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In his acclaimed book American Theocracy, Kevin Phillips warned of the perilous interaction of debt, financial recklessness, and the spiking cost (and growing scarcity) of oil? warnings that are proving to be frighteningly accurate. Now, in his most significant and timely book yet, Phillips takes the full measure of this crisis. They are a part of what he calls ?bad money?? not just the depreciated dollar, but also the dangerous attitudes and the flawed products of wayward mega-finance. His devastating conclusion: In its hubris, the financial sector has hijacked the American economy and put our very global future at risk?and it may be too late to stop it.
- The decline of the US Empire
The author shows that the actual debt bubble can only be compared to the huge debt bubble of 1933, just before FDR devalued the US dollar with 40 %. In 1933 the total credit market debt as a share of US gross domestic product reached 287 %, whereas in 2006 this was a staggering 335 %. Just as in the `30s, the US are entering a new era of Great Depression, but this time, it is very likely it will mean the decline of the US Empire. This amazing thought is well supported with historical and current evidence by the author.
Now, it is important to understand that no "invisible hand" of the market was responsible for the debt bubble of 1933. This was actually planned and produced by the Fed. Read Griffin The Creature From Jekyll Island: A Second Look At the Federal Reserve for more details. The absurd credit market expansion that was created in the US in the last 20 years was likewise planned, by the Fed, under Greenspan's administration (1987-2006). The credit market exploded from $11 trillion (in 1987) to $44 trillion (in 2006). Greenspan didn't act on his own, of course. He is just a puppet, the visible head of a system we could call "Wall Street state capitalism". Obama, elected because he promised "change", not only supports this state policy fully, but even went so far as to actually classify 19 banks as TBTF ("to big to fail"). Citibank - Phillips calls it an "¨¹berbank" - has failed in 1982, in 1991 and in 2008. In a free market economy, they would already have disappeared 27 years ago ! In the US where free market capitalism has long ago disappeared, they will always be rescued, no matter how much they fool around and behave irresponsible.
Who do you think will pay for the 780.000 million dollars Obama miraculously produced "out of nothing" ? You will. All the taxpayers will. Everybody will, because this money expansion leads to a "hidden confiscation of wealth through inflation" (dixit Greenspan, in 1966, before he became corrupt).
In the meantime, the decline of the US has been evident when observing the "real economy". Manufacturing slipped from 25 % of GDP in 1980 to 12 % in 2005, whereas the financial sector rose from 11 % to 21 % in the same period. When the credit market imploded, this also meant that the US not only lost the biggest "export product" they still had, but it also meant that the position of the US dollar as the reserve currency of the world has severely been undermined. China decided from then on to build up their reserves in the form of gold. If you read Griffin, you will understand that this is a very wise decision.
The oil price is still expressed in dollars, but Venezuela and Iran insist to change this to the euro. This will probably become reality quite soon. Saudi Arabia was not amused by the invasion of Iraq either, and doesn't only export oil to China, but buys also weapons from them, as do a lot of oil exporting countries to China, like Iran, Oman, the United Arab Emirates, Kuwait, and Yemen.
China will definitively emerge as the next global Empire. They are exporting much less now, and are investing in infrastructure, raising the general standard of living of their own people at an amazing speed. They built 30,000 miles of expressway in the last 10 years. Compare this to the US interstate system which totals 47,000 miles. They also make the right technological choices at this moment. They will be producing the new technologies the world urgently needs : electric cars and solar panels. Compare this to the Obama policy of... not changing anything at all... He just set the "new" emission standards for vehicles that were already *surpassed* by Europe and Japan in the... 20th century... Corporate interests have totally corrupted the US government. Not only are creative solutions kept in the vault, if they show up, they are actively opposed. Look at the DVD Who Killed the Electric Car?. GM had developed the EV1 ten years ago, but instead of taking advantage of this major step forward, they decided - under pressure from the oil companies - to withdraw and destroy it. They preferred to launch the Hummer... Now, they are bankrupt. Phillips shows through a lot of historical examples that the standstill is typical for empires just before they collapse...
- Great Book for Americans Concerned About Their Financial Future
After reading all the reviews, there is not much I can say that has not already been expressed. If you are an investment professional, you may find some of the book useful and some of it may kill you. I think the book is geared more toward average Americans who are concerned with their personal finances and want to increase their awareness of what the banks have done and how it may potentially impact our future.
Getting past the negative review comments on how Phillips is disorganized and does not explain things in micro detail, for the laymen what he does very well is draw attention to the true nature of inflation and how it is savaging our personal wealth. He also draws attention to the frailty of our global financial system, the illusion of our money and wealth, and many of the risks we will likely face in future.
Yes, the global economy moves quickly and some of it is now dated. Yes, there are semblances of "conspiracy theories", but conspiracy is real and without going too far has a valid place when discussing finance. People may not agree with the author's politics, and may complain about his broad strokes, but regardless he offers many educational and valid points that people should become aware of, and on this level the book is a major success. I suggest people also read "The Creature from Jekyll Island" for a greater understanding of fractional reserve banking and the formation of the Federal Reserve....more info
- Peak Oil Is Here!
Kevin Phillips delivers yet again.
"Bad Money" is one of a handful of books that should be read to understand the times in which we are living.
Outside of the excellent financial parts of the book, the most shocking part to the average American is Ch.5 on Peak Oil....more info
- Devastating critique of the U.S.
Many readers already admire Kevin Phillips's previous books, with their incisive analysis of U.S. politics. In this treatise, published just before the 2008 presidential election, his main concerns are the dangerous dominance of the financial sector in the U.S. economy and the fiscal implications of peak oil. Phillips covers many other hazards, from securitization to the real estate bubble. He provides historical background to explain modern financial circumstances, whacks both the Bush and Clinton administrations, and offers his take on everything from imperial England to the efficient market hypothesis. After he explains how and why the U.S. is teetering dangerously on the brink of disaster, getAbstract is relieved to report that Phillips also offers some ideas about how it might rescue itself by going back to strong manufacturing, solid education and better regulations. This seems to be a fairly hasty overview of bad times, but the author can see beyond the immediate storm to the possibility of a brighter day. ...more info
- Scary about the post American world.
The author shows the scary side of the financial panic of 2008-09. America focused on selling financial products to the rest of the world, and those obligations were not as stellar as they should have been. With the current financial meltdown, much of the rest of the world along with the United States if facing the prospects of a global recession/depression as the trillions of dollars of these obligations are sorted out. Meanwhile Wall Street has made its millions and passed the debt to future generations.
The author also talks about peak oil, dynasic politics, and financial and marketplace corruption. When one looks at one's debt along with the government's obligations, one wonders whether the United States has ever gotten smarter following the Great Depression.
