ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism

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St. Martin's Press, Oct 11, 2011 - Business & Economics - 368 pages
5 Reviews

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

 

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User 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

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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.
 

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Contents

Acknowledgments
BLINDED BY SCIENCE
FINANCIAL ECONOMICS COURTESY P T BARNUM
THE TRIUMPH
HOW DEREGULATION LED TO PREDATION
LOOTING 2 0
THE WIZARD OF
THE SHADOW BANKING
PLUS ÇA CHANGE PLUS CEST LA MÊME CHOSE
Notes
Bibliography
Copyright

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About the author (2011)

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.

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