Tag: review

Book Review: Transaction Man

In Transaction Man: The Rise of the Deal and the Decline of the American Dream (Amazon,) author Nicholas Lemann makes a case for building a plural democracy. Did it have to be a book? Probably not.

The money quote:

Embracing pluralism has to begin with a kind of radical humility. It’s human nature, especially for people who think of themselves as educated, sophisticated, and public-spirited, to believe that what you want the world to look like is a broad, objectively determined meliorist plan that will help everyone.

Pluralism requires accepting a degree of messiness, squabbling, pettiness, and bargaining in the governing of a society: these things are a feature, not a bug. People have a strong and often demonstrated tendency to try to settle their differences through violence. Pluralism means to redirect this tendency into managed, nonviolent conflict. It imagines a system of groups endlessly in vigorous contention. No one group should be able to establish its dominion over the others, either out of selfishness or in the conviction that it represents some inarguably right outcome. There is no such thing as a commonsense solution to a major problem, one that is good for everyone.

Pluralism treats democratic processes, not particular outcomes, as moral absolutes.

The economic system, since the Industrial Revolution, has periodically generated extreme concentrations of power and wealth. Imbalances in economic power always turn into imbalances in political power, unless the political system forcibly corrects them. Concentrations of power always wind up harming people, no matter how benign the holders of power believe themselves to be.

The book meanders between trying to be a history lesson and an NYT human interest piece.

Recommendation: Avoid.

Book Review: Lords of Finance

In Lords of Finance: The Bankers Who Broke the World (Amazon,) author Liaquat Ahamed goes deep into the personalities of central bankers in the years between the first and second world wars – their many foibles and their obsession with the gold standard.

Some interesting titbits regarding the gold standard

Experts thought that the First World War would end a couple of weeks because European economies were so tightly intertwined that the cost of a prolonged war would be unbearable.

So smug were the bankers and economists that they even allowed themselves to be convinced that the discipline of “sound money” itself would bring everyone to their senses and force an end to the war. The experts seemed to have forgotten that among the first casualties of war is not only truth but also sound finance.

In four years of constant and obsessive battle, the governments of Europe had spent some $200 billion, consuming almost half of their nations’ GDP in mutual destruction.

After the War, there was a universal consensus among bankers that the world must return to the gold standard as quickly as possible. The biggest obstacle to such a return was the mountain of paper currency issued by the central banks of the belligerent powers during the war.

Take Britain, for example. In 1913, the total amount of money circulating in the country—gold and silver coins; notes issued by the Bank of England and by the large commercial banks; and the largest category, bank deposits—amounted to the equivalent of $5 billion. This supply of money, in all its various forms, was backed in aggregate by the country’s $800 million of gold.

By 1920, the Bank of England had lent so much money to the government to help pay for the war effort that the total money supply had ballooned to the equivalent of $12 billion. Britain’s gold reserves meanwhile remained roughly the same. Thus, whereas in 1913, there had been 15 cents worth of gold within the country for every $1 dollar in money, in 1920 each $1 of money was backed by less than 7 cents.

Maynard Keynes was strongly against the resumption of the gold standard.

His main point was that under current arrangements, given that U.S. gold reserves were so dominant, to tie the pound to gold in effect meant tying it to the dollar and the British economy to that of the United States—and by implication, to Wall Street.

However, the US and Europe decided to tether themselves to the gold standard. And the rest, as they say, is history.


History is often presented as a linear sequence of pre-ordained events. However, reality is a lot more random. People responsible for setting the course of history are, at the end of the day, human. They act out in anger, claim the moral high ground and dig themselves into irreversible positions, often putting their egos ahead of doing the right thing.

In hindsight, the triggers for the First World War seem trivial, the punishing restitution imposed on Germany by the Allies seems petulant, the moral arguments in favor of returning to the gold standard seem anachronistic and the inability of the US Fed to decisively act against bank failure in the early 30’s seems like a huge failure. However, for the people making those decisions, it seemed entirely rational, logical, right and inevitable.

Recommendation: Read the epilog first and the rest of the book if you find that interesting.