This is a scary book about the bad choices America made as a nation. Hopefully all Phillips has said does not come to pass. If it does, America will be in a bad position. A good read....more info
- The Financialization of America
`Bad Money' tends to jump from subject to subject but the main point is that increased financialization is a sign of a nation in decline and the U.S. is traveling a path previously taken by other world powers including Britain, Spain and Holland. Mr. Philips writes that in the 1980's "elements of the U.S. government decided... that finance, not manufacturing or even high technology, had to be the sector on which Washington would place its strategic chips" The wisdom of the "efficient market" is seen as the apex of decision making and with enough creativity and guile Wall Street believes it can literally create money from thin air. The evidence of finances most favored status is all around us. Financial services have shot past manufacturing as a percentage of the GDP and finance is the one sector of the economy that the Feds have decided must be preserved at all cost.
It is within this protective cocoon that financial institutions have operated with reckless abandon knowing that the rules of the game are heads they win, tails the rest of us lose. Quoting the author, "over five years, the housing sector seems to have provided some 40 percent of the growth in U.S. GDP" but the cost of that growth has been devastating. Lenders felt free to engage in incredibly risky loans knowing that they had little if anything to lose. The author is not the first person to suggest that the Federal government was complicit in growing this bubble as lenders let rationality fly out the door in their mad quest for profits. In fact like an overprotective parent the Federal government has demonstrated that it will go to extreme lengths to shield the market from bad news. In 2005 the Feds changed the criteria for calculating inflation lowering it by 2 points. Of course the classic is the absence of food and energy costs in calculating inflation.
The middle of the book is jam packed with descriptions of money making schemes cooked up by Wall Street. Reading through the myriad of acronyms, confusing loan setups and baffling hedge funds left my head spinning but that's kinda the point. Finance has become so obfuscated and non-transparent that debacles like the sub-prime mess are inevitable.
The Bush administration seems to have two settings, wild overreaction ala Iraq and Social Security and near total disinterest as in global warming and Katrina. I firmly believe that it is the administrations stubborn refusal to address global warming that will damn them by history but as the author writes Bush has pretty much put the country in neutral for the past eight years particularly when it comes to Bad Money's other main topic, peak oil. The author suggests that the invasion of Iraq may have been the sum total of Bush's oil strategy.
`Bad Money' is really an extension of the ideas presented by Kevin Philips' in his previous book `American Theocracy' with updates for recent events. This book is significantly shorter than his previous effort which is fine with me. One change in the authors is to push the threat of religion to the back burner as much larger looming problems of financialization and peak oil take center stage. I was a little bothered by the authors' `a pox on both houses' desire to blame both Democrats and Republican's for this mess particularly when it comes to alternative energy sources. The Dems may put up modest resistance against some oil exploration but the Republican's have been absolutely manic in refusing to address peak oil and global warming. I was also getting a little tired of the constant parallels between the U.S. of today and previous nations in decline. After `American Theocracy' and this book I kinda got the point.
It's a very good book if a bit unfocused. The author tosses out some major accusations including implications that the Federal government personally pumps money into Wall Street in times of worry and a suggestion that the Bush administration may be actually pursuing a weak dollar strategy (may not be so far fetched). I wish the book had spent a bit more time on these two topics....more info
- Haven't We Heard All This Before?
The American political scientist Kevin Phillips' new book "Bad Money" is subtitled "Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism," and if you are a liberal -- which would be the only ones buying this book -- you need not read any further because this book tells you exactly what you know is wrong with America today.
First and foremost the American economy is dominated by speculative capital, as evidenced by the recent Internet bubble and the subprime fiasco. But much worse America's financiers gamble without any risk -- because right now in America finance and politics are too entangled. Washington believes that American finance must be encouraged and protected, and Wall Street is a big giver to political campaigns. As a result America has become debt-ridden, and a very unequal society where the rich just get richer.
Making things much worse is America's problems abroad. First, America has lost much of what political scientists call "soft power" with the Iraq invasion -- the world no longer feels that America is good and noble. This has consequently lead to a big spike in the price of oil, a commodity that Americans are completely dependent on. And worse of all oil is in the control of some of America's arch-nemeses -- Russia, Venezuela, and of course Canada. Even the once reliable Saudis have turned against America.
In Kevin Phillips' analysis America is merely following the path of other great powers -- Hapsburg Spain, Holland, and Britain -- in its decline, and he spend a lot of time drawing historical parallels between America and these past empires. He concludes that there will be an inevitable re-balancing of power from America to Asia.
Given that every liberal holds this analysis to be the new faith Kevin Phillips will be indubitably lauded in the liberal press: The New York Review of Books, New York Times Book Review, and the New Yorker. But this is a very flawed book. It's merely a re-hashing of Kevin Phillips' previous books: "American Dynasty" and "American Theocracy." Moreover, I had to struggle to get used to his clunky academic writing. But it's the analysis itself which is most problematic.
First, let's talk about one of his arguments, an argument that is in his eyes is so obvious it's an assumption -- that the 21st century belongs to Asia. Mr. Phillips, with all due respect, have you been to Asia?
The idea that the global economy will roar on, and leave America is totally absurd. The American consumer is what drives the global economy -- if America goes into recession then so does the rest of the world. If the American dollar collapses then World War III will just be around the corner.
Consider America's trade deficit with the rest of the world. America buys oil from the Saudis and McDonald's toys from China, and America pays using Treasury bonds -- which is long-term debt, which is in itself no more useful than toilet paper. By last count America owes $1.3 trillion dollars to China. Does China have a prayer in the world of collecting on this debt? No chance in hell. But who else is going to buy Chinese goods? And China has 1.3 billion people -- that's a lot of people to have to keep employed. Like it or not China is stuck because Americans are the only ones materialistic enough to want what they manufacture. So if China and America stopped trading with each other American consumers can only buy one new shirt per year instead of 100 from Walmart. But China's unemployment problem skyrockets, its manufacturing base collapses, its assets bubbles burst, and the country goes bonkers.
Even with George W. Bush as president America cannot fail. America is just too wealthy -- it has too many resources and too many talented individuals -- plus if it's ever in trouble it can just decide to take over Canada. And America is just too resilient -- its greatest advantage is that it's constantly ability to transform itself without violent revolution (the one exception is of course the American Civil War). But America is dangerous because the wealth and strength of the global economy is completely dependent on America, and America -- ever since the collapse of the Soviet Union -- has chosen to be greedy and irresponsible. And the real effects of an American recession will be felt less on main street America and more in the factories of China and the oilfields of Saudia Arabia....more info
- Losing Control
Kevin Phillips describes immediate problems with the economy, that is, energy shortage, dollar decline, and mushrooming debt. Few are thinking about what it will take to avoid major recession and how badly a recession will be compounded with huge debts.
