Editorial Review

"Hell is empty, and
all the devils are here."
-Shakespeare, The Tempest

As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street, or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators, or clueless home buyers?

According to Bethany McLean and Joe Nocera, two of America's most acclaimed business journalists, the real answer is all of the above-and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

All the Devils Are Here goes back several decades to weave the hidden history of the financial crisis in a way no previous book has done. It explores the motivations of everyone from famous CEOs, cabinet secretaries, and politicians to anonymous lenders, borrowers, analysts, and Wall Street traders. It delves into the powerful American mythology of homeownership. And it proves that the crisis ultimately wasn't about finance at all; it was about human nature.

Among the devils you'll meet in vivid detail:

• Angelo Mozilo, the CEO of Countrywide, who dreamed of spreading homeownership to the masses, only to succumb to the peer pressure-and the outsized profits-of the sleaziest subprime lending.

• Roland Arnall, a respected philanthropist and diplomat, who made his fortune building Ameriquest, a subprime lending empire that relied on blatantly deceptive lending practices.

• Hank Greenberg, who built AIG into a Rube Goldberg contraption with an undeserved triple-A rating, and who ran it so tightly that he was the only one who knew where all the bodies were buried.

• Stan O'Neal of Merrill Lynch, aloof and suspicious, who suffered from "Goldman envy" and drove a proud old firm into the ground by promoting cronies and pushing out his smartest lieutenants.

• Lloyd Blankfein, who helped turn Goldman Sachs from a culture that famously put clients first to one that made clients secondary to its own bottom line.

• Franklin Raines of Fannie Mae, who (like his predecessors) bullied regulators into submission and let his firm drift away from its original, noble mission.

• Brian Clarkson of Moody's, who aggressively pushed to increase his rating agency's market share and stock price, at the cost of its integrity.

• Alan Greenspan, the legendary maestro of the Federal Reserve, who ignored the evidence of a growing housing bubble and turned a blind eye to the lending practices that ultimately brought down Wall Street-and inflicted enormous pain on the country.

Just as McLean's The Smartest Guys in the Room was hailed as the best Enron book on a crowded shelf, so will All the Devils Are Here be remembered for finally making sense of the meltdown and its consequences. ... Read more

Reviews

I thought it would take at least a decade for a book this good
I am only about 40% through this book but I had to stop and give it 5 stars! This is an excellent and balanced account of the events, laws and business practices that led up to the crisis. This is not a book that over-simplifies the crisis with terms like "Wall Street Greed". Instead, it sheds light on all the variety of players that it took to create this mess: Fannie/Freddy, The Sub-prime companies (many you probably never seen mentioned in press), policies and laws that go back to the Clinton era, failures of regulators and the justice department, the Fed, Banks, Wall St., the Rating agencies and of course, the general publics own stupidity.

If you are willing to accept the fact the the answers to the cause of the crisis are not simple and you "can handle the truth" then you must read this book.
... Read more

Editorial Review

What if there were a way to cut through all the financial mumbo-jumbo? Wouldn’t it be great if someone could really explain to us—in plain and simple English—the basics we must know about investing in order to insure our financial freedom?

At last, here’s good news.

Jargon-free and written for all investors—experienced, beginner, and everyone in between—THE INVESTMENT ANSWER distills the process into just five decisions—five straightforward choices that can lead to safe and sound ways to manage your money.

When Wall Street veteran Gordon Murray told his good friend and financial advisor, Dan Goldie, that he had only six months to live, Dan responded, “Do you want to write that book you’ve always wanted to do?” The result is this eminently valuable primer which can be read and understood in one sitting, and has advice that benefits you, not Wall Street and the rest of the traditional financial services industry.

THE INVESTMENT ANSWER asks readers to make five basic but key decisions to stack the investment odds in their favor. The advice is simple, easy-to-follow, and effective, and can lead to a more profitable portfolio for every investor. Specifically:

• Should I invest on my own or seek help from aninvestment professional?
• How should I allocate my investments amongstocks, bonds, and cash?
• Which specific asset classes within these broadcategories should I include in my portfolio?
• Should I take an actively managed approach toinvesting, or follow a passive alternative?
• When should I sell assets and when should I buymore?

In a world of fast-talking traders who believe that they can game the system and a market characterized by instability, this extraordinary and timely book offers guidance every investor should have.

Reviews

Elegant summary of the core of personal investing
One of the advantages of a college education with a major in finance is that you learn the fundamentals, and, more importantly, you learn the boundaries of the universe in terms of what the field includes and what it excludes. Spend an hour or so reading this book, and you will also get that comfortable feeling that comes from knowing that you understand what personal investing is really all about. You will get the "big picture" and how it affects you.

I have been a full time faculty member teaching at the college level for the past 35 years and must say that the authors have managed to capture the essence of personal investing in about as few pages as I have ever seen and with a clarity that is very rare in books on this topic. I intend to make it required reading for both my undergraduate and graduate personal finance classes.

I might also add that any negative reviews posted to this site are likely to come from Wall Street brokers who make their living by exploiting the general public's ignorance on investing. These brokers don't like books that clarify and illuminate rather than mystify and obfuscate basic principles. As a lifelong educator, I applaud Goldie's and Murray's nobel effort to help readers educate themselves so as not to be fooled by the same Wall Streeters who disgraced themselves in 2008 and nearly destroyed our economy with their greediness. Anyone who feels they don't know enough about investing should read this book. It is a gem.

The title says it all - The Answer
You won't be getting this book from your broker for Christmas. You don't need to read a bunch of "Beat The Market!!!!!" books to develop a sound approach to investing. Evaluate your personal investment goals and timeframe, take a gut check on your appetite for risk, and accept that risk and returns are correlated. The authors make a compelling, data driven argument in under 100 pages that describes a "no regrets" approach to investing. Market timing, stock picking, commodity speculating, etc. ultimately benefit the trading pros over the average investor. Choose your asset allocation model with a few simple principles, then buy diversified global capitalism for your equity component with low expenses. And hold it. Done. You won't be the big winner in any given year, but you will likely out perform 95%+ of investors who buy the proven myth that they can beat the market. There are many purveyors of this snake oil, but few truth tellers. Murray and Goldie get it right, and this book is so short and to the point that you must read it.

the investment primer for everyone
I just read The Investment Answer this morning in under an hour and it is brilliant -- comprehensive without being overwhelming, easy for a broad audience to read and understand, and most importantly, easy for anyone to execute.

Over the last 30 years, this is the model we have used to invest, and it has served us very well. But we have not been able to articulate this sensible plan to friends and family (especially our children) in a way that was understandable and compelling. The temptation to "take the bait" from Wall Street is strong. Many friends and colleagues who are more "sophisticated" investors suffered the sad outcomes so elegantly described in the book.

Gordon and Daniel -- thank you, thank you for writing this book. I am placing my order for 10 copies to give away to family and friends this morning. You have accomplished what few have -- a lasting legacy that will positively impact many families for a lifetime!

All you need to know for a successful investment experience
Like losing weight, successful investing is based on a few simple concepts. However, also similar to losing weight, the concepts are not always easy to implement. It takes discipline to execute the simple concepts of eat less and exercise more. It also takes discipline to execute the simple concepts of diversification and rebalancing. Dan Goldie and Gordon Murray have done a terrific job of breaking down successful investing to a few core concepts. They explain the concepts in layman terms, always keeping it short and simple. The beauty of this book is the brevity yet clarity of each concept covered. You do NOT need to read a 300+ page book to understand investing. There is now this book, which is under 80 pages...but even a quicker read than you might think because of the font and graphs. I read the entire book in two hours one evening. I have an undergrad degree in Finance and Economics and have spent about five years combined time earning my CFA and CFP(r) designations. YET, if you simply commit to spending two hours reading this book, you will be privy to all the key investment principles that took me 20 years in the business to discover. Not only do I give this five stars, but I plan on buying 50 books and giving them away to every relative and friend I have. Disclosure: I don't know either author nor have I met either one. I'm just in the same industry and delighted that someone actually wrote the book that I wish I had written.

The book that I wanted to write!
Dan and Gordon have written the book that I've wanted to write for years, but never found the time. It is clear and concise. I read it in less than an hour.

The authors do a great job of explaining the difference between an independent investment advisor and a salesman working in Wall Street's broken business model. This is something that the vast majority of investors do not understand.

Even novice investors will find this easy to understand. Perhaps even more important, it debunks the myths that prevent most investors from achieving success. Read it and buy another copy for someone that you care about.

Perfect, Bite-Size, Investment Book for Any Level Reader
This book is a perfect culmination of: Goldie's experience with frustrated clients due to Wall Street gimmicks, explanations of why Wall Street's solutions are substandard, and an academically, exhaustive, investment remedy for every investor. BAMM!

The authors' abilities to "cut to the chase", and quit the "beating around the bush", leaves the reader feeling refreshed and informed. Simple examples and compelling stories will resonate well with all levels of readership.

If you are looking for a way to quit worrying about your investments, ignore CNBC & WSJ, and "drop" that confused feeling you have about investing, this is your book! Grab a cold Coke, relax, and enjoy yourself for the next hour of your life. You will forever thank the authors for presenting the information in such a light manner. I bet you will refer the book to at least 3 of your friends.

Run, don't walk, to get this book!!
Several years ago, Gordon sat my husband and me down to show us the beta version of this book. We'd been friends for years and he felt strongly that we needed to know how to protect our money. His arguments were so clear and compelling that we moved our investments from a traditional retail broker to an investment advisor with an investment philosophy based on the concepts in this book -- efficient markets, modern portfolio theory, diversification, and asset allocation.

For the first time, we felt confident that we and our investments were in good hands. Then the recession hit. Our portfolio did less badly than many and rebounded faster than most. And with this book, we understood why.

Run, don't walk to buy this book or download the pdf version. It will give you the peace of mind and sense of control that ONLY happens when you understand how the financial world really works. With what we learned, we felt ready to act in our own best interests. You will too.

Women should read this book!
Like me, many women were not handling their family's investments and are now seeking to take control of this aspect of their lives. Now that I manage my own investments, I wanted to make wise and purposeful decisions. I didn't want to just take the path of least resistance. This book helped me ask the essential questions and seek answers that suit my objectives. I finally feel in control of my finances!

The best basic investment book you'll ever need
I read Dan and Gordon's book cover to cover in about 45 minutes last weekend. It is chock full of very good data and excellent advice on how to invest money successfully, something most investors do not achieve. I plan on giving the book to each one of my children to help them better understand how to properly invest their own money.