Book Review: Crashed

In Crashed: How a Decade of Financial Crises Changed the World (Amazon,) Adam Tooze gives us a chronological, blow-by-blow account of the 2008 Global Financial Crisis (GFC) and its after-effects.

As a financial history buff, I found the book fascinating, albeit a tad tedious with the details. It also reinforced my belief that you cannot take the politics out of the political-economy – i.e., the study of economics cannot be divorced from politics.

With prices accelerating toward annual increases of 14 percent in 1979, Volcker and the Fed decided that it was time to apply the brakes.

In June 1981 the prime lending rate touched 21 percent.

The result was to send a shuddering shock through both the American and the global economies. The dollar surged, as did unemployment. Inflation collapsed from 14.8 percent in March 1980 to 3 percent by 1983. In Britain this was the crisis with which the Thatcher government began. In Germany it would contribute to Schmidt’s unseating and his replacement by the conservative government of Helmut Kohl. France’s Socialist government under President François Mitterrand would be forced into line in 1983.


The Chinese model gets a fair amount of ink and it helped fill some of the gaps I had in my understanding of how the Party, Policy and Politics are intertwined, local vs. central political power, etc.

The book also highlights the all too familiar role of bumbling researchers with errors in the models that unleash large social movements that lasts years after the corrigendum is published. Reinhart and Rogoff’s “Growth in a Time of Debt” lead to painful austerity in England, debt brakes in Germany and birthed the Tea Party in the US. No one wanted to hear later that the analysis was riddled with errors.

Recommendation: Skim.

Book Review: Merchants of Doubt

In Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Climate Change (Amazon,) authors Oreskes and Conway describe how the Big-Tobacco’s efforts to obfuscate evidence against smoking founded an entire industry dedicated to spreading FUD against science.

History shows us clearly that science does not provide certainty. It does not provide proof. It only provides the consensus of experts, based on the organized accumulation and scrutiny of evidence.

There are always uncertainties in any live science, because science is a process of discovery.

The inherent uncertainties involved in the scientific exploration of a topic provides the opening for the Merchants of Doubt. By highlighting these uncertainties and engaging in relentless campaigns of doubt-mongering, these MoDs have twisted the scientific process and created an anti-science brigade.

With the rise of radio, television, and now the Internet, it sometimes seems that anyone can have their opinion heard, quoted, and repeated, whether it is true or false, sensible or ridiculous, fair-minded or malicious. The Internet has created an information hall of mirrors, where any claim, no matter how preposterous, can be multiplied indefinitely. And on the Internet, disinformation never dies.

Is it any wonder that there are people who still believe that the Earth is flat?

Recommendation: When you read this book along with This Is Not Propaganda, you’ll want to kill-off all social media/messaging companies and see yourself agreeing with the basic plot of Utopia. So, avoid, to preserve sanity.

Book Review: Trade Wars Are Class Wars

In Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace (Amazon,) authors Matthew Klein and Michael Pettis argue that a handful of elites have captured the financial benefits of open global trade and finance. This has caused a global savings glut and a hunt for safe assets that has resulted in a series of boom-busts in American asset prices and an hollowing-out of its manufacturing base. These underlying income and wealth inequalities have manifested themselves as trade wars.


Trade war is often presented as a conflict between countries. It is not: it is a conflict mainly between bankers and owners of financial assets on one side and ordinary households on the other—between the very rich and everyone else. Rising inequality has produced gluts of manufactured goods, job loss, and rising indebtedness. It is an economic and financial perversion of what global integration was supposed to achieve.

America’s openness to international trade and finance means that the rich in Europe, China, and the other major surplus economies can squeeze their workers and retirees in the confidence that they can always sell their wares, earn their profits, and park their savings in safe assets.

The world’s rich were able to benefit at the expense of the world’s workers and retirees because the interests of American financiers were complementary to the interests of Chinese and German industrialists. Both complemented the interests of the wealthiest throughout the world, even from the poorest countries.

The book is an easy read and anyone who is interested in understanding the current macro environment should read it.

Recommendation: Read it Now!