The end result is loss of control. Growth of debt and credit industry leads to public loss of control of its economic future - a result of higher inflation coupled with higher interest rates producing enormous debts. The financial sector now dominates the industrial sector. The Federal Reserve Board would play a major role in determining the future, yet it is controlled in part by the banking sector which is not elected.
Phillips' style is arduous yet candid. When style is compounded with the bad news this can be a trying book. Phillips makes up for it with a multitude of important points.
- Bad money, good book
I don't have much to add to the other reviews except that, as a professional writer and editor, I think Phillips's style is pretty smooth and non-fatiguing, considering the complexity of the subject. He does as well as anyone can explaining such man-in-the-moon concepts as collateralized debt obligations. It is true, though, that Bad Money is probably not the ideal introduction to the story of our colossal economic undoing for any reader who is entirely unfamiliar with modern financial terminology and practices.
I mentioned this book in a blog posting: <[...]>....more info
- Sound Message, Poor Writing
The book brought forth a significant message about what ails America and how/why the dollar is facing collapse. The problem is that Phillips writes in a high-brow academic style and with an assumption of knowledge probably not possessed by the average reader. He has been poorly served by his editor/publisher in this regard. This important and timely work could've delivered the same message to a much wider audience had he written in plain English. Phillips gets an 'A' for concepts/ideas/analysis, but a 'C' for rendering his thoughts in a marketable manner. Pity....more info
- Bad Money Tedious, no solutions
Phillips' book Bad Money is one of the most poorly written, tedious books I have ever tried to read. It has a lot of disturbing facts through-out; things the american public should be informed about, and elected officials should be held accountable for. But GEEZ! Why doesn't the author abide by basic writing principles, for example having one main subject per paragraph, clear and concise language, etc. The book reads like a rough draft.
What are we supposed to DO about the problem??? No help here....more info
- dismantles economic myths and self-deceptions
By avoiding completely America's habitual junior high school political patriotic pep rally approach practiced universally by politicians and pundits, Phillips provides uncompromising realism necessary to stem the relative and self-immolative economic decline of the U.S.
His book demonstrates overwhelmingly that the few, but not the people, benefited from what he terms the "financialization" of the economy over the last few decades at the expense of neglecting the manufacturing sector. With lots of hoopla, the expanding financial service sector was sold in the media while the manufacturing sector was neglected. Unrelentingly, the statistics prove that the manufacturing sector has been shrinking and that the massive financial service sector has been expanding, so that the latter now constitutes 20 to 2l percent of the GDP while manufacturing shrank to about 12 percent. This transition is correlated to a similar historical one between the agricultural and manufacturing sectors which started more than a century ago. No doubt major changes could not have been avoided in this transition, but the scope and overpromise of financialization was irresponsible, tragic and a giant fraud.
Co-joining this economic transition was an explosive growth in private debt while the media and pundits focused far too much on the public debt. Credit market debt quadrupled from 11 trillion to 48 trillion in the last few decades, massively outpacing public debt.
"Malfeasance of money" was maximized and revealingly "socializing of risk" (sort of what Walter Heller already formulated in the sixties as privatizing the profits and socializing the losses) was institutionalized with the aid of the Presidential Working Group on Financial Markets created in 1988 after the '87 crash. It included Fed Chair Greenspan, the Treasury Secretary, etc. Colloquially termed the Plunge Protection Team it enacted "Wall Street Socialism" and "socializing the risk" domestically and "financial mercantilism" abroad. 44 percent of corporate profits came from shuffling money around while only 10 percent came from manufacturing.
New debt instruments, CDO, SIV, derivatives of one sort or another, etc. enabled this pattern which was also boosted not just by Reagan but also by Clinton's Financial Services Modernization Act of '99, which dissolved the constraints and legal separation between banking, insurance and mortgages. (Clinton's patron was billionaire financier, Ron Burkle, who first contributed to him hugely and later hired him as a consultant, while Chelsea also was employed by a financial corporation after Hillary became a Senator of New York.)
Inflation statistics were changed so that they understated the inflation rate between 2 to 3 percentage pts. and overstated GDP growth. Under Bush, Jr. wars were declared while Bush urged consumers, unlike during previous wartimes, to continue to spend and travel. M-3 was eliminated by Bernanke in '06, though it was the ultimate indicator of inflation and was growing between 10 to 12 percent in '06 (by the way causing the Chinese to object to the dumping of M-3 since they could not gauge U.S. inflation accurately.)
"Bad Money," though not well-written and too narcissistic, does include illuminating and highly relevant statistics and graphs. Phillips places the horrible economic evolution into an historical comparative framework by referring frequently to Spanish, Dutch and British historical economic precedents. For an economic historian, this is a delight, though it falls short of being truly scholarly. But Phillips is not trying to write economic history. He is merely enlisting historical fact to shed additional light on recent U.S. economic events. And sure enough, historical comparisons aid tremendously in understanding the evolution and facts of America's current economic malaise.
Greenspan, for example, was impressed and seemingly highly influenced by the rising house prices of '75 and '79 when cashing out home equity provided massive consumer demand. Phillips believes that this aided in Greenspan's advocacy in encouraging the subprime mortgage mess and repeating, on a more massive scale, generating consumer demand by expanding enormously home equity loans between '01 and '06. Well, maybe Phillips did not fully gain insight into the Greenspan-Roland Arnall connection since Arnall with Greenspan's personal and monetary support started Ameriquest, one of the worst practitioners in the subprime mess.
In August '07, dramatic changes materialized, and the subprime mortgage bubble burst. In spite of having two oil Presidents and one oil V-P, oil's role was neglected as was manufacturing. Free markets were advocated, though not practiced in reality, and the mess was confronted by powerful and emerging foreign state oil corporations, foreign Sovereignty Funds, etc. which had all massively accumulated dollars and used them for nationalistic economic policies while America was under the false belief that the rest of the world would quite naturally follow America's wonderful capitalistic economy which, in reality, was undergoing economic self-immolation and suffering from imperial financial and military hubris.
Phillips's tome is interspersed with plenty of citations from those who advocated the financialization of our economy, including the religious Right which advocated "God Wants You To Be Rich" as well as those who warned of its consequences. Among the latter are the BIS in Basel, Switzerland, Kurt Richebacher, Alex Weber, Bert Ely, Hyman Minsky, et al.
The book cites Robert Reich's good point of ending treating hedge fund and private equity manager's income as capital gains and advocates, quite correctly, emphasizing "high value-added manufacturing and exporting" like Japan, Germany and Switzerland. Abandoning the hubris of military and financial imperialism would also help, Phillips adds by way of concluding, since both are drags on the U.S. future. In compliance with the Austrian School of Economist's notion that all credit expansions are followed by busts, the U.S. economy is now confronting another major example of this concept. All in all, Phillips' book is right on the mark serving the highly commendable purpose of dismantling enormous self-deceptions and delusions and rectifying massive fraud as well as re-orienting economic processes into a far better direction. Former IMF head Koehler seems to agree with Phillips when he recently judged the financial markets as a "monster."
