ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism
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.
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
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LibraryThing ReviewUser Review - rivkat - LibraryThing
Its organization falters in places, and while it gives a fair amount of intellectual history it expects you to understand a lot of finance jargon, but this is a fresh take on the economic collapse ... Read full review
I am a recovering quant, and let me say that this book explains the financial crisis that we are still in more precisely and cohesively than any other book besides maybe "The Big Short" (although this book is much more technical and precise).
In particular, the book explains how traders and quants think, how the regulators got confused by both economic theories and pervasive opacity, and how the hedge fund Magnetar managed to set up enormous bombs (in the form of synthetic CDOs which were constructed to fail) that blew up the entire system.
A must-read for anyone seriously interested in knowing how this all happened and how we can keep it from re-occurring.