Tag Archives: Financial Crises

A Nation of Deadbeats by Scott Reynolds Nelson

When you read this book you garner a vastly deeper appreciation for the terms scholar, historian, research and story teller. You also are blessed with a unique narrative regarding the history of America’s financial disasters in the nineteenth century. I’ve done quite a bit of reading in this genre – and this book is a MUST READ.


 

A Nation of Deadbeats
I truly enjoyed this work. Actually, I became immersed in the narrative and learned more than I could have hoped.

This work has encouraged me to continue to “explore the places where maps have failed us…pushing along in the dark.” (p. 254). Yet, the historical evolution of U.S. capitalism that this work recounts, illuminated the absence of pre-existing maps from which to plot the path ahead. However, this work also revealed for me that man, at every juncture, with his seemingly eternal penchant for wealth and power, and organization – emerged, and injected itself at every opportunity.

For me, this book distinctly reinforced the incontrovertible evidence inhabiting the historical record; when you combine man and money, the emergence of mayhem is a matter of fact. Although we currently live in a time where our culture suggests that we know most everything, can control our environments, and predetermine outcomes of socio-economic (and geo-political) policies – I remain a healthy skeptic…particularly as it relates to ALL things economic. Again, this volume is a reminder to me to remain sensitive to the alerts from my “crap detector” (attached to my forehead, swiveling in a 360, 24-7 – and – solar powered). The “smugness” that inhabits our intellectual, social, economic and political discourse today remains, in my opinion, one of our most profound, enduring weaknesses – as a species – particularly as folks continue to espouse rigidly militant “certainty” about issues; past, current and future. I, for one, appreciate those who possess a high regard for questions vs. those who attempt to cram answers down my throat…as the author’s commentary at the end of the book, directed at his colleagues, elicited deeply appreciative smirks from this reader.

Yes, as some of the author’s final remarks in this book indicate, I too have ongoing concerns about the unregulated and mysterious miasma of rogue waves of capital that seemingly slosh between the shores of our globe…outside the cognitive awareness of the ordinary citizen…capital without margin (“margins impose safety”… p. 251), incalculable leverage, incomprehensible risk, and a source of instability whose magnitude and morph I remain acutely concerned with…as inertia continues to thrust us into places where maps are under construction…pushing along in the dark.…to a yet, unknown destination. Yet, the human motivations remain seemingly unchanged.

This particular work is profoundly appreciated by this reader. Thank you so very much Mr. Reynolds.

I highly recommend it.


 

This Time is Different – Eight Centuries of Financial Folly by Carmen Reinhart and Ken Rogoff

Reinhart, Carmen M. & Rogoff, Kenneth S. This Time is Different – Eight Centuries of Financial Folly, Princeton University Press, Princeton New Jersey Copyright © 2009 by Princeton University Press.

This Time Is Different

Wow…Although this imposing volume penned by Reinhart (Professor of Economics at the University of Maryland) and Kenneth Rogoff (Thomas D. Cabot Professor of Public Policy and Economics at Harvard) appears written solely for trained academics — nothing could be further from the truth.

This is an incredible study that is digestible fare for a wide audience who may desire to have a better understanding of the history of financial crises.

Here are a few of my favorite excerpts:

The instruments of financial gain and loss have varied over the ages, as have the types of institutions that have expanded mightily only to fail massively. But financial crises follow a rhythm of boom  and bust through the ages. Countries, institutions, and financial instruments may change across time, but human nature does not. P. xxvii – emphasis is mine.

Economic theory tells us that it is precisely the fickle nature of confidence, including its dependence on the public’s expectation of future events, that makes it so difficult to predict the timing of debt crises. High debt levels lead, in many mathematical economics models, to “multiple equilibria” in which the debt level might be sustained –or might not be. Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are. But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite. Such was certainly the case of the United States in the late 2000s. As we show in chapter 1,  all the red lights were blinking in the run-up to the crisis. But until the “accident,” many financial leaders in the United States-and indeed, many academics-were still arguing that “this time is different.” p.xlii & xliii – emphasis is  mine.

Technology has changed, the height of humans  has changed and fashions have changed. Yet the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. P. 292. – emphasis is mine.

But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked. This time may seem different, but all too often a deeper look shows it is not. Encouragingly, history does point to warning signs that policy makers can look at to assess risk-if only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, “This time is different.” p. 292 – emphasis is mine.

A reservoir of insightful research, data and poignant observations. A volume that belongs in your library as a reference book that one will likely return to on many occasions for further illumination.

LOVED IT.