- Bad Money
I found parts of this book to be very difficult to comprehend and enjoy, i.e. the details of the financial industry and their various methods/schemes. However, the chapters on Peak Oil and the Politics of Delusion were outstanding! In fact, I would recommend the purchase of the book for the Peak Oil chapter alone. Every American should read that chapter; especially those who think we're fighting a military war with the rest of the world. In fact, we're fighting an economic war with the rest of the world and we're losing it; partially because of the slow, steady drain that fighting a military war brings with it....more info
- Makes you want to put your money in the mattress
Mr. Phillips hardly needs another glowing review, but his analysis will make you want to pull your money out of whatever U.S.-based investment it is in now, and stick it in the mattress (Don't! Inflation will eat it up). What blows me away is that Mr. Phillips wrote the book I wanted to publish. In fact, the prospectus I wrote at the end of last year to interest my publisher in such a work eerily echoes almost all of the major themes hammered on in "Bad Money."
What Phillips does best is profusely illustrate and provide evidence for the complicity of the traditional Wall Street firms, the "shadow" banking system (private equity and hedge funds), and the US Government (Federal Reserve, Secretary of the Treasury, etc) in perpetuating the myth of U.S. economic well-being. What you are led to conclude is the economic crisis we are currently experiencing, not even close to bottoming out, is simply the five year delay of the collapse of the dot.com, telecom, and energy (e.g., Enron) sectors, caused by the same financial shenanigans perpetrated by the same financial engineers.
The only weakness I can see in the book is that Phillips only hints at who these people are and how they seem to move comfortably from one economic crisis to another. He provides a glancing history of how other world powers were felled by their infactuation with financial mercantilism, facilitated by migrant financial engineers. While he acknowledges that there's more here the reader needs to know about, it seemed painfully obvious to this reader that he felt this was a line in inquiry better left to others.
Thankfully, Phillips sets aside any poliitcal and economic ideology. He is unsparing in his critique of politicians from all sides of the spectrum and shows how this crisis has nothing to do with party affiliation and everything to do with the crony-capitalism that has reduced free-market economics to a shadow of its former self.
Every American with an inquiry mind should read this book.
Jason Makansi, author of "Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You."...more info
- A Labor Perspective
The fact that Joe "I'm-mortgaged-to-the-hilt" is now living in a car he can't afford to move may mean more than a temporary adjustment in the credit system. That's according to author Phillips, and his book makes good sense. As he shows, our financial underpinnings are rickety, to say the least. Worse, our financial bubble no longer rests on an industrial foundation, but has become the economic foundation itself.
Now talk of "foundations" has slipped out of fashion with the rise of post-modernism, and certainly Phillips does not himself use the term. Instead, he talks about an economy that lacks its former variety, and as a result has come to put too many eggs in the financial basket, as it were. Thus, when the various financial shocks including oil pricing reverberate, there are few other sectors to cushion the blows. Thus, the US may be on the way to losing leadership of the capitalist world to the fast rising industrial economies of Asia. This, I take, to be a major thesis of the book.
I want to suggest a slightly different perspective on the current financial shake-up than the book's more narrowly internal one. A moment ago I alluded to an economy of goods and services resting on an industrial base. The reason for suggesting such is that historically the concept of industry implies a working class in a way that the concept of a financial world does not. And, it's the relative absence of a labor component to the analysis that I believe detracts from the book's overall framing.
It's no secret that wages and benefits for American workers have been stagnant or in decline for some time. The trend has spread across administrations of both major parties. Moreover, the proportional share of wealth gained from productivity has also declined for wage-earning Americans. These I take to be uncontested facts that reflect the widening wealth disparities of the last 30 years or so. The agents and effects of this decline are more central, I believe, to the current crisis than a basically conservative commentator such as Phillips allows for.
At the most obvious level a better paid workforce would have less need for risky sub-prime and credit card gimmicks, other factors being equal. Indeed, homes and products were within the pay-check reach of most wage-earners for several decades in mid-century past. Unsurprisingly, real wages and proportional shares for blue-collar America also rose during that same period. Much of that prosperity came from rising shares in the nation's wealth distribution, while those shares were largely kept in place by the clout of organized labor at both the work site and in the nation's capital. In an important sense, I would argue, strong unions acted as a break on capital's natural tendency to over-reach and suffocate effective demand by pushing down wages.
However, a number of factors conspired to weaken organized labor, whose presence was never really accepted in the halls of power, anyway. The inflationary spiral of the 70's, the off-shoring of the Clinton-Bush years, along with the albatross of Taft-Hartley, all contibuted heavily to labor's decline. The point here is that people who could formerly shop at Safeway and May Co. were soon faced with a choice. With a shrinking wallet, they could either go to Walmart or take out a credit card, while for many, the situation meant doing both. In short, a fast receding American Dream not only jeopardized those working people reaching out for it, but also those who had already attained a measure. Put broadly, the relative loss of purchasing power among wage-earners opened up a fertile field for the credit exploitation and the financial speculation to come.
There's a second and much less noticed factor at work here. This one has more indirectly to do with what Phillips calls the crisis in American capitalism. And that is the sudden demise of Wall Street's great rival, the Soviet Union. Ironically, in my view at least, that so-called socialist system (really a state-capitalism) acted as a foreign brake on the Wall St.'s most aggressive and adventurous tendencies, such as the risky deregulation campaigns of the Clinton-Bush era, a direct precursor of the credit fiasco.
Now, whatever it's real life failings, the Soviet system did present an alternative to American style capitalism, and one whose worker-peasant appeal resonated among Third World nations. Thus the ideological competition was intense. At a policy level, Washington was forced to remain concerned with the general health of wage-earning America. After all, vast tracts of middle-class suburbia, along with abundant, affordable consumer goods amounted to an important component of America's overseas appeal. On the other hand, large numbers of people seen living in cars or getting kicked off welfare or retiring without pensions or getting sick without health insurance, would have cancelled much of that appeal. And image mattered to the rivalry.
Of course, a Soviet presence couldn't stop the Vietnam disaster, nor prevent industries from relocating along the Mexico border, nor halt partial deregulation under Reagan's aegis. Nonetheless, it's hard to conceive of even a Bush Jr. embarking on an Iraq adventure with a counter-force so close by, or de-industrializing the economy by taking manufacture out of the country, or ignoring pressure from a Soviet backed PLO to finally settle that 60-year running sore. In fact, the Soviet collapse, whatever its true benefits, disastrously freed Washington's most aggressive corporatists from their boardrooms and think tanks. Now, those strategists could reach for global empire without an over-concern with domestic repercussions. And it's those effects that are now being felt in a shrinking dollar, a debt crisis, and a Wall St.-led Democratic Party as committed to world hegemony as the Republicans.
