) had pushed him to put in a few well
laid out examples that would endable the reader to properly understand
just what a CDO or an SIV actually consist of, how they function, how
they're handled in the marketplace and so on. Again, this is not an
easy read.
That said, however, the points Phillips makes are well backed up in
economic analysis and facts, and in historical relevance, both of which
areas Phillips is intimately familiar with. He is sounding an alarm to
anyone willing to listen, and what he lays out in this book is very
disturbing to anyone who has noticed the growing chaos in our financial
markets, the rising insecurity of our economic situation, and the
seeming inability and unwillingness of our political leadership to deal
with these growing problems.
The preface, with its subtitle "The Political Economics of Deception",
starts with these paragraphs that lay out in startling clarity the
central concern of the book:
"The most worrisome thing about the vulnerability of the U.S economy
circa 2008 is the extent of official understatement and misstatement --
the preference for minimizing how many problems there are and how
interconnected they are... Whether the U.S. government and the
Republican and Democratic parties can remedy the debt and oil-related
transformations of the last two or three decades is dubious enough. Far
more worrisome is the possibility that neither Washington nor Wall
Street is willing to confront the deeper problem -- the ascendancy of
finance in national policymaking (as well as in the gross domestic
product), and the complicity of politicians who really don't want to
talk about it."
One important point Phillips makes is one people can instinctively
relate to: the debasement of government statistics. People know from
their daily lives that the economy is not good, that prices of almost
everything are on the rise, that jobs are harder to come by, and that
overall, things just aren't as good as they once were. But at the same
time, the government keeps insisting that unemployment and inflation
are low and that the economy is growing, citing figures that people
can't reconcile with what they're experiencing every day. The reason is
because the numbers have been cooked to support the government's claims
and no longer represent any meaningful measure of the things they are
supposed to relate to. And the numbers they can't cook, they suppress.
For example:
"Beginning in March 2006, the new Fed chairman, Ben Bernanke, ordered
that the government cease publishing data on changes in the broadest
measurement of the U.S. money supply, the so-called M3. It was
expanding at a 10-12 percent annual rate in 2006; outsiders calculated
that as of August 2007, that growth had accelerated to a high-powered
14 percent.... Continued publication of M3 reports would have undercut
the assertion of Bernanke... that the inflationary expectations of the
public had been safely 'anchored' at a low level by the tame core
CPI... For 2007, the U.S. M3 numbers show runaway inflation in the
annual range of 14 percent."
Another point Phillips makes in the book is that our growing financial
problems are compounded by our energy and political problems:
"the prior eminence of the United states in global petroleum matters
has left not only an outdated infrasturcture but a spectrum of
disabilities, unwarranted smugness, vested interests, and booby traps.
These range from currency vulnerabilities and lack of a serious
national energy strategy to apparent policy inertia in Washgton, where
many officeholders seem unable to understand how much has changed for
the United States over the last decade."
Other warnings include the rise of oil consumption by countries like
China and India and the extent to which oil-producing countries are
already re-directing their output towards those markets.
"In the wake of the unpopular U.S. invasion of Iraq, the Saudis showed
their displeasure... continuing to reduce oil sales to the United
States... after peaking at the equivalent of 1.7 million barrels per
day in 2002, Saudi sales to the United States fell to 1.1 million
barrels per day in May 2004... China soon jumped ahead of the United
States in oil exports from the Saudi kingdom... the demand for oil in
China alone will, before long, equal the entire production of Saudi
Arabia... China stands to be the world's largest oil market of the
2030's, possibly replacing the United States in that capacity by 2025."
Phillips also touches on why the political leadership seems both unable
and unwilling to deal with the array of problems the country is facing
and shows how this same deadly political inertia has afflicted other
great powers in history, citing examples from the Spanish, Dutch and
British economic empires that preceded our American economic empire.
The comparisons are fascinating and disturbing at the same time.
Again, in looking at what I have written, I know that I have barely
scratched the surface of all there is in this book that merits being
read. All I can do is urge anyone who wants to understand why the
economy seems to be in such bad shape, why the government figures seem
to be so contradictory with what is happening, and why our political
leaders seem neither willing nor able to deal with the problems, this
is the best book you can possibly read and the time to read it is
_now_, before the election, so you can see through the utterly
meaningless drivel that politicians are putting out instead of talking about the very real problems we're facing, about what our options - however painful - are, and about what the consequences to us as as nation are if we continue to do nothing.
Summary of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
The bestselling author reveals how the U.S. financial sector has hijacked our economy and put America?s global future at riskIn American Theocracy, Kevin Phillips warned us of the perilous interaction of debt, financial recklessness, and the increasing cost of scarce oil. The current housing and mortgage debacle is proof once more of Phillips?s prescience, and only the first harbinger of a national crisis. In Bad Money, Phillips describes the consequences of our misguided economic policies, our mounting debt, our collapsing housing market, our threatened oil, and the end of American domination of world markets. America?s current challenges (and failures) run striking parallels to the decline of previous leading world economic powers?especially the Dutch and British. Global overreach, worn-out politics, excessive debt, and exhausted energy regimes are all chilling signals that the United States is crumbling as the world superpower.
?Bad money? refers to a new phenomenon in wayward megafinance?the emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services. Also ?bad? are the risk miscalculations and strategic abuses of new multitrillion-dollar products such as asset-backed securities and the lure of buccaneering vehicles like hedge funds. Finally, the U.S. dollar has been turned into bad money as it has weakened and become vulnerable to the world?s other currencies. In all these ways, ?bad? finance has failed the American people and pointed U.S. capitalism toward a global crisis. Bad Money is the perfect follow- up to Phillips?s last book, whose dire warnings are now proving frighteningly accurate.
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