Read this book before you invest
I wish that someone had written such a succinct treatise on investing before I first started investing my money. I could have avoided some very counterproductive forays into commodities, oil and gas ventures, and other highly suspect "investments". Read this book before you implement your investment plan. ... Read more

Editorial Review

Over the past seven years, in a highly unstable global economy, Cisco doubled revenue, tripled profits, and quadrupled earnings per share. How? By Doing Both. When companies face key strategic decisions, they often take one path and abandon the other. They focus on innovation and new business at the expense of core businesses or vice versa. They stress discipline and sacrifice flexibility. They focus on customers and ignore partners. And they struggle. Cisco believes there is a better way: Doing Both.

Doing Both means approaching every decision as an opportunity to seize, not a sacrifice to endure. It means avoiding false choices, reduced expectations, and weak compromises. It means finding ways to make each option benefit and mutually reinforce the other. In this book, Cisco Senior Vice President Inder Sidhu explains why “doing both” is today’s best strategy. Then, drawing on Cisco’s hardwon insights and the experiences of companies like Procter & Gamble, Whirlpool, and Harley-Davidson, Inder presents a complete blueprint for “doing both” in your organization, too.

Win by Doing Both!

• Sustaining and Disruptive Innovation

• Existing and New Business Models

• Optimization and Reinvention

• Satisfied Customers and Gratified Partners

• Established and Emerging Countries

• Doing Things Right and Doing What Matters

• Superstar Performers and Winning Teams

• Authoritative Leadership and Democratic Decision Making

Reviews

A Living Example of why "Both-And" wins over "Either-Or"
There is evidence showing up everywhere that the "both-and" theory is not only real, but far more powerful than the limiting "either-or" postulate. "Doing Both," by Inder Sidhu is not only strong evidence that it works, but a wider, broader scope for its use.

We've seen parts of the both-and theory at work in business through co-opetition. However, simple collaboration habits often times do not include the factors that influence business success. Some people might think that today's collaborator would more likely be a new college graduate who works for a start-up technology company who uses a BlackBerry to increase personal productivity.

But, there is more to it than that. Both-and is allowing product innovation and the balancing of many seemingly conflicting goals to be maintained within an organization. Profitability is enabled by balancing seemingly conflicting purposes, not by choosing one or the other.

Inder Sidhu addresses multi-evolutionary product development agendas with a very elegant way of "Doing Both" things. Cisco has become a role model of sorts, where workers are empowered with personalized services, choice, and work-life balance in a human network to get their work done and make organizations thrive. The opening analogy on doing both form and function with the Golden Gate Bridge Bridge is very powerful as it became the symbol for Cisco.

Hopefully their example will inspire you to influence your current environment with the expectation that cultural factors influencing collaboration will include role modeling by senior leaders, a formal collaboration process, tools, training and rewards that will work for you.

"Doing Both" provides insight that will help ease the transition from the old management style to this new more profitable one. This book earns 5 stars because it is inspiring, insightful, and most importantly, practical. It is very well written and is fluid as well as engaging. It very proactively makes the both-and theory come across as quite believable and doable.

This book represents some fresh thinking to current business challenges. Definitely worthwhile spending some serious focus time on.

Let me also tell you about another new business challenge that I believe would be just as important spending some good focus time on...it is proactive managing your online reputation. In addition to "Doing Both" I would highly recommend getting Wild West 2.0: How to Protect and Restore Your Reputation on the Untamed Social Frontier.

Even though Cisco is a great company, it still has customer problems ... and you will to. It is inevitable that you will get some bad product reviews, or even worse, revengeful customers who will try to ruin your company's online reputation. Wild West 2.0 tells you exactly where to look for reputation problems and then how to repair them. Internet Reputation Management should not be delegated to your webmaster. From my experience it is now a critical management and marketing issue that concerns everyone from the CEO on down.

Interesting and inspiring


Inder begins with sharing how Cisco's TelePresence video conferencing technology has enabled him to see, hear and almost feel his mother's presence who is 8,000 miles away back home in India. The intro is touching and a friendly reminder of how technology has changed our lives in many ways and most importantly how we stay in touch and always connected.

Inder takes you through the various steps that Cisco has taken to grow to a $40 billion dollar company with over 60,000 employees. Its an interesting read as Inder walks through the history and the strategic decisions made to remain competitive through innovation and bold moves. Inspired by the stories of the background of the leaders chosen, the difficult questions and challenges faced and their paths take to success.

Doing Both is an interesting and inspiring read.

Business wisdom not to be missed
This book hones in on the point that optimal business decisions are not necessarily trade-offs between two choices but usually involve doing both. Written in an engaging, easy-to-read, story-telling style, the book offers numerous examples of how Cisco has been "doing both" to enable its success from multiple angles: technology innovation, market segmentation, supply chain management, organizational design, and more. Inder Sidhu's examples from his personal life are moving and help to make the book quite inspirational. A joy to read.

Unique Insights and Lessons Not To Be Missed
Business books are a "dime a dozen". Fortunately, this book is one that stands apart from the pack. Insightful, thoughtful, compelling and thought provoking, "Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth" takes the reader on a dynamic journey into the inner workings of Cisco and it's remarkable transformation. Inder SIdhu's storytelling is highly entertaining and provides unique insights that today's business leaders must not miss. This book will be one that I highly recommend to my friends and colleagues.

Organizational transformation is not -- repeat not - a zero-sum game

One of the most self-defeating mindsets is suggested by the admonition, "You can't have your cake and eat it too." Obviously there are situations when there are two options that are mutually-exclusive. However, most of the time, when facing a choice, it is a mistake to select only one and dismiss all others. Inder Sidhu does not advocate "a balanced compromise between two objectives, but a mutually reinforcing multiplier in which each side makes the other better." He cites comments included in Built to Last (1994) co-authored by Jim Collins and Jerry Porras when discussing a highly visionary company "that doesn't want to blend yin and yang into a gray indistinguishable circle that is neither highly yin nor highly yang; it aims to be distinctly yin and distinctly yang - both at the same time, all the time. Irrational? Perhaps. Rare? Yes. Difficult? Absolutely."

Sidhu devotes the bulk of his lively narrative to explaining how exemplar companies such as Apple, BYD, Cisco, GE, Google, IBM, and Procter & Gamble achieve these strategic objectives:

o Improving the core business while conducting disruptive innovation
o Strengthening current account relationships while adding new ones
o Fine-tuning what is done well while transforming or eliminating what isn't
o Creating customer evangelists while creating steadfast partners
o Thriving on "Main Street" while exploring "the road less traveled"
o Doing it right and doing what is right (i.e. what matters)

Obviously, doing both (of whatever) is not always possible or, when possible, advisable. Also, any lessons learned from the exemplar companies such as those Sidhu examines (especially Cisco) must be modified to accommodate the specific needs and resources of much smaller organizations.

With all due respect to the value of these lessons, I think the single greatest benefit of this book is the mindset it can help its reader to develop. Although Sidhu does not cite them and their books, he has clearly been influenced (albeit indirectly) by business thinkers such as Henry Chesbrough (Open Innovation and Open Business Models) and Roger Martin (The Opposable Mind) as well as Venkat Ramaswamy and Francis Gouilllart (The Power of Co-Creation). Their major recommendations track almost seamlessly with Sudhu's own:

1. Be open-minded to possibilities, whenever/wherever they occur
2. Respect and examine those that are plausible, especially if unorthodox
3. Seek out collaborations that are mutually-beneficial
4. Welcome each "failure" as a precious learning opportunity
5. Juxtapose (for rigorous scrutiny) contradictory ideas and options
6. Embrace change as an ally, not as a threat
7. Achieve constant improvement with a discovery-driven process
8. Welcome and support principled dissent
9. Cultivate and nourish an insatiable appetite for learning
10. Challenge what James O'Toole characterizes as "the ideology of comfort and the tyranny of custom"

Congratulations to Inder Sidhu on a brilliant achievement.

Insightful Premise
Mr. Sidhu effectively presents the issues faced by Cisco in balancing its interests in maintaining current products, services and markets, and expanding into very different ones. He outlines how Cisco has dealt with avoiding the complacency and inflexibility in maintaining current products, services and markets by expanding into new areas, but simultaneously, avoiding overextending the company.

I thought the anecdotes from the experiences of other businesses were instructive, especially for us non IT types. The example of the building of the Golden Gate Bridge was especially helpful.

The concepts outlined in the book would be helpful to the owner of any business, from a local sole proprietorship to a company such as Cisco.

I higly recommend this book.

... Read more

Editorial Review

A brilliantly reported true-life thriller that goes behind the scenes of the financial crisis on Wall Street and in Washington.

In one of the most gripping financial narratives in decades, Andrew Ross Sorkin-a New York Times columnist and one of the country's most respected financial reporters-delivers the first definitive blow- by-blow account of the epochal economic crisis that brought the world to the brink. Through unprecedented access to the players involved, he re-creates all the drama and turmoil of these turbulent days, revealing never-before-disclosed details and recounting how, motivated as often by ego and greed as by fear and self-preservation, the most powerful men and women in finance and politics decided the fate of the world's economy. ... Read more

Reviews

Simply a chronology
The book details the events, the people and the conversations that roiled the banks in 2008. The book does not really discuss why the events happened. If you're looking to understand why these banks fell, this is not the book to read.

The book is very readable and even at 539 pages, a person can finish it quickly. Another plus is that unlike most NY Times reporters, the author keeps most of his opinions out of the story until the last 2 pages.

His opinions are:

The government allowing Lehman to go into bankruptcy was the catalyst that caused the floodgates to open. This is probably why he spends a lot of the book developing the Lehman story.

He's ambivalent about whether the government players could have prevented the collapse of the banks or even if they did the right things when they did act. But he's quite clear that more banking regulation was needed then and is needed now.

One can disagree with his opinions, but he does well to leave most of them till the end of the book.

A few criticisms:

As mentioned, he does not discuss why exactly these events happened. In the epilogue, he briefly mentions 4 events that percolated over 10 years that conspired to cause the perfect storm in 2008. But he could have spent a chapter (prologue) describing these events and how they conspired to cause the problem. Apparently he's not a banker or an academic, so maybe he didn't feel qualified to do this.

Second criticism: In a few places prior to his epilogue, he lets us know his (negative) opinion of some players. It's obvious his disdain for Chris Cox and Sheila Bair. But he's particularly vitriolic towards the Wall Street Journal editorial page. I thought that as a chronicler, the author should have omitted his opinions of these people/institutions. Except for these incidents, he does largely keeps his opinions out of the manuscript until the last few pages.

Overall, a quick read that details the players and the chronology of events. If all you need is to understand the crisis, then this book should suffice.

A Real Page Turner
This is an excellent book that reads like something that Dan Brown might have written. But its real. The part that amazed me was the level of detail Sorkin was able to get about behind the scenes conversations that took place. Stuff about how people such as Dick Fuld of Lehman reacted to the problems when it was becoming clear that the company was going down and he was in denial. How Paulson was reacting to things when there were no rules about what to do.