The irony is that the very economics accentuated by the global power grab are not only undermining the grab itself, but threatening to undo the primacy of American capital. Phillips is right to be alarmed. But a labor perspective is much more important to the picture than Phillips provides....more info
- Good money after bad
As I write this review in January of 2009 we are still at the crossroads of the biggest financial crash since the Great Depression. Daily we claim new lows in unemployment, retail sales falling, car sales off, consumer confidence at all time lows, interest rates to low, record government and personal debt,low stock valuations and so on. If you are interested in understanding who caused this, and what lead to this crisis then this book can answer most of your questions from a historical perspective.
The author shows how we as a nation began to rely to heavily on the financial sector for our GDP. How the housing bubble was created and allowed to get completely out of hand. Also you will see how the securitization of mortgages lead to the most reckless risk taking in corporate history. You will see how the peak oil theories started to play out in the markets last year. Did the world peak out on oil production in 2005 and are we now just in a steady decline?
I found the authors perspective on the Unites States emerging as a super power based partly on its incredible oil production at the beginning of the 20th century very interesting. I found the comparison to Great Britain's Coal production in the 18th century, Spain's gold after the discovery of the new world and the Netherlands domination through wind power using its fleet in the 1600's all interesting food for thought. He also shows how as empires and nations move away from real productivity to becoming mainly financiers to others is the beginning of the end for their power. The U.S. has gone from the largest lender in the world to the largest debtor in just 60 years or so.
This latest pillaging of Wall Street with CEOs walking away with hundreds of millions of dollars in bonuses as their companies are bankrupted or ruined has made even Alan Greenspan rethink his belief in how capitalism works,and whether companies can be trusted to operate in their own best interests. I have been a capitalist my whole life, and this latest show of greed and lack of control by executive boards has changed my faith in the system. Now our government has decided to through over a trillion dollars of good money after bad. This book will enlighten you to the big picture over the last few years and covers a great amount of topics.
"Financial Shock" by Mark Zandi is another great book, even more current than this one. ...more info
- Bad Money is right on the Money
After listening to this audio book I felt like I was beginning to understand some of the financial quagmire big money has gotten our country into, perhaps it will make me a wiser investor. I have bought this book for several of my friends....more info
- Overpopulation---the neglected cause of the next depression
Kevin Philips has written an excellent book describing the current meltdown of the US economy and building a strong case that the US may well be headed towards a second great depression.
He also makes the connection with scarcity of cheap oil, arguing that this is one of the reasons that the US may fall from its position of leadership.
The facts presented are chilling, but present only part of the story.
For years, Americans have been ignoring one of the most serious problems they face, and that is how population growth makes inevitable a scarcity of resources.
Quite recently the population within the US has been growing at about .9% per year, meaning that all resources (water, food, oil and oil substitutes) must grow at .9% per year for the average standard of living to remain constant. Population growth within the US is almost entirely due to illegal immigration and the increased fertility of illegal immigrants.
In spite of all of the press coverage of first the ozone hole, then global warming, then peak oil and its consequences, virtually nobody makes the connection that overpopulation is the underlying cause for all of these problems.
The reason is that it would demand that the US adopt policies that stop illegal immigration and give a full range of family planning options to all who wanted them, and these issues are highly unpopular in the first case with the left, in the second with the far right. Both policies are opposed by religious groups, who have in effect prevented an informed discussion of population issues.
The basic thesis of this book is correct: depletion of oil sounds the death knell for US supremacy in world ecoomic affairs.
For decades we have been pretending that population growth does not matter because it can be superceded by technological progress and the resulting economic growth. For several decades, the "green revolution," largely based on the increased productivity that oil products could provide in food harvests, has enabled us to ignore population growth. For decades we were able to borrow from the Chinese and create arcane derivatives based upon mathematical models understood by only a few savants, thereby enabling a false sense of wealth among US consumers. Realizing that we were running out of the resource that made this pyramid scheme possible, we invaded Iraq, in an attempt to further delay the day of reckoning.
Now we must pay the piper. The results will not be easy to bear. In the period 1929-32, the Dow lost 89% of its value and unemployment rose to 25%. This time around, the collapse will end with a much lower average standard of living for US citizens, as they indeed begin to compete with an unlimited number of Indians and Chinese who are willing to do their jobs for pennies on the dollar....more info
This is a great book about the origins our our current financial straits. It's not a light read but compelling and thought provoking to be sure.
It details America's rise as global financial hegemon and offers predictions about what the future of the global economy will look like. Phillips offers four predictions for the future of the world economy namely that (1) Asia will dominate the global economy by 2030 (2) China will be the dominant player within Asia (3) Some city with a large Chinese population will eventually emerge as a financial capital, rivaling London and New York and (4) the leading currency in Asia will have a global reserve function by 2030 (p. 182).
There are also a number of interesting facts sprinkled throughout the book. One figure I found fascinating was the ranking of principal suppliers of crude oil to the US. It turns out that Canada is our leading source of oil, accounting for 1.85MM barrels per day. It's followed by Mexico, Saudi Arabia, Venezuela, Nigeria, Angola, Algeria, and Iraq (p. 139).
A great book, and one I could see myself re-reading again in 6 months.
- A Major Disappointment
This review covers the audio version of Bad Money, which runs 8 cds. I am a fan of Kevin Phillips, so this audio book was a major disappointment. I found the text disorganized, ill-focused, pompous, and too long by a half. It wasn't until well into disk 2 that he stated his major thesis, then he went off AGAIN on some tangent or another, jumping forward and backward in time, disgressing repeatedly, alternating between being descriptive and analytic. I couldn't follow "the plot" and quit listening mid-way through disk 3. Scott Brick, the reader, manages to overdramatize much of the text, further exacerbating the unpleasant listening experience. The 8 CD set of Bad Money is a waste of money and in my opinion Kevin Phillips should quit writing any more books and stick to a career as talking head....more info
- Why isn't this guy President?
Good book. I was surprised at how right on he is. We are even studying this book as a companion to our Bible Study (who would have thought). ...more info
- This Only LOOKS Like A Book About the Economy
One would expect that a book subtitled "Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism" would answer two basic questions: (1) What is wrong with the economy, and (2) How did it get that way? As a bonus, we might also like to know just who is responsible for the incipient Great Depression II, so that we can begin erecting gallows and fashioning enough nooses, and we might like to entertain suggestions as to how the crisis might be solved, but it turns out that Dr. Phillips knows no more about economics than do you or I or your local greengrocer. As a result, the book meanders in a desultory manner around various topics that are at best only tangentially related to our financial woes, and most are irrelevant.
