Why are we in such a financial mess today? There are lots of proximate causes: over-leverage, global imbalances, bad financial technology that lead to widespread underestimation of risk.
But these are all symptoms. Until we isolate and tackle fundamental causes, we will fail to extirpate the disease. ECONned is the first book to examine the unquestioned role of economists as policy-makers, and how they helped create an unmitigated economic disaster.
Here, Yves Smith looks at how economists in key policy positions put doctrine before hard evidence, ignoring the deteriorating conditions and rising dangers that eventually led them, and us, off the cliff and into financial meltdown. Intelligently written for the layman, Smith takes us on a terrifying investigation of the financial realm over the last twenty-five years of misrepresentations, naive interpretations of economic conditions, rationalizations of bad outcomes, and rejection of clear signs of growing instability.
In eConned, author Yves Smith reveals:
--why the measures taken by the Obama Administration are mere palliatives and are unlikely to pave the way for a solid recovery
--how economists have come to play a profoundly anti-democratic role in policy
--how financial models and concepts that were discredited more than thirty years ago are still widely used by banks, regulators, and investors
--how management and employees of major financial firms looted them, enriching themselves and leaving the mess to taxpayers
--how financial regulation enabled predatory behavior by Wall Street towards investors
--how economics has no theory of financial systems, yet economists fearlessly prescribe how to manage them
|Publisher:||St. Martin's Press|
|Product dimensions:||9.54(w) x 6.40(h) x 1.26(d)|
About the Author
Yves Smith is creator of the influential blog, Naked Capitalism, a top ranked economics and finance blog with over 250,000 unique visitors each month. Smith has been working in and around the financial services industry since 1980 as an investment banker, management consultant, and corporate finance advisor. Smith has appeared, on CNBC, CNN, and FOX Business News, and has written over 40 articles in venues such as The New York Times, Slate, and the Christian Science Monitor. She lives in Manhattan.
Most Helpful Customer Reviews
Yves Smith has the creds to back up her assertions about the Great Recession. She has worked in the financial markets, and writes with a commanding voice on both current economic conditions as well as the history of thought and debate which has brought us to this point in 2010. This is not a gossipy work on who-did-what-when, nor is it narrowly concerned with a single topic, but a high altitude tour over a landscape of shortsighted greed. Specifically, Smith takes on the prevailing economics orthodoxy that free markets work best and that free markets bring about the greatest social good. She illustrates exactly how this thinking was distorted and sold, how contrary thinking was at times suppressed, as well as documenting how policymakers have adopted this and brought about the current financial crisis. To date, this is probably the most useful discussion on economic policy in the US.
Neoclassical economists contend that the economy naturally seeks equilibrium, an optimal point where the supply of goods and services equals the demand. This intellectual view has encouraged politicians to deregulate markets to make them more competitive and efficient. But deregulation of financial markets has been a failed experiment in freeing banks and investment firms, says financial writer Yves Smith. She argues, convincingly, that the global financial crisis that began in 2007 has provided ample justification for greater regulation of banks and other related institutions. This book went to press in late 2009, prior to the 2010 passage of the Dodd-Frank Act, a sweeping reform of the US financial services industry that embodies some of the author’s proposed changes. getAbstract suggests Smith’s book to all those affected by the 2008 meltdown for its incisive description of the symptoms, causes of and cures for the financial crisis.
I'm coming at this book largely from Smith's worldview. That said, I'll start with the positive: she proves her thesis - that neoclassical ideas in economics, deployed to prevent government intervention, were behind many of the seemingly "stupid" actions of the Masters of the Universe and the people who were supposed to throw them in prison at various moments - and proves it well. The ideological component of the crisis has often gone ignored because a small group of people think there's still money to be made in it (and they're probably right). The other positive is the amount of detail provided. I'm a finance neophyte, so some sections were hard to follow, but otherwise I appreciated some of the longer explanations. The big negative was how bloggy the book ended up being. There were some campy exaggerations, like how Smith repeatedly refers to economists (generally) thinking something stupid and being, as a group, unable to produce anything of importance, and the evidence she uses to criticize economists (generally) comes from quotes from... economists. We're supposed to distrust the entire profession but certain economists are fine? Not that there's anything intrinsically impossible in that idea, but the movement from "some" or "most" to "all" has become a staple of internet discourse and finds a good home here. The blogginess appears in the structure of some chapters as well, that jump backwards and forwards, not just temporally but in terms of argumentative structure. The finance and financial-ese was already hard to follow sometimes, and these leaps don't help much. But those are small critiques in comparison to what Smith is offering: a unique perspective from her years of experience in the finance industry on the uncertainty inherent in the economy. She's bringing back Keynes to smack the neo-Keynesians, and focuses on the concrete details of how these ideas came to rob us.
Rainbow Dash sneezed. The summer Feather Flu was catching on. And Windigo's punishment was no better. The ice around her was spouting little snowflakes. The black ice was spreading in the indigo filly's eyes as the numb pegasus froze. A wicked grin spread across her face. She thought she had a good reason, Rainbow Dash had crushed her snow igloo. Rainbow Dash shivered and huddled with her mane wrapped aroud herself. No luck. Her wings ached with frostbite, her stomach rumbled, and the snowflakes cut her coat like ninja stars. She could just curl up and die here. But no, she thought, there's no backing down! Consider your friends! She imagined them, one by one. Twilight would never be able to sleep. Rarity would close up shop. Applejack would sell her favorite napping tree. Pinkie Pie would be straight-maned forever and live in complete darkness. Fluttershy would bawl her head off. Stay strong! she thought. Equestria needs you! Ponyville needs you! Your friends need you! You need you! She thouhght this strongly, emitting one single sneeze. A little tiny snowflake rushed through the air.