But probably the most interesting parts were how the different personalities were reacting while the ground was shifting under them. At the peak, many of the people involved were literally working 24 hours a day highlighted by a phone call made to Vikram Pandit, CEO of Citibank at 3 am telling how a deal he made at midnight for Wachovia had instead been trumped by another and that that deal had already been signed and blessed by the government. How major decisions were being made on the run and how solid institutions became institutions on the brink in a matter of hours.

The book also explains how companies like Barclays and China Investment Corporation were working behind the scenes as well how Paulson, Geithener and others in the government were scrambling to keep things from collapsing. There is a lot of Monday Morning Quarterbacking going on and some of the things these people did may not have been the best, but they pulled it off and we should all be grateful.

But there some bad guys, namely the short sellers and as usual some in congress. The book makes clear that out of control short selling added fuel to the flames that were occurring and that when we were facing this emergency some members of Congress were focused on their own butt instead of doing what was needed.

There is a huge cast in this book and its is sometimes hard to keep the people and their roles straight, but make the effort. You will be rewarded.

Interesting reading
I was interested in knowing what goes on behind the scenes in these financial crisis times. I thought maybe it would be a little dry reading matter, but found it was as hard to put down as an adventure novel. Very indepth without any apparent bias in my opinion on the author's part.

The Definitive Book on Financial Crisis
After reading two other well-publicized books on the real estate bubble and following market crash, I felt like I had been had. One book, primarily about Lehman, was shallow and written by an egotistical prima donna. The other was too technical and appeared to not have been edited well.
This book was written by a finanial author and is fair, thorough, and puts everything in perspective. It is well-written and flows for an easy read.
If you have any interest in financial history, this book belongs on your shelf along with other classics like When Genius Failed, Barbarians at the Gate, and the Smartest Guys in the Room. Ignore the poor ratings by those who were disappointed in the Kindle price. That is another issue.

Strong Recommendation
I have read many books on last year's economic crisis, and this book if not the best is certainly one of them. It is a well-written description on literally a day to day basis of the events in NYC and DC that changed our economic landscape forever. The book allows us to know the thoughts of many of the major participants and details the reasons for the actions taken, and shows us how close we came to an economic collapse. I strongly recommend it. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves

Important Lessons in Too Big To Fail
Book Review: Lessons From Andrew Ross Sorkin's "Too Big To Fail"
By Ravi Nagarajan
Published on January 5, 2010 at 6:05 pm
Originally published on The Rational Walk: [...]

Most outside observers had difficulty keeping up with the momentous events of the weekend of September 14-15, 2008 with all of the twists and turns that finally led to Lehman Brothers' historic bankruptcy filing, Bank of America's purchase of Merrill Lynch, and AIG's bailout only a few days later. Ever since that tumultuous period, there has been a need for a comprehensive book covering the behind the scenes events. Andrew Ross Sorkin's Too Big To Fail has succeeded in delivering exactly what is needed to gain a better understanding of these historic events.

If newspapers are the "first draft of history", Andrew Ross Sorkin played a major role with his New York Times coverage of the financial crisis in 2008. Although Mr. Sorkin is only 32 years old, he has obviously been able to build up a massive network of contacts on Wall Street and in Washington. Mr. Sorkin's coverage spans the timeframe from the failure of Bear Stearns up to the passage of the TARP legislation, but the narrative really shines when it comes to the events of a September weekend when the financial system came much closer to total collapse than anyone on the outside could have realized at the time.

Mr. Sorkin's book has received a great deal of media attention and book reviews, but there is also a need to step back and think about the lessons that must be learned if future crises are to be avoided. The inability of Washington to come to any agreements on financial system reform was a significant failure in 2009, but one that received little attention outside the financial press. With each passing week of relative "calm", chances grow greater than another crisis may be required to prompt reforms.

Greed and Fear

The old adage that a balance between greed and fear creates equilibrium on Wall Street seems hopelessly out of date in light of the revelations in this book. In the "text book world", investors and other players in a market system need to be driven by the profit motive ("greed") but decisions are tempered by a desire for safety ("fear"). For many decades on Wall Street, the partnership model in investment banking seemed to keep the level of risk aversion high enough to prevent overreaching (for a great book on the old model at Goldman Sachs, for example, see Charles D. Ellis' The Partnership).

One can argue that many leading Wall Street players lost huge sums of money in the 2008 crash, so the absence of more "fear" in the system cannot be explained merely by a change in the ownership models of the investment banks. Indeed, an absence of adequate levels of risk aversion extended to Main Street and Washington as well. Rep. Barney Frank's famous declaration in favor of "rolling the dice" with softer underwriting standards for mortgage lending as well as the reckless disregard of financial prudence by many subprime borrowers cannot be ignored.

False Illusions and Egos

From the outside looking in, Wall Street and Washington are populated by highly confident, assertive, and competent individuals who seem equipped to carry out their responsibilities in a capable manner. While there are many individuals who fit this description well, some of whom appear in Mr. Sorkin's book, many others appear to suffer from the human defects that affect everyone else. At several points in the book, we can see cases where ego prevented otherwise intelligent actions from being taken.

For example, why did Lehman Brothers' CEO Dick Fuld, shocking even his own team, attempt to abruptly change the terms of a nearly sealed deal with Korea Development Bank in early August that would have valued Lehman at a premium and likely saved the firm? Was it a matter of seeking better terms for his shareholders, a question of ego, or confidence that a government bailout would be a backstop if all else failed?

There are countless other situations in the book where the reader, with the benefit of hindsight, asks: Why?

Government Saviors?

Government players hardly come out of the story looking like heroes either, with the possible exception of Treasury Secretary Hank Paulson who had the unenviable task of coming up with solutions for the crisis without appearing to favor a bailout of his former colleagues at Goldman Sachs. Throughout Mr. Sorkin's account of the events, it becomes quite apparent that helping Goldman was probably the last thing on Mr. Paulson's mind.

Timothy Geithner, the current Treasury Secretary, was President of the Federal Reserve Bank of New York during the crisis. Mr. Geithner comes across as the main deal maker for the Fed while Chairman Ben Bernanke takes a much lower profile role. While there is no doubt that Mr. Geithner played a critical role, he often comes across as authoritarian in terms of his tactics. For example, at several points, he makes threats or orders bank CEOs to take action during meetings and simply leaves the room asking to be notified when a solution is in place. Whether this was necessary or not during these remarkable times is an open question, but this is not how we should want government officials to behave in normal times.

President Bush hardly appears in the narrative and seems quite detached in the few occasions where he is being briefed on the crisis. For all practical purposes, Secretary Paulson was calling the shots for the Executive branch of the Federal Government throughout this process. Sen. Barack Obama made a few appearances in the book (as well as on Secretary Paulson's calendar) but Sen. John McCain hardly appears at all which is surprising given that he famously suspended his campaign in order to return to Washington and work on a solution for the crisis.

Financial Regulatory Reform

One of the interesting aspects of the book is the degree to which government officials pushed to "marry" commercial banks and investment banks during the height of the crisis in September. It seems like every possible permutation was considered, to the point where Mr. Geithner was referred to mockingly as "E Harmony" in a reference to the online dating site. At the same time, many in government blame the 1999 repeal of the Glass-Steagall Act, which prohibited the union of commercial and investment banks, for precipitating the crisis.

While the idea of giving investment banks access to stable deposits through commercial banks had a great deal of merit during the crisis, such mergers also created ever larger institutions, many of which are considered "too big to fail". It seems that society must decide which is the lesser of two evils: Government regulations that seek to keep financial institutions small such that none can become "too big to fail" or heavy handed regulations that properly govern mammoth institutions that are obviously "too big to fail".

Wall Street: Pick Your Regulatory "Poison"

Wall Street cannot have it both ways: If regulations are repealed that then allow financial institutions to grow so large that a failure would have systemic impacts, then regulations governing the conduct of these institutions is essential to avoid future crises from developing. On the other hand, if we accept regulations that prohibit mergers that will result in massive institutions, Wall Street firms should have more flexibility to conduct their ongoing affairs without as much regulatory scrutiny since the failure of any one institution will not be systemically important.

It seems preferable to have "blocking" regulations such as Glass-Steagall rather than "operational" regulations required to govern massive financial institutions that are of systemic importance. A "blocking" regulation is not as intrusive into the day to day operation of firms and is less likely to throw sand in the gears of capitalism. In contrast, the regulatory regime required to monitor massive systemically important institutions will, of necessity, be intrusive and bureaucratic.

"Too Big To Fail: The Sequel"?

There are many potential solutions that should lead to a more stable financial system going forward, but each passing week makes it less likely that reforms will be made. As the economy recovers and "business as usual" returns to Wall Street, the seeds are now being planted for the next crisis. While no doubt capable of the task, we should hope that Mr. Sorkin does not have the opportunity to write a sequel to Too Big To Fail. The consequences could be even more severe.

Too Big to Fail is too Good to Skip
The litany of books on the 2008 economic crisis covers a lot of ground. There are a plethora of good books that have come out thus far (and plenty of bad ones). My reading has already taken me through some books that I find dangerous in their ideology, but also some that are remarkably astute. What I have not come across until this latest addition to the series is a book that was nearly impossible to put down. Andrew Ross Sorkin's Too Big to Fail put an end to that. While I have over a dozen books to complete still in this project, and am backed up more than that with books I have completed but not yet reviewed, I can safely say that no book will prove to be as much fun to read as Sorkin's. I recommend it for any reader who has the ability to take down over 500 pages of a brilliantly-written suspense thriller.

Sorkin's book does something that very few books written about the crisis will be able to do: It narrates a series of events with virtually no ideology or partisanship whatsoever. I can honestly say that after finishing the book I still had no idea what Sorkin believes about the TARP bill, the nature of Wall Street, the role of lawmakers in causing the collapse, the merit (or lack thereof) of the Federal Reserve's response to the crisis, etc. Sorkin tells the story of the events leading up to, and immediately following, last September's week from hell (the week that included the bankruptcy filing of Lehman Brothers, the government bailout of AIG, and the emergency sale of Merrill Lynch to Bank of America). Intertwined with the narratives of that fateful week, Sorkin incorporates extensive biographies of the lead characters including Henry Paulson, Tim Geithner, Richard Fuld, Ken Lewis, Jamie Dimon, Lloyd Blankfein, and many others. By the time I was done with the book I felt like I knew the characters personally. His research is comprehensive and his list of sources unmatched. No major character in this story has come forward to deny his version of any of the major stories. Whether someone is a hopeless obsessive of these events (like me) or not, the book is wildly entertaining, completely fascinating, and extremely well-told.