In place of specifics about the economy, Kevin Phillips rambles about under the pretense of giving us the "Big Picture" or a "Historical Perspective," and thus we are treated to an entire chapter (chapter 6) on not merely what happened during the first Great Depression, but a complete overview of European history, as well. "In 1618, the fall of a weak Spanish first minister led to a burst of activism, and several years later . . ." And blah, blah, blah, followed by an analysis of the situation in Holland in the seventeenth and eighteenth centuries. It's all absolutely fascinating (NOT!), but the trouble with this is that, if one digs hard enough, one can discover any lesson from history that one's looking for, and when does Phillips get to the economic situation of 2008? He doesn't. If the fact that in the fifth century the capitals of both Rome and Spain were moved to different cities (pg.157) is pertinent to our present situation, then what, if anything, can be considered irrelevant? Rin Tin Tin? Cameron Diaz? Jujubees?
Throughout "Bad Money" Kevin Phillips refers again and again to his previous books (he wants you to buy them), and since he has little information to share with us about the present economic crisis, he begins writing those old books all over again. We get many pages of his American Dynasty, including the scintillating revelation that "John Quincy Adams was elected president in 1824, . . . twenty-four years after his father, John Adams . . ." and that "Benjamin Harrison was elected president in 1888, forty-eight years after his grandfather, William Henry Harrison . . ." (This in a book about the economy.) Phillips has a Mencken-like animosity toward the Christian Right that he vented in his American Theocracy, so he here he spends a chapter placing the blame of our financial situation at the feet of the devout.
Because it's easier to write about than specifics of the financial system, an entire chapter is devoted to the debate on whether the world has reached Peak Oil production or not, but now (November, 2008) that the price of oil has fallen below $50-per-barrel, all that has been rendered moot for the time being.
I would fain admit that on random occasions, the stream-of-consciousness Philips writes in stumbles briefly into economic matters, but much of this is material that you have already read in the same papers and magazines that Kevin Phillips reads. There are many graphs and charts from The Financial Times and many quotes from that British journal. Unfortunately, Phillips adds little to the quotes, and he doesn't clarify the more abstruse terms. This book desperately needs a glossary, and before you read it (not that I'd recommend that you do) you should first become familiar with such terms as brouses, derivatives, credit default swaps, mercantilism, deleveraging, fixed-leg features and two-step binomial trees. (If you don't know what those are, don't feel bad, neither does Kevin Phillips.)
There is some new and startling information in "Bad Money," but much of it is of a dubious nature and is merely mentioned in passing. Our nation's conservative masses have followed the lead of their mob masters (turn-on any radio) and are blaming "minorities" (you know who) for the financial crisis, because these high-melanin types purchased homes they couldn't afford. But what about the "Ninja loans" that Phillips mentions? These were loans eagerly given to people with no job, no income, no assets. Are the brown people to blame for those, too? Unfortunately, Phillips cites such loans only in passing. Which lenders made them? How many such loans were made? Sorry, no further information is available. Likewise, Phillips mentions bonds that were backed by delinquent credit-card accounts. Phillips informs us that these bonds were given a rating of AAA, but that's all he knows.
Phillips provides a stunning revelation when he quotes several sources about a shadowy Plunge Protection Team within the Federal Reserve that may (or may not) have been manipulating the market by secretly buying and selling stocks and futures. On the other hand (pg.60), "There's never been any official confirmation of this." That's quite a serious charge --the Federal Reserve, a government within the government, buying and selling stocks to influence the market-- and I for one would like to learn more about it. Is it happening or not?
Alas, Phillips admits, "I have no personal firsthand knowledge and am not interested in becoming a conspiracy investigator." In other words, he doesn't know. It seems that there is much that Kevin Phillips doesn't know about the economy. Read this book and you, too, will know just as little....more info
- Bad Money is a good read!
This is a must read for any elected pol who thinks they know whats going on....more info
- bad money
This book should be read before The Predator State is read. It is a less detailed, somewhat bias claim the understand the current situation in our economy but it lacks the meat that Galbraith covers in the Predator State.
I do believe that is is worth reading so that some understanding of what we are doing by borrowing so much at this time has caused. We seem to need a good recession to get back our ethics and begin real growth sometime soon. We are in very bad shape and now that the problem has become so large, we cannot just keep feeding the greedy. We need taxes and punishment for the white collar stupid managers that got us here. If only we had the ethics that were in place before the Yuppies and Yippies told us they wanted change but forgot what they were doing due to drugs, we might have been better off today. They failed and they failed by huge amounts....more info
- Too bad he is an ideologue
If you are a Bush hater you will like this one. Too many statistics though. The author does have some interesting ideas about the current economic crisis and I look forward to learning more and deciding which I think are true....more info
- Interesting but lack of attention to the Kindle version
I'd give this 3 1/2 stars as I found the content fairly well presented but felt some of the issues were too rushed and could be more deeply examined analytically. It felt like the publisher's deadline was the more important criterion. Also, I appreciate that this was not a political partisan or ideological diatribe. Phillips is pretty fair in assigning failures to the people in control.
The loss of a star was due to the Kindle edition not linking footnotes or the index to their references in the text. What use is an index with no links or location numbers? Thus, as a non-fiction work for future reference it fails poorly. How about a revised Kindle edition that previous buyers can upgrade to?...more info
- Best Book Around on the Financial Crisis
There is simply nothing better for understanding the mess we are in and what we will have to address if we really hope to dig our way out of this very deep hole. Required reading for all Americans. It is surprisingly readable for the information and deeper understanding Phillips is giving us. Puts things together so well you end up feeling like every other source of information or commentary sees only part of the elephant. Pair this with "The World is Flat" by Tom Friedman and you've got the ideal gift for each of your children, teenage or above, to prepare them for what's ahead....more info
- bad book
This book could have been a nice 10 page pamphlet. The other 190+ pages are just a repeat of the same arguments, sometimes using the same words. And, after hearing the author on Bill Moyers PBS program I expected more and perhaps even a prescription for how to get out of our 2008 financial meltdown. Unless you are a pessimist and see the end of American capitalism this book is not for you. ...more info
- Bad Money - Required reading
Kevin Phillips once again gives clarity to a complex issue. This book should be required reading by anybody involved in financial decisions in the public and private sectors....more info
- The other shoe
This book details the possibly fatal indebtedness of the US to lenders throughout the rest of the world. The only major omission is a discussion of the instruments that may be the final nail in our coffin, Credit Default Swaps....more info
- Essential reading
"Bad Money" is the most brilliantly written analysis of the economic situation we confront today. I purchased it and read it thanks to Bill Moyers' recommendation and his interview with Kevin Phillips, the author. As enlightening as it was, and terrifying--it was also entertaining. The prose style, the apercus, the freedom of the content--made for aremarkable--even stunning read. I can not recommend it more highly....more info
- Good Book, glumy outlook-
Aside from going overboard a bit on the vocab, I really liked this fast paced, easy to read, and easy to understand book. The author paints a dark picture of our financial system, and you will have to make your own judgments as to what his analysis means, but as far as the facts the author is spot on. ...more info
- Bad Money
Mr. Phillips wrote a very thorough and complete review of the reasons why America and the world community are suffering during the current fiscal crisis. This book should be read by all who aspire to public office and by all who are in a position to put this knowledge to good use by correcting the monumental failers of our government leaders and the ruthless criminals who were the Corporate bosses that brought the failure to fruition. As an aside I will not be satisfied until they have been stripped of their ill gotten gains and sent to prison to rot....more info
- Great Analysis of Basics
Phillips does a great job of describing the specific causal factors for the housing bubble and its related credit bubble. These are not frequently written about in the popular press and the "experts" (Paulson, Bernanke, et.al) don't talk about it either. Phillips shows that the debt instruments that brought down the financial system were chimeras, figments of value, that reflected no real value at all. Our economy has been operating a giant Ponzi scheme and all of us were suckered into it. The only real wealth in it is the gazillions that the creators of the debt instruments have run away with. This should be "must" reading in business school finance and economics courses. ...more info
- Real Research
Arrived in excellent condition. You can't go wrong with Kevin Phillips' books--well researched, well written. Everyone in America should read this and other of his books....more info
- Not Perfect But Still Very Worthwhile
This book is prophetic esepcially in light of the events of the last couple of weeks and earlier this year (Bear Stearns and the rest) though I did find it sometimes a bit repetitive.
