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Type of bind: Hardcover
Dewey Decimal Number: 332.04150973
EAN num: 9781586485634
ISBN number: 1586485636
Label: PublicAffairs
Manufacturer: PublicAffairs
Quantity: 1
Page Count: 224
Printing Date: March 03, 2008
Publishing house: PublicAffairs
Sale Popularity Level: 557
Studio: PublicAffairs
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We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions. According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it.
The Trillion Dollar Meltdown explains how we got here, and what is about to happen. After the crash our priorities will be quite different. But things are likely to get worse before they better. Whether you are an active investor, a homeowner, or a contributor to your 401(k) plan, The Trillion Dollar Meltdown will be indispensable to understanding the gross excess that has put the world economy on the brink—and what the new landscape will look like.
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Rated by buyers 
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This book is the financial layman's primer for the credit crisis. It is clear, concise, and offers a mature and historically-grounded view of the credit bubble, past, present, and harrowing future. A great read.
Rated by buyers -
If you want to understand what and why are US (and international) banks suddenly covering every corner of the world to raise capital - this book has the answers!
Morris has an incredible foresight. While the book was written before the Banking Crisis hit the US, you feel as if you were reading the morning's newspaper.
A must for any business person!
Rated by buyers -
The author paints a very broad picture in leading us into the main focus of the book, which is the credit crunch resulting largely from the subprime mortgage mess. The sketches of previous bubbles leading up to this bubble give helpful background and strengthen the notion that this debacle is part of an ongoing trend dating back to the 80s. There is precedent for the current troubles in the 1987 market crash, the LTCM hedge fund failure, and the demise of GE's Kidder Peabody in 1994.
A number of ingredients have gone into the mix of these ever arising bubbles. Since the advent of computer trading, investment banks and hedge funds have been able to develop more and more complex financial instruments that have made them more and more enthusiastic about taking on risk. They are aided by the fact that they can essentially work in dark corners behind the scenes with no regulators poking around. Sucess leads to the prospect that even fatter returns are within reach if they keep leveraging their positions. The fuel that keeps the fires burning is easy money and burgeoning asset values; and it all works well until home prices stop going up or the Fed decides to raise interest rates. Then we have a crash.
The book gives the reader a glimpse into what goes on in the dealmaking recesses of the investment banking world. We learn, for instance, that a Credit Default Swap is a credit derivative that is supposed to hedge against mortgage defaulting and that synthetic CDOs are arrays of Credit Default Swaps with different tranches divided according to risk; and that SIVs are a means the banks use to hide the stuff from their books.
The macroeconomic viewpoint of this book is far too sketchy to enable anything but a scattershot casting of blame. The author would have done better to have maintained more of a focus on the excesses of unregulated finance and the problems of remedy. The recent fallout, which has so far included the government rescue of Bear Stearns - an abandonment of free market principles, leads to the obvious conclusion that sensible regulation is necessary. Nevertheless, there seem to be many in influential positions who prefer to look the other way and parrot that any regulation is bad regulation.
Rated by buyers -
The book provides an excellent analysis of the current US inspired credit crisis that is threatening the financial system. The problem boils down to an unwinding of an enormous credit bubble, built up over the last twenty five years, and a corrupt, overly leveraged, wall street establishment that is able the pocket gains and socialize losses. The problem is not necessarily one with the free market (in the real sense), but rather one with the current neo-corporatist model (aka Chicago school monetarism, or soft fascism) where in effect the most powerful and wealthy interests in a country gain control of the state regulatory and legislative agencies and use them as a battering ram to further their own private interests at public expense. Of course the public is usually too distracted and dumbed down to ever figure out what is going on until after their bank accounts are empty, they're hopelessly in debt, and their children are being packed off to fight the latest war for "freedom and democracy".
It seems that this same neo-corporatist model is to some extent also at work in the pharmaceutical, media, and military industrial complexes as well. It creates a type of "tapeworm economy", or ponzi scheme, that eventually caves in on itself.
Rated by buyers 
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I was very much impressed by Charles R. Morris's "The Coming Global Boom" in the early 1990's, so this book was quite a disappointment. "The Trillion Dollar Meltdown" is an example of the phase Charles Kindleberger describes in his "Panics, Manias, and Crashes" as "looking for the scapegoats." Here the principal scapegoats are Milton Friedman and Alan Greenspan. Morris both decries and predicts the demise of Friedman's free market "ideology" and Reagan's idea that government is part of the problem and not the solution.
Morris sets up his argument by describing how liberalism and fiscal Keynesianism lost credibility by the end of the 1970's with what has been described as stagflation. Fiscal stimulus no longer stimulated an economy mired in so much debt. Morris then describes how Paul Volker implemented Friedman's Monetarism policy , but according to Morris, it worked because Volker didn't believe in the ideology. Volker just wanted to demonstrate to the world he was serious about inflation.
While I think Morris brilliantly critiqued the Liberalism of the 1970's, I disagree with his argument that it went away. Reagan promised to abolish the Energy and Education Departments and that went nowhere. Republicans talked about "government as the problem" but then expanded most government programs. The liberal interest groups that proliferated in the 1970's turned their attention to the Federal Courts and achieved many of their goals there. Interest group Liberalism didn't go away in the 1980's. It's agenda was still advanced merely by changing venues.
My point is that big government never died, Morris's claims notwithstanding. Nor did financial regulation end with the repeal of Glass-Steagall Act. In the aftermath of the Dot.com boom-bust, the Sarbanes Oxley Act---which Morris doesn't mention---put heavy restrictions on new stock issuances. So, the money went where the regulations aren't. As it usually does.
I would also say that in dealing with the current crisis, Fed Chairman Bernacke is not using the Milton Friedman approach of letting the "fire burn itself out." Instead, Bernacke is using the Walter Bagehot strategy of finding the lender of last resort to bail out the ailing institutions.
Now, I agree with Morris that many of these `investments" he describes are scams.
I think variable rate mortgages are a bad idea because most people who agree to one have no idea that they are placing a bet on what the Fed will do over the life of the loan. They are signing up for what could be a rather bumpy ride.
I also agree with Morris's criticisms of Sallie Mae and the student loan mess, but I would point out that the colleges themselves are considerably to blame for these problems. Many colleges have accumulated vast trust funds while doing little to help their students. It sometimes seems to me that a college education has become like home ownership: having one is better than not having one but too many bucks have been chasing too little bang for some time now.
I think the institution that is most profoundly in need of reform in America is the United States Congress. When the Republicans forgot what they had been elected to do, they were turned out of office. But, when the Democrats returned to power, I saw that many faces of the Committee Chairs were the same as those who were turned out of power in 1994. Do you think they learned anything in the interim? I don't.
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