I do have to interact with the events described in this book at some point, and I intend to do so in greater detail when my review series is complete. I do not accept any version of the 2008 catastrophe that either totally villainizes Henry Paulson, or totally vindicates him. My interest in this review series is ideological: I believe that the Libertarian-anarchist crowd, and even more disturbingly the Keynesian-leftist crowd, have axes to grind in their portrayal of the crisis that must not be left unaddressed. Sorkin's book does not pose any such problems. The complex issues he addresses require an economic thinker like myself to formulate opinions, but he does so without poisoning the well. I did not complete this behemoth book with any more clarity about the propriety of TARP, the role of short sellers in the financial crisis, or the moral hazard embedded in much of Uncle Sam's reaction to the crisis. But what I did get out of reading this is an incredible amount of color on all the aforementioned issues (and others) that I desperately needed. The proper ideological commentary on September of 2008 is coming, but in the meantime, kudos to Andrew Ross Sorking for not attempting to provide that commentary, and instead providing me 550 pages of reading bliss.
... Read more

Editorial Review

Reviews

Unfortunately, Reruns Are Already Starting!, November 4, 2009
Reinhart and Rogoff's book provides a quantitative history of financial crises derived from over 600 years and 66 nations. The basic message from all their data is that there are remarkable similarities in today's financial crises with experience from other countries and nations. The common theme is that excessive debt accumulation by government, banks, corporations, or consumers often brings great risk. It makes government look like it is providing greater growth than it is, inflates housing and stock prices beyond sustainable levels, and makes banks seem more stable and profitable than they really are. Large-scale debt buildups make an economy vulnerable to crises of confidence - especially when the debt is short-term and needs to be refinanced (the usual case).

Reinhart and Rogoff go on to conclude that most of these booms end badly. Outcomes include sovereign defaults (government fails to meet payments on its debt), banking crises (heavy investment losses, banking panics), exchange rate crises (Asia, Europe, Latin America in the 1990s), high inflation (a de facto default), and combinations of the preceding (1930s, today).

What did the authors learn from their data digging? Severe financial crises share three characteristics: 1)Declines in real housing prices average 35%, stretched out over six years, while equity prices fall an average 56% over 3.5 years. 2)The unemployment rate rises an average of 7 percentage points during the down phase (average length = four years). Output falls more than 9% over a two-year period. 3)Government debt tends to explode, an average 86% in real terms. The biggest driver of this debt explosion is the collapse in tax revenues; counter-cyclical fiscal policy efforts also contribute, as well as spiking interest rates.

Reinhart and Rogoff also identify what they find to be the best and worst (pronouncements from the Federal Reserve, U.S. Treasury heads, and more than a few 'successful' academics and stock-pickers) early warning indicators of crises. Finally, the authors warn that premature self-congratulations on early successes in correcting a banking crisis may lead to complacency and an even worse state of affairs.

The 'good news' is that Reinhart and Rogoff have provided a detailed and credible accounting of past experiences. The 'bad news' is that despite the authors' scholarly and intense efforts, "This Time is Different" is not likely to sway many minds for two reasons. 1)The book is too much of a scholarly tome to become widely read, and there are too many self-serving 'think-tanks' offering contrarian opinions. Others, more data-driven, will point out that most of "This Time Is Different" is drawn from earlier days and non-U.S. nations, and thus of limited applicability to the U.S. today. 2)Despite recent disproof of claims that government has mastered the economic cycle via Federal Reserve fine-tuning and counter-cyclical government spending, and that 'the old rules of valuation no longer apply,' we're back blowing bubbles. Today's MSNBC headline reads 'New Market Bubble May be Brewing,' the 'Greenspan Put' (government will bail out falling markets, while allowing soaring ones) continues, no action has been taken to rein in Wall Street gambling and unwarranted bonuses, financial institutions believed 'too big to fail' are bigger than ever, and 2010 election pressures will undoubtedly auger for continued easy money, inflating ourselves out of debt, and increased debt at all levels.

Prodigious and full of gallows humor, October 3, 2009
Rogoff and Reinhart, two very substantive (and, I might add, earnest) economists, have produced a prodigious work which will be read and studied for years. They have gathered mountains of data from primary and secondary sources and reduced it to dozens of charts and graphs, a heroic work in its own right. Their intention, God bless 'em, is to lay out the follies that have led to economic/financial crises over the last eight centuries. Their findings: humans have not learned from past mistakes. The title is ironic and is worthy of Peter DeVries.

The authors say it is "almost comical" that no governments reveal their true financial condition today, nor have they done so in the past. The lack of transparency and the shenanigans that go on behind the curtains contribute, of course, to the human suffering that ensues in crisis after crisis.

One needs to find this book comical if one is not to slip into a permanent depression about the utter failure of national leaders to address shortcomings in national domestic and foreign economic policies in order to avoid systemic crises. No one has, from the 13th century onward, anywhere in the world.

The authors persist in saying that they hope their monumental effort will lead to an examination by policymakers of past mistakes and help them avoid future mistakes. I say, "Good luck with that." In my opinion, this book ranks with the complete works of Shakespeare in illuminating the human condition. Or Bruegel, or Beethoven. It will not bring about change, but it will entertain in a deeply satisfying way.

Explaining the Second Great Depresson and Its Potential Aftermath, October 24, 2009
Be prepared for a very sobering and complete review of eight centuries of financial crises, complete with charts and graphs that even those who fell asleep in the Macro 101 in college should be able to understand. This book is worth reading in its entirety, but chapters 13 to 17, in which the authors draw important lessons from the 800 years of financial folly for the present course of the "Second Great Contraction of 2007" and its aftermath, make this volume well worth the price.

Also, be prepared for some sobering analysis of the effectiveness of central banks and government policymakers in addressing economic crisis (yes, regrettably, still not very effective even with the benefit of 800 years of history and analysis to draw on). You will learn why This Time is Ultimately Not That Different in so many ways. Ken Rogoff worked at both the Fed and the IMF so he is in a unique position to evaluate the global scope of the 2nd Great Depression in modern history, and it is the very global nature of this event that leads him to conclude that the aftermath with be long-lasting and have profound effects on the global economy for many years to come.

While documenting the fiscal policy response to the Second Great Contraction of 2007, including the massive global government bailouts in the banking sector, Rogoff points out that the size and long-term impact of these measures, while profound, may be dwarfed by the effects on the U.S. national deficit and national debt of reduced Federal tax revenues during the global downturn. With such high levels of debt and limited means to reduce government expenditures to compensate for sharp reductions in tax revenues, the ultimate effect may be a debasing of the U.S. dollar by the Fed, producing a period of increased inflation or stagflation.

The earlier chapters describing periods of hyperinflation, bank and sovereign defaults throughout history are fascinating, leading up to the payoff in the final chapters, in which one can draw one's own conclusions about what course this most recent crisis will take and just as importantly, how policymakers are liable to miscalculate once again. The Federal money-printing presses around the world are in high gear once again, more automated and sophisticated than ancient regal sovereigns clipping coins and extracting gold and silver from the royal coinage to finance their realms.

Proving once again that history doesn't always repeat itself, but it does rhyme.

less than what I hoped for, November 15, 2009
I have little to add to previous reviews of book contents. However, my take away was different than that of prior reviewers. The book provided less than I expected. I had hoped for an attempt to relate the various crises in a holistic manner by considering interplay between banking, currency, internal and external political pressures including war, markets and flaws and excesses therein, debt, inflation, greed of the ruling class, competition between societal classes, etc. I expected to receive the benefit of the authors' experience, wisdom and insight. I imagine such an effort would have required focus on one or perhaps a few comparators for the present situation. That was not the purpose. Instead the book is a vehicle for showcasing an extensive new economic data set developed by the authors of 800 years of economic crises. One receives a birds-eye statistical analysis of that data.

That is not to say that the work was poorly written or uninformative. A number of insights were provided and supported through cogent argument and readable graphics. The text was quite readable though redundant in places. Good effort was made to provide two reading tracks - one for those who wanted to know details behind the analysis and one for those focused on findings and conclusions. Important, recurring themes were demonstrable through the data, and considerable useful and interesting information was certainly provided.

Nevertheless, only a few general and cursory allusions were provided to the "why and wherefore" factors noted above; i.e., context was studiously avoided. Absent consideration of the larger picture including motivations of significant players, the authors' concluding recommendations for avoiding future crises were produced with blinders and appear real-world unrealistic at best.

This is a readable economics text which provides historical economic data that are likely to be relevant to the course of the present crisis. Its weakness is that beyond statistical delineation of selected historical economic markers of risk (which were mostly intuitive in any case) it does not provide insight into the nature of past, present or future difficulty. Perhaps my expectations were misguided but I was not prepared for the measured, academic tone of the book with steadfast refusal to venture beyond the central data set. As such I was disappointed and found the effort sterile and overly long.

An Academic Abstract, December 9, 2009
When I purchased this book I was expecting to learn about the various financial crisis through out history and the psycholgy that lead up to the crisis. Instead I read a book that was mostly data. Half of the book consists of tables and graphs, another 25 percent explains how the data was collected, and the last 25 percent explains what the data means. The main points I took away from the book are the following:

1. Devaluing a currency is a form of default.
2. Countries in their initial and middle stages of development frequently default on their debt, while advance countries rarely, if ever default on debt, but if they do default they will devalue their currency, which will cause inflation.
3. Banking crisis are usually cased by large drops in home values.
4. It takes years for a country's economy to recover from a banking crisis.
5. During a banking crisis government debt will usually grow on average by 86 percent.

If you are an economics professor who loves to look at data you may enjoy this book, but the average reader will not.

an important and timely book held back by terrible, terrible graphics, December 30, 2009
Don't be fooled by the (suberb) Mad Men-style cover art -- this is essentially an academic text, descriptions of Reinhart and Rogoff's compilation of data on domestic and external debt defaults for dozens of countries over hundreds of years. The papers they have circulated and/or published based on this data have received extensive attention in the last year, and this book contains little that will be new to those who have read them. I think that Reinhart and Rogoff were, originally at least, most impressed with the data on domestic defaults but in the aftermath of the 2008/2009 "great contraction," the work on banking crises will probably be of interest to many readers as well.

The book is repetitive, which reflects its origin as a series of independent papers, but which can be viewed as an advantage in that it makes it easier to read (or assign to students) a single chapter, without reading all that has preceded it in the book. The book's great weakness is the terrible design of its numerous time series graphs. Many of these show multiple data series on a single set of axes, with no clear indication of which line represents which data series. I suspect that in whatever software Reinhart and Rogoff used in their original analysis, these lines had different colors, or perhaps one was dashed, but in the rush to publish these details were lost. They can be decoded through a close reading of the accompanying text but, if you can understand a graph only through a close reading of the text describing it, why have a graph at all? Perhaps this will be addressed in later editions.

The book is copiously footnoted, as you would expect for a work of this sort. It's not fun reading but it is authoritative and important. If you're not sure whether or not it will be of interest, google for a copy of one of Reinhart and Rogoff's recent papers on the same topic; several are available freely online. If the paper is interesting to you, the book probably will be too.