Also with the rather rapid changing events in the financial market some of the information is a bit outdated, but that it endemic with any book that really is trying to capture a moving target - as of the writing of the book it was more on point in terms of timeliness, but regardless of that fact it does offer insights as to the factors which were/are causing issues - oil, mortgages and the rest that we have become all too familiar with.
Despite the shortcomings the book is still very worthwhile in providing an overview of the situation and is a springboard for you to learn more about the issues facing the U.S. economy....more info
- Good but pesamistic
This book is very well researched and much of the financial market is playing out in the ways predicted by the book. I found it informative and very useful for a group discussion that my coworkers had on the topic as part of a Staff Ride.
My only critique of the book is that it is big on problems but short on solutions. He tries to express the silver lining and talk about the ways out at the end of the book but it is a little late after a largely depressing look at where our country and economy are.
I would recommend "The Post American World" if you are looking for a good complimentary book....more info
- Phillips Provides a Unique Perspective
I thought I did a good job of keeping up with the collision of international finance and politics, but reading Bad Money made me realize how little I know. This book has completely shifted my perspective on the world economy and the U.S. diminishing role in it. Since finishing the book, I read and hear world news stories almost daily that confirm Phillips' insightful analysis (like the way that China is using its vast reserves of U.S. dollars to buy world influence and control the distribution of other countries' oil, just as the U.S. once did).
The world has changed and, until reading this book, I never realized how much. I just heard the door slam on the predominant global influence of the U.S....more info
- A solid non-fiction account of oil troubles, debt, and the bursting of the American financial bubble
Kevin Phillips' BAD MONEY receives Scott Brick's excellent acting skills as it provides a solid non-fiction account of oil troubles, debt, and the bursting of the American financial bubble. Any collection strong in nonfiction economics listens needs BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM. ...more info
- It is worse than you think
Kevin Phillips, you have done it again. I don't know why you morphed from a Republican strategist into a harsh critic of right-wing, robber barons' assault on the welfare state and its dream of economic justice. But you hit the nail on the head time-and-time-again: entrenched interest groups, the collapse of real political debate, the transition from productive to financial capital, the politics of oil, the protection of Wall Street by the Fed. giving rise to meltdowns rather than tamable booms and preventable busts, the shift of wealth from those who labor or save to those who speculate, financial gambling in the form of derivatives and other synthetic securities which reward their inventors and defraud both latecomers and the public at large, the embrace of moral hazard which is a subsidy for those too big to fail and happen to be friends and peers of the government officials who are supposed to regulate them. I know someone who hustled subprime mortgages for speculators by knowing how to work the computer programs lenders use to assess mortgage risk; his clients had absolutely no equity. There was so much money to hustle, lenders were not interested in due diligence. They chopped the loans into little pieces, packaged them to disguise risk and sold them as equities. I am not sure the broker is not in jail. He was small potatoes. How about the Mertons, Greenspans, Bernankes and legions of Ph.D.s from MIT who claimed they were diversifying risk only to discover when things went wrong they were gambling on air and there was no liquidity? A fixed roulette wheel does not help when too many people learn how it is loaded. See Bookstaber's excellent A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. As Phillips points out, a good deal of finance in the US is a giant subsidized Ponzi scheme. Only in a world of greed and class oppression would labor be taxed more than return on capital.
It is a pretty shabby picture but unfortunately 90% of the voting public has little ability or interest in understanding it. No wonder, as Phillips points out, Obama's backers will swallow his hedge fund contributors without noticing what their presence in his camp means. Although Joe Biden may bring a white bread image to the Democratic ticket, he also brings the bipartisanship which makes it impossible to honestly name, if not solve, both foreign policy problems and the increasingly skewed distribution of wealth in the US. If I were to talk to my middle/upper-middle class friends about how much we all benefit from the set up as it is, they would either not listen or regard me as attacking them.
Kevin, you have the courage to tell it like it is. But is anyone listening?
Besides the fact that the book is a bit repetitive and, having listened to it as a book on tape, the narrator is overly dramatic making each nugget of corruption sound like an apocalypse, I find some of the overarching historical comparisons a bit of a stretch. The declines of Rome, Spain, the Dutch Confederation, and finally Britain are interesting background, and some aspects are reminiscent of what is happening to
America now, but each had its own very individual causes. Metropolitan Spain, the master of a great empire, was always a debtor. That is how it fought its wars. New World silver and gold just made it possible to fight nastier wars of the counter reformation. Indebtedness was not some declining empire phenomena. Italian and German bankers were paying for the conquest of Granada years before Columbus sailed. Similarly depopulation and decline don't really fit either England or Spain. Spain had plenty of poor from denuded Andalusia to get rid of and opportunity lay abroad. Besides wool for the Low Lands, wine and olives, Spain had little industry and needed less when the geld started pouring in. And, at the height of the industrial revolution, England was exporting it street ruffians and poor to Australia. There was no place for them at home even though industry needed surplus labor to keep wages down. It had all the displaced, barefoot Irish it needed. England only really bankrupted itself in WWII. Where its decline began is hard to say. It may have been initiated way before coupon clipping and remittance men of Edwardian England became subjects of literature. How about sometime between the Crimean and Boer wars? An interesting take on Britain is in Correlli Barnett's reactionary book Collapse of British Power (History/20th Century History). He sees the decline as a function of free trade, public schools' crippling of ruling-class moral fiber, post WWI pacifism, and the greater cost of defending the empire and Commonwealth in comparison to its military return especially during WWII. As for the Dutch Republics, I guess I need to find a good economic history of them. From I had thought their small population and increasing cost of shipping made them hopelessly outflanked by their larger English neighbors. The Dutch had prospered by early textile manufacture, shipping cheaper (paying their sailors less in the Baltic trade) and stealing weaker Portugal's overseas entrepots. ( See Charles Boxer, The Dutch Seaborne Empire 1600-1800 and John Keay The Spice Route: A History (California Studies in Food and Culture).) In the end the Dutch Republics were outcompeted and outfought by England.