A must read, October 11, 2009
As Martin Wolf from Financial Times has written... "A MASTERPIECE"

One of the most interesting things about this books is that it combines a very rigorous research on the topic while keeping it accessible to a large audience. The book is self-contained, with definitions provided along the way, which makes it easy for people with no previous knowledge in economics to enjoy and understand it.

The authors also put together a database without precedents in the area which not only makes their statements much stronger, but also makes a great contribution to the field.

The empirical counter part to Kindleberger's Manias,Panics,and Crashes:A History of Financial Crises, October 4, 2009
The authors do a good job in demonstrating the highly repetitive,ergodic nature of financial crises over the last 800 hundred years.This book can be regarded as providing additional amounts of empirical support for the conclusions originally arrived at by Adam Smith in 1776 in his The Wealth of Nations (1776,pp.260-340 of the Modern Library (Cannan) edition with the foreward by Max Lerner) , by J M Keynes in 1936 in chapters 12,17,and 22 of his General Theory and by Kindleberger in his original 1978 book,titled Manias,Panics,and Crashes.Smith, Keynes and Kindleberger all concluded that private banker or financier financed/backed speculation was the major culprit in producing the standard process of a bubble,inflated bubble,mania,panic,crash,and then a recession,depression,or economic downturn.
The authors do acknowledge the role of speculation.However,they appear to be trying to downplay this cause while emphasizing the role of government, as far as apportioning blame for the great economic damages that result from allowing the speculative process to proceed unhindered.This makes sense only if it is first recognized that private interests often take control of the government regulatory apparatus.Rogoff is a past supporter of the efficient market hypothesis(EMH).The EMH,now completely rejected ,except by economists who have built their academic careers promoting this Ptolomaic type,artificially created,model , essentially concludes that bubbles are not possible.The EMH directly contradicts not only just the historical record of the last 800 hundred years,but of the last 3,500 years where the main source of speculation was in land and precious metals.

A reader,who has read any of the authors mentioned above, will not learn anything new.However, the additional technical analysis performed by the authors does allow one to conclude that the EMH is simply false,although this conclusion appears self evident from the historical record provided in past works other than this one.Only economists ,concentrated mainly in the economics and business departments at the University of Chicago,were able to delude themselves into believing that bubbles were impossible.The authors should have recognized the vast empirical work of Benoit Mandelbrot who had proven the EMH false back in the late 1950's-early 1960's.

One criticism of the book is that ,while Kindleberger is covered,neither Keynes,Smith ,or Mandelbrot is adequately acknowledged.Another is that the current ,severe theoretical shortcomings in financial economics should have been at least mentioned in the introduction,footnotes,or conclusion of the book.

A very timely reminder that no country is "too big to fail", October 29, 2009
When one reads the book, the first impression is the incredible amount of work the authors put into collecting the most comprehensive, as of today, dataset on financial crises and key economic variables for not only developed but also developing countries. This dataset will most definitely be at the heart of future empirical work on financial crises.

It will discipline economists to strive to build more realistic models that are able to reproduce the systematic trends and fluctuations of economic variables around the period of financial crises. As the authors admit to be surprised themselves, not only such systematic relationships abound across time but also across developed and developing countries.

The book is an important reminder that it is easy to live under the illusion that "this time is different" and that developed countries have outgrown severe financial crises. However, as the current financial crisis reminded us the more we lie to ourselves, the less vigilant we are as to potential worst case scenarios.

Finally, speaking of vigilance, the book is not only a thorough description of the past but also hints at a very serious problem many countries including the US would most likely face in the future; namely, the issuance of unsustainable levels of government debt which could have tremendous negative medium and long run effects at a global level.

Analyzing the Commonalities in Causes and Consequences of Centuries of Financial Crises., June 18, 2010
"This Time Is Different" presents a quantitative history of financial crises -debt crises, bank crises, currency crises, inflation crises- with an eye to commonalities in the run-ups and aftermaths of these crises. Of course the authors' point is the reverse of the book's title: this time is never different. Economists Carmen M. Reinhart and Kenneth B. Rogoff demonstrate that financial crises have a lot in common, regardless of when and where they take place, by showing us the data. The obvious conclusion would be that financial crises are predictable. Although they state that "it is beyond the scope of this book to engage in a full-fledged analysis of early warning systems," the authors present much of the information that would be required to develop a predictive model.

Whether it's predictive value is fool-proof or not, I was fascinated by the data and analyses. The authors have pulled together an unprecedented amount of data for various types of financial crises over a period of centuries. They found it particularly difficult to find reliable data on domestic debt, which they call "an exercise in archeology", but managed to uncover enough to claim that domestic debt is the vital piece of missing information in understanding debt intolerance. Reinhart and Rogoff use data on 66 countries that account for 90% of world GDP over nearly 8 centuries, with an emphasis on the past 2 centuries, for which they have the most data (and which had the most crises).

"This Time Is Different" has 6 parts but it effectively has 3 topics: sovereign and domestic debt and default, banking crises with some forays into inflation and currency crises, and the current global financial crisis, otherwise known as the Second Great Contraction. Looking at the charts, it's clear that serial default is historically the norm. And, though advanced economies may outgrow patterns of default, they never outgrow banking crises, which are surprisingly similar in their causes and duration in advanced and emerging market economies. Up to this point, the authors generally use data from the past 2 centuries. It is only in the chapter on default through debasement that they include the past 8 centuries.

The chapters dedicated to the US subprime crisis and Second Great Contraction draw on data since 1900 only. The authors attempt to develop benchmarks for gauging the severity and duration of a crisis based on data from past crises. This is the most opinionated section of the book, even though the authors' views are empirical. They present both sides of the argument for and against the housing boom and large US account deficits, but Reinhart and Rogoff conclude that rising asset prices, slowing productivity, large current account deficits, and sustained public and private debt build-ups create, if not a looming crisis, an accident waiting to happen. They admit, however, that it would have been difficult for policy makers to act in time even if they had seen it the current crisis coming.

"This Time Is Different" seems to have been written both for economists and interested laypeople. It's packed with data, easy to understand, but sometimes repetitive or more verbose than necessary. It looks like each part was intended to be relatively self-contained so that readers may study them separately, but this makes for repetition. I found this mildly annoying. Then again, the repetition may be helpful when I use the book as a reference later. The style is a quibble, but the information within is engrossing. I was not even tempted to give any of the graphs a quick glance. I was interested in every one. ... Read more

Editorial Review

The intimate, fly-on-the wall tale of the decline and fall of an America icon
 
With one notable exception, the firms that make up what we know as Wall Street have always been part of an inbred, insular culture that most people only vaguely understand. The exception was Merrill Lynch, a firm that revolutionized the stock market by bringing Wall Street to Main Street, setting up offices in far-flung cities and towns long ignored by the giants of finance. With its “thundering herd” of financial advisers, perhaps no other business, whether in financial services or elsewhere, so epitomized the American spirit. Merrill Lynch was not only “bullish on America,” it was a big reason why so many average Americans were able to grow wealthy by investing in the stock market. 

Merrill Lynch was an icon. Its sudden decline, collapse, and sale to Bank of America was a shock. How did it happen? Why did it happen? And what does this story of greed, hubris, and incompetence tell us about the culture of Wall Street that continues to this day even though it came close to destroying the American economy? A culture in which the CEO of a firm losing $28 billion pushes hard to be paid a $25 million bonus. A culture in which two Merrill Lynch executives are guaranteed bonuses of $30 million and $40 million for four months’ work, even while the firm is struggling to reduce its losses by firing thousands of employees.

Based on unparalleled sources at both Merrill Lynch and Bank of America, Greg Farrell’s Crash of the Titans is a Shakespearean saga of three flawed masters of the universe. E. Stanley O’Neal, whose inspiring rise from the segregated South to the corner office of Merrill Lynch—where he engineered a successful turnaround—was undone by his belief that a smooth-talking salesman could handle one of the most difficult jobs on Wall Street. Because he enjoyed O’Neal’s support, this executive was allowed to build up an astonishing $30 billion position in CDOs on the firm’s balance sheet, at a time when all other Wall Street firms were desperately trying to exit the business. After O’Neal comes John Thain, the cerebral, MIT-educated technocrat whose rescue of the New York Stock Exchange earned him the nickname “Super Thain.” He was hired to save Merrill Lynch in late 2007, but his belief that the markets would rebound led him to underestimate the depth of Merrill’s problems. Finally, we meet Bank of America CEO Ken Lewis, a street fighter raised barely above the poverty line in rural Georgia, whose “my way or the highway” management style suffers fools more easily than potential rivals, and who made a $50 billion commitment over a September weekend to buy a business he really didn’t understand, thus jeopardizing his own institution. 

The merger itself turns out to be a bizarre combination of cultures that blend like oil and water, where slick Wall Street bankers suddenly find themselves reporting to a cast of characters straight out of the Beverly Hillbillies. BofA’s inbred culture, which perceived New York banks its enemies, was based on loyalty and a good-ol’-boy network in which competence played second fiddle to blind obedience.

Crash of the Titans is a financial thriller that puts you in the theater as the historic events of the financial crisis unfold and people responsible for billion of dollars of other people’s money gamble recklessly to enhance their power and their paychecks or to save their own skins. Its wealth of never-before-revealed information and focus on two icons of corporate America make it the book that puts together all the pieces of the Wall Street disaster. ... Read more

Reviews

INCOMPETENCE RICHLY REWARDED, November 8, 2010

Until the many recent revelations on the causes of our financial institutions almost total capitulation when faced with difficult trading conditions, many, including myself, held those running these businesses in great respect bordering on awe, believing them to be superior to most other mortals. This conviction was reinforced by the fact that they were paid large basic salaries, were given huge annual bonuses almost as a matter of course, had pension funds of unimaginative magnitude, and were beneficiaries of a multitude of perks from chauffeured limousines, almost limitless expenses through to personal use of corporate aircraft. If these people were not outstanding business leaders surely the supposedly 'wise' members of the Remuneration Committees of these companies would not be irresponsible enough to rewards them so extravagantly?

Wrong. It is quite evident from this outstanding book on the last desperate efforts of Merrill Lynch to avoid the ignominy of 'going down the tube' and the ill-conceived and clumsy efforts of The Bank of America when buying what was considered to be a 'trophy purchase' without exercising much care and due diligence, at a price that was at a considerable premium over its real value, that the senior executives of both companies were 'thrashing' around in the dark, displaying all the signs of 'lemming' management and not living up to the level of expertise that they were being paid for.

Greg Farrell's account of these manic times is excellent. Although fairly long in terms of pages, it holds ones interest throughout and gives both the uninitiated and more financially experienced reader, a 'fly-on-the-wall' perspective into the dire repercussions of banks operating 'casino' type operations on their own accounts, and throwing the dice on the 'Credit Derivatives' Table especially as it transpires they had little or no appreciation of the downsides.

A really good book which I believe is Mr Farrell's first and it is hoped not his last.