Despite the shortcoming in Phillips' comparative history, his clarion call of decline is well taken. I like to think of Fulbright's "arrogance of power." We are headed for a fall, but maybe not the apocalypse Phillips trumpets. Our increased productivity from the US lead in computers has a lot to do with the wealth generated since the late 1980's. That is production, not finance. It just was, and still is, being lopsidedly distributed leading to private splendor (fed much by finance) and public squalor. The consequences of Lyndon Johnson's guns and butter and the 70's oil boycott stopped middle/lower-middle class growth and Reagan reached into their pockets and gave their subsidence to the upper/middle and upper classes along with a giant share of the new productivity. More people should read Phillips' books. But then it is not in many peoples', who know better and vote, interest to advocate for his implied solutions. It might preclude million dollar houses, jet-setting and three Volvos in the drive way . And as for the lower classes who might really profit from his criticism, they are too busy paying their subprime mortgages, watching television, playing video games or shopping at Wal-Mart. So we have a world of unnecessary conflicts and economic injustice. Remember Tolstoy's description of the Russian nobility ignoring Napoleon's advance on Moscow. Rather than G?tterd?mmerung, we have the twilight of our empire which is OK because of all the harm to which our arrogance has led. Our successors, the Chinese, don't give any sign they will dominate the world any more fairly.
Charlie Fisher author of Dismantling Discontent: Buddha's Way Through Darwin's World
- Help wanted
Does the mortgage credit crisis bother you? Are you concerned about high oil prices? Do you get the feeling that Wall Street is largely a high-stakes casino, where insiders collect billions on winning bets, and also collect billions on losing bets, payed off with taxpayer bailouts? Do you want to understand why this is happening and how the game works? Then go find a different book. The author of this book is a "big idea guy", and he does nothing to elucidate his major points, all of which I was painfully aware before reading page one.
The writing is in a churning stream of consciousness style, looping back over the same topics several times, in no particular sequence, as if hoping that some meaningful connections would appear just from the proximity of the paragraphs. Most annoying, is the habit of introducing an interesting topic, promising, "more on this in a later chapter", then repeating the introductory comments without pushing further when the later chapter arrives.
There is no way to deny that the problems outlined in the book are important and deserve attention. Most of the positive reviews here award 4 or 5 stars based on that alone. But not only are no solutions offered, the problems themselves are not broken down and explained in any meaningful way. The comparisons of recent American history to the declines of previous empires is interesting, but superficial. If the thesis is that an over-emphasis on financial services leads to decline, I want to know why. I believe it could be true, but I don't understand why. No help here.
I do know that when the government takes the downside out of risky behavior, by promising taxpayer bailouts for failed lenders, that it's a recipe for disastrously risky behavior. That's obvious. Why is it allowed to happen? Who can stop it? Somebody please give me the name of a book that can help....more info
- People Hurt People
"Guns don't hurt people. People hurt people." It's the same in shadow finance. If you invest for yourself, or if you want to invest for yourself, but you don't trust a system that keeps the middle class investors in the dark, that over-extends its borrowing to crisis levels, that sells questionable contracts & mortgages not only to naive Americans but to unsuspecting foreign institutions (buyer beware), then you will find the root causes of our 2007 financial lock-up in BAD MONEY useful. Like Roger Lowenstein's books describing earlier lock-ups, Kevin Phillips' book outlines how people we trust repeatedly let us down. Notice that I use the phrase "lock-up" & not "sell-off". From the early 1990s to the present, Lieberman, Greenspan, Paulson, Gramm, etc., all have fought against transparency in the financial markets by turning the discussion towards the fear of more regulations. Buyer beware! ...more info
- Powerful but Depressing
I read this book after hearing the author, Kevin Phillips, give a radio presentation to the Cambridge Forum. Phillips was familiar to me as a spokesman for conservative perspectives over a span of decades, a perspective that I never shared. Thus, I was a bit skeptical when I first heard his presentation on this topic. However, I was quickly impressed by his careful, scholarly analysis, and have come to agree that he is exactly right. Phillips' central point is that the United States has abrogated its leadership position in the world by virtue of having stopped being a nation that produces goods and services of real value and becoming a nation who's primary business is the manipulation of financial markets and debt. He cites earlier examples of the Maritime Dutch republic of the 1700s, Great Britain around the time of WWI, and even Rome. The sobering point is that once a nation has gone this route, the course is irretrievable. He finds lots of blame for this situation, and it is not all deposited on any single political party...there is plenty to go around! He discusses our biggest product, Credit Debt, the root causes of the rise in oil prices, and the impact of right-wing evangelicals on the administration's feeble approach to dealing with our major challenges. This is not a feel-good book, but it is an important contribution to helping Americans understand our current situation. HIGHLY RECOMMENDED...more info
- Tough read but worth checking out
Since there are so many long reviews of this book that pretty much cover most of the salient points, I'll keep mine fairly short. This book is interesting if you are one of those people that suspect there is something wrong with the way our country has been doing things, and there are a number of important ideas you may not have heard about or thought about in the way they are presented. I have only a couple of small complaints. As others have pointed out, the style is often extremely dense, especially when dealing with economic issues, and sometimes he seems repetitive. A layperson will feel like he or she pretty much has to trust the author because he uses so much jargon and brings in so many complex examples that there is no way a non-expert can evaluate his arguments. The book is mostly a rehashing and updating of his earlier book American Theocracy which might make more interesting and easier reading. The book is quite recent, yet it seems quite out of date because it pretty much assumes Hillary Clinton will be the Democratic nominee in 2008 and barely even mentions the actual nominee in an aside. Finally, as others point out, the author doesn't really give any hints of where he thinks it will all lead or what we should do about the problems we face. Part of this is by design and he gives an explanation of why he doesn't do it, but in my opinion, this leaves the book open to many interpretations, and it is easy to jump to severe conclusions. On the positive side, the author does briefly point out, without dwelling on it, that the US does enjoy some potential advantages in geography that previous empires did not, and he also mentions that many of those previous empires now enjoy a relatively successful existence as a non-empire.
This book is relatively short so it's woth checking it out if you are interested in the topic. You might want to read his book American Theocracy first. ...more info
- A tough read but a timely and truly urgent one
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
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.
"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.