Good Insight into the Merrill Meltdown & the BOA Merger, November 18, 2010
This book doesn't try to explain the definition of a CDO or how the housing bubble built, popped, etc like every other book on the crisis does

This book assumes you have read a few other books on the crisis & have the basic knowledge of the housing market Boom & Bust and how it happened and what caused it... so if you are looking for an Introductory Book on the 2007 crisis there are lots of others that would be much better

However, if you want to know what went into some of the behind the scenes decisions that brought Merrill Lynch to the brink on non-existence and the factors that lead Bank of America to pay such a huge price for a company that was imploding... this book is great. Goes into the background and personalities of Stan O'Neal, Ken Lewis, John Thain and the other major players and gives a good picture of what each person did to result in the 2008 Merger

Plenty of books have been written on the crisis, What caused it, who is to blame etc. But all of those Books focus on Bear Stearns or Lehman Brothers or Goldman Sachs... and the Merrill/BAC merger is only mentioned in passing. This is the first book I have read that focused on the crisis from Merrill's perspective

An Absolutely Magnificent Story, December 12, 2010
An absolutely magnificent story.

It's a tough position for another book on the U.S. financial crisis to be released on November 2, 2010 (Crown Business NY, NY) --- if you have read as many great books about the crisis this year as I have.

Don't be fooled. Don't let the 454 pages of this volume dissuade you from considering this magnificent story from Greg Farrell (correspondent for the Financial Times - BA Harvard and MBA from Columbia).

What Crash of the Titans is, in my opinion, is evidence of simply phenomenal storytelling, supported by a depth and breadth of investigative journalism that is both unique and unparalleled. Farrell is a pro - truly a master story teller. The 454 pages flew by based upon the prowess of Farrell's ability to keep the reader engaged on a page-turning journey. His character development is amazing. The tension, innuendo and intrigue are simply fantastic and lend to the credibility of this work as a truly unique, non-fiction financial thriller for 2010.

In the spirit of full disclosure, I worked at both NationsBank and BofA during my career as a regional manager of a commercial lending group (during the years when BofA was acquired by NB and adopted the Bank of America brand). I was with NB at the time of the acquisition and stayed on for several years thereafter with the BofA logo on my business card. Farrell's ability to capture the "culture clash" that occurred during this merger was uncanny - spot on target.

This book is, in my opinion, an eminently fair characterization of the story and the people. Frankly, John Thain did his best - and his performance could not likely be outperformed by comparably capable Wall Street executives who may have been thrust into the situation Mr. Thain was.

Greg Fleming - wherever you are - you are my hero! I'll work for your team any day. I'm waiting for your call Mr. Fleming.

From the sheer excellence of the story telling, supported by the research and investigative journalism...I rate this work as FIVE STARS.

Buy it. You'll truly enjoy it. This book ranks right up there with the works of Lowenstein, Michael Lewis and Scott Patterson's published in 2010.

Insider Story, November 30, 2010
This is a well written portrait of how Merrill Lynch collapse. There are many explanations but the one that stands out in reading this is how it is possible for a CEO not to know where the increased earnings are coming from. The total failure of risk management is remarkable. It shows that O'Neil was so blinded by growing Merrill and his own bonus that he did not pay attention.

Thane came in to try to save the company he seemed to lack the ability to see what was happening. It all becomes a tragic story. One wonders if there is not a need for a separate disclosure statement by the chief risk officer of a firm certifying the bonuses of all senior employees before a board approves bonuses.

I worked in a large corporation for many years and I was impressed how real the dialogue was. I could hear the players speaking in the same manner.

The last point is how poorly Bank of America was managed. I was amazed.

Count the life boats!, November 8, 2010
Crash of the Titan's takes the next step beyond books of it's genre, opening as it does after the financial ship has already hit the iceberg. Without sacrificing gory business detail, Farrell creates an extraordinary psychological study laced with the menace of a Soprano's episode. The fall of Merrill and the closing of the capital markets to the common investor, the abandonment of a vision of building value for high stakes gambling, and the willful blindness and wolfish greed of flawed personalities -- Neal, Thain, Lewis and Alphin -- are breathtaking. But what's truly chilling is that we read this disaster tale seated on the deck of the Titanic.

A Blue Chip Book - Triple A Rated!, December 14, 2010
If you have any interest in the inner workings of a major Wall Street firm, how certain people make it to the top of a cutthroat, backstabbing business, and how they manage to stay on top; then this is the book you must read. I have read several books about the 2008 financial crisis and this was the most thought provoking, thrilling and enjoyable one of them all. It is jam packed with insightful, unique details that the author has tightly woven into an exceptional page turning narrative.

I first became familiar with the author, Greg Farrell, when he wrote for USA Today covering major white collar crime stories and I was an FBI agent in New York City. I was always amazed at how he could condense a very complicated business story into a few paragraphs and still convey an accurate and comprehensive report. After reading several of his articles I always wondered what Mr. Farrell could do if he was ever given the freedom to write a detailed, lengthy story. Now I know! Mr. Farrell has knocked the cover off the ball, and also the arrogance, overconfidence and hype out of these two financial institutions.

The author often writes about "the smartest person in the room". The irony of this book is that halfway through reading this book, it occurred to me that maybe the "smartest person in the room" was the person writing the book itself. While he does have the benefit of 20/20 hindsight, the Harvard educated, Columbia MBA trained author displays a firm grasp and total understanding of the issues involved in running BoA and Merrill Lynch at a time when both firms had to keep up their earnings to match their competitors.

Mr. Farrell has written an amazing book that not only explains how these titans crashed, but reveals in accurate, factual detail why they crashed. I absolutely loved this book!

Greed is Not Good, But This Book Is, November 17, 2010
I read an excellent review in Salon a few weeks ago (link below) and picked up the book shortly after. The book lived up to its promise, and then some.

I have to say that when I was younger, I often found myself jealous of people I knew who worked on The Street. But time, perspective and now this book have pretty much wiped all that away.

[...]

Shows how Stan O'Neal killed Merrill Lynch and almost Bank of America too., November 27, 2010
An excellent study how Stan O'Neal messed up Merrill Lynch via its hitherto unknown heavy reliance on sub prime mortgages & CDOs after a distinguished career where he did just about everything else right. O'Neal had steered Merrill since the early 90's into a power house, almost challenging Goldman, only to fall into Ken Lewis' hands at Bank of America. A great addition to the books about the 2008 crisis that is well worth reading. Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America, Merrill Lynch: The Cost Could Be Fatal: My War Against Wall Street's Giant, The Tumultuous History of the Bank of America.

Librarian's review: less than average, November 5, 2010
It takes 300 pages to get to the main point: BAC paid $29 per share for ML. Along the way, you learn that Ken Lewis cheered for the Carolina Panthers during the negotiations for Merrill? Or that someone stopped at Starbucks? What was revealed here that wasn't already known?

It puts you on the subway holding yesterday's newspaper.

The narrative lacks the can't-put-it-down traction weaved by other business journalists like Roger Lowenstein (When Genius Failed), Andrew Sorkin (Too Big Too Fail) and Michael Lewis (The Big Short). In comparison, Greg Farrell falls short telling a story about how Merrill Lynch was sold to Bank of America.

Phrases are overused and repeated ad nauseam as though the author struggled to fill pages: CDO's are repeatedly referred to as "radioactive waste" and Merrill Lynch's financial advisors "the thundering herd" and Ken Lewis as "Bank of America's CEO Ken Lewis." After the first reference, you can ditch the titles, we know who he is. The weak narrative wears the reader down.

It is not a "fly-on-the-wall" account of what happened. For that, please read Sorkin's "Too Big Too Fail."

I may have added a star if the book included photos of some of the characters in the book, Thain, Fleming, Lewis, O'Neal, Paulson, etc. It should have included some key court or business documents related to the sale and photos of a meeting. The book painstakingly describes in detail the paintings of former BAC CEO's lining the wall of headquarters facing "northeast." Why no photos of these?

I also did not like the sourcing notes. For example, Farrell says he interviewed 120 people for between 250 and 300 hours. But 15 people gave him 150 hours of their time. Question: How did he interview the balance of 105 people in the remaining 100 or so hours? I don't classify this as in-depth reporting. Do you?

Most of the books I read end up highlighted, taped and book marked to sections I might want to refer to again later. Not this one.

Theo Karantsalis, librarian ... Read more

Editorial Review

Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Reads like a detective story — which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island will change the way you view the world, politics, and money. Your world view will definitely change. You'll never trust a politician again — or a banker. ... Read more

Reviews

Must, MUST read.
Think you know anything about the dollar bills in your wallet?
Think you know who runs this country?
Think that we live in a "free market" economy?

Think again.

Griffin piles up facts and analyzes them with relentless, cold logic. The picture he paints isn't pretty. The Federal Reserve System is a legal cartel expressly designed to create riskless profits for member banks, while simultaneously turning our entire financial system into the legal and moral equivalent of a Las Vegas casino. Yeah, you might get lucky for a while, but the house will always win. Our monetary system is a pyramid scheme that only functions as long as debt is being created at an accelerating rate.

This all sounds crazy, but Griffin has the facts to back it up. The challenging part about Griffin's arguments is that he explicitly states that the foundation and perpetuation of the Federal Reserve System was a conspiracy. Whenever the "C"-word is mentioned, it is an unfortunate truth that many people get turned off. But as Griffith himself says, if a group of people, operating in secret, create a system that explicitly benefits themselves at the expense of others, what else can you call it but conspiracy? Heck, I guess you could call it a "peanut" or a "canteloupe" but it would still add up to the same thing--a system expressly designed to reward failure and punish diligence and honesty. Kinda explains all the crookedness and incompetence behind all the wall street and corporate shenanigans of the last decade, doesn't it?

And if you keep an open mind and pay close attention to his arguments, you'll see that the best place to hide a conspiracy is in plain sight.

If you care about free markets, and your constitutional rights, you will read this book today.

An Evil Of MONSTROUS Proportions!

What is The Creature From Jekyll Island? Well, first of all, it's uglier than The Creature from the Black Lagoon; it's more densely wrapped in deception than the Mummy is in cloth; it sucks the lifeblood of America more ravenously than Dracula does his victims; it reeks worse than the Werewolf; and it's stronger and more dangerous than Doctor Frankenstein's miscreation!

The Creature from Jekyll Island is the PRIVATE Federal Reserve that holds America and Her People hostage with an astoundingly perverse and "criminal" economic system that is an evil beyond your worst monster-infested nightmare. But the Creature comes in a guise to mislead the people, like a Wolfman in sheep's clothing.

Why is the system "criminal"? Because the U.S. Constitution proclaims itself to be the "supreme Law of the Land" (see Article VI), and Article I, Section VIII of the Constitution states that "The Congress shall (Constitutionally speaking, "shall" has been legally defined as "must")...coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Why Congress? Because it is answerable to the People it represents! Remember, our Constitutional Republic was meant to be representational government! We're a long way from that now! The Federal Reserve is NOT Congress; it is unelected, meaning nonrepresentational, and being therefore unconstitutional, it is illegal, hence "criminal."

I first read G. Edwrd Griffin's magnificent study, 'The Creature From Jekyll Island' eight years ago. I had read plenty of political books prior to this one, and countless since, but Mr. Griffin's tour de force has yet to be equaled when it comes to educating the reader in wide-ranging topics that coalesce most of the geopolitical mysteries of our time into the diabolical scheme known as the Federal Reserve System.

Don't make the mistake of letting the sophisticated subject matter drive you away as forcefully as the intriguing title beckons you. Despite the complexity of the topic, G. Edward Griffin masterfully organizes the material and lays it out, not only in a very readable manner, but he actually fashions a carefully researched, extensively footnoted nonfiction tome into a spellbinding journey that reads nearly like a page-turning mystery novel.

In the process of explaining and demystifying the history, the stated goals of the Federal Reserve, and the real agenda behind it, Mr. Griffin necessarily enlightens the reader about myriad conspirators who occupy positions in a variety of social engineering organizations. Without this understanding, one could not possibly grasp the full scope of the problem, nor fathom how such a demonstrably evil entity could have remained cloaked and in power since 1913. (Indeed the thirteenth year of the Twentieth Century represented an unlucky number for America and eventually the world.)

You will find some reviewers here complaining that Mr. Griffin has unfortunately polluted his 600+ page study with John Birch Society style conspiracy theories. What you WON'T find is where any of those same reviewers have proven any errors in fact committed by Mr. Griffin. They challenge the idea of a conspiracy, but not any of the abundant and overt evidence that clearly points to it. I myself don't like little yapping dogs, but I'm not prepared to say that they don't exist simply because I'd prefer not to even think about them. And I can hear those yapping quadrupeds as clearly as I can see the indisputable evidence of underhanded collusion in high and influential places when it comes to this country's monetary system.

"You are a den of vipers!" President Andrew Jackson thundered at a delegation of supporters of the central Bank of the United States in 1834. "I intend to rout you out, and by the Eternal God I will rout you out!" Jackson succeeded in ridding this country of the inherent perniciousness that a central bank levels on a nation. But President Jackson's hard-earned victory for his countrymen was sadly overturned in 1913, when a corrupt privately owned central bank was again foisted on the sleeping people of this once free nation in the form of The Federal Reserve cartel. As Griffin states on page 573, "The Federal Reserve is the world's largest and most successful scam."

I will tell you plainly that regardless of what you think you know about the political spectrum, Democrats and Republicans, liberals and conservatives, civil rights and corporate greed, socialism and capitalism -- regardless of how well informed you may think you are by reading mainstream news magazines and newspapers, listening to NPR and talk radio programs and watching political debates on nightly news TV shows -- until you have read and digested G. Edward Griffin's, 'THE CREATURE FROM JEKYLL ISLAND', you will never really understand contemporary American and global politics. But afterwards, the political puzzle will come together before your eyes, and never again will you follow the red herring into the brainwashing house of mirrors which is our current political milieu.

If you're inclined to read only one political book, be sure it's this one, as it will make sense of your world like nothing else. 'THE CREATURE FROM JEKYLL ISLAND' belongs in the personal library of every American who truly cares about his or her country (regardless of political party affiliation); by rousing the people of this nation from the ignorance of deep sleep, it has the potential to be the silver bullet or the stake through the heart of America's worst monster! Read it now or the Wolfman's gonna getcha!

A Bechmark In The Realm Of Civic Knowledge!
Author G. Edward Griffin's book "The Creature From Jekyll Island: A Second Look At The Federal Reserve" is a most well researched and written historical text. Griffin presents the background with almost an air of mystery that the reader must peel away, like layers of an onion, to reveal the truth.

The book provides, in great detail, the time, place, and manner in which the groundwork for the Federal Reserve was laid, and more importantly, the reasons why. Griffin explains why even the name is misleading. The Federal Reserve is not a federal or governmental administration, and it is not a reserve, such as a bank.

Also provided is great historical detail about the commerce and industry in our nation during the Nineteenth and early Twentieth Centuries. This book will not disappoint the reader looking to expand his or her knowledge of how the collective financial machinations of our country are run.

I read this book during my undergraduate years and once presented the book in defense of a historical argument I had with one of my history professors. Needless to say the professor looked at my reference (the book is so well researched), acceded to my contention, borrowed the book "for his own enrichment" and never gave it back! I gratefully let him keep it so maybe he would soften his ascribed "socialist democrat" leanings. Unfortunately I am sans the book this day. Oh well, we march on.

As the topic of Civics is not really taught in public schools, or even required in undergraduate studies anymore, this book will serve to "illuminate" the reader into the background of how private finances and politics are inseparable. My only criticism of this text is the highlighted aspect of a government conspiracy at work. Not that Griffin's arguments have no merit, they certainly do, as Lord Acton so aptly is quoted "Power corrupts and absolute power corrupts absolutely!" However, the mere aspect of "a conspiracy notion" is all the extremists on all sides need to "debunk" a truly great piece of historical research and writing.

I rate this wonderful book five stars. It is well worth the money and deserves a place on the library shelf of every institution and the home of every student of history.

An Evil Of MONSTROUS Proportions!

What is The Creature From Jekyll Island? Well, first of all, it's uglier than The Creature from the Black Lagoon; it's more densely wrapped in deception than the Mummy is in cloth; it sucks the lifeblood of America more ravenously than Dracula does his victims; it reeks worse than the Werewolf; and it's stronger and more dangerous than Doctor Frankenstein's miscreation!

The Creature from Jekyll Island is the PRIVATE Federal Reserve that holds America and Her People hostage with an astoundingly perverse and "criminal" economic system that is an evil beyond your worst monster-infested nightmare. But the Creature comes in a guise to mislead the people, like a Wolfman in sheep's clothing.

Why is the system "criminal"? Because the U.S. Constitution proclaims itself to be the "supreme Law of the Land" (see Article VI), and Article I, Section VIII of the Constitution states that "The Congress shall (Constitutionally speaking, "shall" has been legally defined as "must")...coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Why Congress? Because it is answerable to the People it represents! Remember, our Constitutional Republic was meant to be representational government! We're a long way from that now! The Federal Reserve is NOT Congress; it is unelected, meaning nonrepresentational, and being therefore unconstitutional, it is illegal, hence "criminal."

I first read G. Edwrd Griffin's magnificent study, 'The Creature From Jekyll Island' eight years ago. I had read plenty of political books prior to this one, and countless since, but Mr. Griffin's tour de force has yet to be equaled when it comes to educating the reader in wide-ranging topics that coalesce most of the geopolitical mysteries of our time into the diabolical scheme known as the Federal Reserve System.

Don't make the mistake of letting the sophisticated subject matter drive you away as forcefully as the intriguing title beckons you. Despite the complexity of the topic, G. Edward Griffin masterfully organizes the material and lays it out, not only in a very readable manner, but he actually fashions a carefully researched, extensively footnoted nonfiction tome into a spellbinding journey that reads nearly like a page-turning mystery novel.

In the process of explaining and demystifying the history, the stated goals of the Federal Reserve, and the real agenda behind it, Mr. Griffin necessarily enlightens the reader about myriad conspirators who occupy positions in a variety of social engineering organizations. Without this understanding, one could not possibly grasp the full scope of the problem, nor fathom how such a demonstrably evil entity could have remained cloaked and in power since 1913. (Indeed the thirteenth year of the Twentieth Century represented an unlucky number for America and eventually the world.)

You will find some reviewers here complaining that Mr. Griffin has unfortunately polluted his 600+ page study with John Birch Society style conspiracy theories. What you WON'T find is where any of those same reviewers have proven any errors in fact committed by Mr. Griffin. They challenge the idea of a conspiracy, but not any of the abundant and overt evidence that clearly points to it. I myself don't like little yapping dogs, but I'm not prepared to say that they don't exist simply because I'd prefer not to even think about them. And I can hear those yapping quadrupeds as clearly as I can see the indisputable evidence of underhanded collusion in high and influential places when it comes to this country's monetary system.

"You are a den of vipers!" President Andrew Jackson thundered at a delegation of supporters of the central Bank of the United States in 1834. "I intend to rout you out, and by the Eternal God I will rout you out!" Jackson succeeded in ridding this country of the inherent perniciousness that a central bank levels on a nation. But President Jackson's hard-earned victory for his countrymen was sadly overturned in 1913, when a corrupt privately owned central bank was again foisted on the sleeping people of this once free nation in the form of The Federal Reserve cartel. As Griffin states on page 573, "The Federal Reserve is the world's largest and most successful scam."

I will tell you plainly that regardless of what you think you know about the political spectrum, Democrats and Republicans, liberals and conservatives, civil rights and corporate greed, socialism and capitalism -- regardless of how well informed you may think you are by reading mainstream news magazines and newspapers, listening to NPR and talk radio programs and watching political debates on nightly news TV shows -- until you have read and digested G. Edward Griffin's, 'THE CREATURE FROM JEKYLL ISLAND', you will never really understand contemporary American and global politics. But afterwards, the political puzzle will come together before your eyes, and never again will you follow the red herring into the brainwashing house of mirrors which is our current political milieu.

If you're inclined to read only one political book, be sure it's this one, as it will make sense of your world like nothing else. 'THE CREATURE FROM JEKYLL ISLAND' belongs in the personal library of every American who truly cares about his or her country (regardless of political party affiliation); by rousing the people of this nation from the ignorance of deep sleep, it has the potential to be the silver bullet or the stake through the heart of America's worst monster! Read it now or the Wolfman's gonna getcha!

Warning: This book will change your life
Here is a quick overview of how I figured out the monetary system to the point of being confident that my understanding is reasonably correct and being able to explain the basic scam in about 45 minutes.

First I became convinced that if I am ever going to understand how the world works I should probably figure out an answer to the question "what is money?" Surprisingly, a search on Amazon.com did not return very many books on the topic. Like any good college educated liberal I chose the one book which garnered praise from all my favorite trusted sources such as the New York Times and the Washington Post. I didn't see how I could possibly go wrong spending $12.92 for the 800 page book "Secrets from the Temple: How the Federal Reserve Runs the Country", which The Nation said, "May be the most important political book of the decade."

Unfortunately, after reading William Greider's 10 year, day by day account of Federal Reserve Chairman Paul Volker's back and forth decisions on raising and lowering interest rates, I still did not have the foggiest clue as to what money is or how it is created. I'm sure most people would have given up at this point but I was not ready to throw in the towel. For some reason I was not convinced by the book's conclusion that it was critically important to maintain the money mystery because "Taboos uncoded lost their power to persuade...The mystery was necessary, therefore, to sustain social faith. Knowledge was disturbing. Not knowing the secrets was reassuring."

I needed another book, however the only ones that the New York Times seemed to recommend were all described as condensed versions of "Secrets of the Temple." I had no choice but to bite the bullet and for the first time in my life order a book which was not recommended by the New York Times. I ordered "The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin. At least Willie Nelson seemed to like it. Actually, I wasn't quite sure if Willie Nelson was wholeheartedly endorsing the book in his review which simply read, "Scary. It's the story of the world banking system. Enough said."

I was quite pleased that Jekyll Island contained a pretty good description of the money creation process. However, the book contained a lot more than that. All I can say is that I often see my life as divided into two main periods; before reading Jekyll Island and after reading Jekyll Island. I finally knew what Willie Nelson meant by "scary."

Now that I was starting to really get somewhere in figuring out how money is created, I needed to find more information to clear up some of the details. My wife even got involved in the search for truly academic and scholarly information. I will be forever indebted to her for discovering a free downloadable copy of a book entitled "The Mystery of Banking" by Murray Rothbard. This was exactly what I had always been looking for. It clearly explained the process without dumbing it down in any way or obfuscating the details in order to "sustain social faith."

That is essentially how I got started in learning about money. I have found this to be the most fascinating field I have ever encountered and I am very glad that I didn't take William Grieder's advise to remain blissfully ignorant.

Beware! This book is an expose on truth in lending.
This book will make your hair grisle up on the nape of your neck when you read it. This is a non fiction horror story of how the federal reserve came to be the controlling factor in our everyday lives. It chronicles history in such a fantastic way that when you research it and find it TRUE, it makes your guts wrench in utter dispair at the situation we have gotten into by entrusting financiers to our monetary system. If you want to know ANYTHING about the economy, this is the book to read. Though I must say that it is not for the faint of heart in the predictions it makes.

Given enough readers, this book could save the country.
"The Creature from Jekyll Island" shows you the greatest fraud in history: the Federal Reserve System. You will read what it has let its creators do to our country. And you will learn how we, the people, can get rid of it.

"Creature" says what many Washington and Wall Street insiders know, but would never say: that through the Federal Reserve System, powerful men use inflation to rob us blind.

G. Edward Griffin does not stop there. He visits remote continents and distant times to show how rulers have used their control of money to control their peoples. And, he relates how, at considerable risk and cost, Andrew Jackson returned to our people a great deal of economic freedom by refusing to renew the charter of the Second Bank of the United States.

This book's information shines a light on current events that is stark, strong, and new. It will affect not merely how you see financial or business news, but all sorts of news relating to domestic and foreign developments. You will understand much more about the "New World Order," the Kyoto "Global Warming" treaty, the latest adjustment of Federal Reserve interest rates, and why your children's history textbooks leave out so much.

You may find yourself discussing this book with your friends and neighbors. You may change your political registration. You may even try to elect candidates whose ideas reflect knowledge of the history Mr. Griffin describes.

Do yourself a favor: please read this book.

The Most Comprehensive Book Written on the Federal Reserve
This book is without a doubt the best book written on the "Federal" Reserve (which is about as "federal" as Federal Express). The book's four chapters explaining what money is (and isn't!) are the best I have ever read (and that includes the late, great economist Murray Rothbard's "What Has Government Done to Our Money"). My only qualm with this book is that Mr. Griffin should have left out the "C" word (i.e., conspiracy) from the text. He should just tell the history of the "Fed" along with his excellent economic analysis and let the reader figure out for him or herself what is going on. It becomes difficult to recommend this book to anybody outside of the John Birch Society (for which Mr. Griffin is a writer). But all in all, Mr. Griffin has done an admirable job. This is the true story of the monstrosity we affectionately call "The Fed" -- not like that Establishment whitewash on the "The Fed" by Rolling Stone writer William Greider called "Secrets of the Temple." For those of you who are skeptical about reading Mr. Griffin's long tome, you might want to start with Murray Rothbard's much shorter "The Case Against the Fed," before moving on to the Griffin work. ... Read more

Editorial Review

The first authoritative history of hedge funds-from their rebel beginnings to their role in defining the future of finance.

Based on author Sebastian Mallaby's unprecedented access to the industry, including three hundred hours of interviews, More Money Than God tells the inside story of hedge funds, from their origins in the 1960s and 1970s to their role in the financial crisis of 2007- 2009.

Wealthy, powerful, and potentially dangerous, hedge fund moguls have become the It Boys of twenty-first�century capitalism. Ken Griffin of Citadel started out trading convertible bonds from his dorm room at Harvard. Julian Robertson staffed his hedge fund with college athletes half his age, then he flew them to various retreats in the Rockies and raced them up the mountains. Paul Tudor Jones posed for a magazine photograph next to a killer shark and happily declared that a 1929- style crash would be "total rock-and-roll" for him. Michael Steinhardt was capable of reducing underlings to sobs. "All I want to do is kill myself," one said. "Can I watch?" Steinhardt responded.

Finance professors have long argued that beating the market is impossible, and yet drawing on insights from physics, economics, and psychology, these titans have cracked the market's mysteries and gone on to earn fortunes. Their innovation has transformed the world, spawning new markets in exotic financial instruments and rewriting the rules of capitalism.

More than just a history, More Money Than God is a window on tomorrow's financial system. Hedge funds have been left for dead after past financial panics: After the stock market rout of the early 1970s, after the bond market bloodbath of 1994, after the collapse of Long Term Capital Management in 1998, and yet again after the dot-com crash in 2000. Each time, hedge funds have proved to be survivors, and it would be wrong to bet against them now. Banks such as CitiGroup, brokers such as Bear Stearns and Lehman Brothers, home lenders such as Fannie Mae and Freddie Mac, insurers such as AIG, and money market funds run by giants such as Fidelity-all have failed or been bailed out. But the hedge fund industry has survived the test of 2008 far better than its rivals. The future of finance lies in the history of hedge funds. ... Read more

Reviews

Best of the 10 finance books for the layman I've read in the last two years
If you have read "Too big to fail", "House of Cards", "Big Short", "Lords of Finance", "Fool's Gold", etc. you will like this book better. More wisdom based on incredible research and interviews. I was initially resistant to Mallaby's recommendations about financial reform, but he sold me based on reasoning well supported by evidence. The clearest, most readable and reasoned discussions of the efficient-market theory and Soros' reflexivity. If you don't know those terms, read this book anyway. He will at the end and you'll be glad whether you interest is investing or just voting. This is scholarship dressed up as popular non-fiction. On a par with Tom Wolfe and Malcolm Gladwell for brining non-fiction to a wide audience.

Deserve a place in any traders' library
When I read through page#97, my first thought is this book will rank as high as the Remini of a stock operator and two market wizards book. Now I am in page#179 and I still think so. This is one of the best trading books I read in the recent five years.


I was a history and war buff, the one thing I notice is that a thick detail history or biography books often are not as good as books that are writen from a high level but with a lot of details to illutrate the pointd made. This is one of those books. For example, the details regarding 1992 pound sterling is the best one I read so far. It fully make the points regarding Soro's character. Better than any Soros's biography or the books writen by himself.

The traders the author chose cannot be better.

From a trader's prespective, this book will go down in history as top five trading books all time.

I believe this is the 2nd Amazon review I wrote ever. and it deserve the time I spent.

A developer from <[...]>The Options Lab

Revealing study of hedge funds
Sebastian Mallaby, the Paul Volcker Senior Fellow in International Economics at the Council on Foreign Relations and a Washington Post columnist, has written a most illuminating book on hedge funds.

The top three hedge-fund managers in the USA get $1 billion each a year. The money comes from fees (often a fifth of the profits), short selling and leveraging bets with borrowed money. Then they apply the whole package to bonds, futures, swaps and options. Mallaby calls it a `carnival of creativity and greed'

Hedge funds claim that they make the market work. They believe the myths that the markets are always right, that they correct themselves, that the chaos after the credit crunch could only happen once every billion years. They base their models on assumptions of `rational expectations' and `efficient markets'.

But the efficient-market theory crashed with the 1987 crash, the bond market meltdown of 1994, the Long-Term Capital Management bust in 1998 and the crisis that started in 2008. Currency markets, like equity markets, do not tend towards an efficient equilibrium. As Keynes said of those gambling on bubbles, "the market can stay irrational longer than you can stay solvent."

In reality, hedge funds are not about making markets more efficient or prices more accurate. They are all about seizing profits from other people's wealth-creation. They are parasites.

Michael Steinhardt, for example, made his fortune by milking discounts offered by pension funds and mutual funds. His collusion with brokers harmed the funds, which would have got better prices for their stock if insiders hadn't fixed the market. So the losers were millions of ordinary Americans, the winners were the millionaires who invested with Steinhardt.

Britain's membership of the Exchange Rate Mechanism (1990-92) gave speculators an opening. The Major government spent $27 billion of reserves trying to save the overvalued pound. After we left the ERM, the pound fell 14 per cent, losing the taxpayers $3.8 billion. The great philanthropist George Soros got $1 billion, in a `vast transfer of wealth from taxpayers to traders'.

In 1997, the hedge funds caused Asia's financial crisis. Soros' fund sold the overvalued Thai baht short. His fund made $750 million from the forced devaluation; Thailand's output fell by 17 per cent, plunging millions into poverty. Then Soros told South Korea it must `restructure' by making it easier for employers to sack workers.

As Mallaby sums up, "During the crises of 1997, hedge funds had profited by betting against governments that set illogically high prices for their currencies. In the hangover from those crises, hedge funds would profit by betting against governments that set illogically low prices for the broken jewels of their economies."`

Morgan Stanley and Goldman Sachs boasted of their independence from governments, yet when in trouble in 2008 begged for government funds. The International Monetary Fund said the bailouts cost the taxpayer $10 trillion.

Future crises are bound to happen. As Mallaby writes, "When banks can pocket the upside while spreading the cost of their failures, failure is almost certain."

As he notes, "government insurance encourages financiers to take larger risks; and larger risks force governments to increase the insurance. It is a vicious cycle", which, he warns, "will go on until governments are bankrupt."

Surprisingly Enjoyable History of the Evolving Role of Hedge Funds.
The splashy title "More Money Than God" doesn't do Sebastian Mallaby's hedge fund chronicle justice. It sounds like a gossipy tour of New Gilded Age wealth. Hedge fund managers are among the nouveau mega-riche, but that's not what Mallaby's book is about. This is a history of the major developments in hedge funds from Alfred Winslow Jones' pioneering "hedged fund" in 1949 through John Paulson's 2007 coup in shorting sub-prime mortgage securities and beyond. Mallaby defends hedge funds against the rash of criticism that their successes and failures in the past few years has unleashed by chronicling the changing role and increasing power of hedge funds over the past 60 years. He presents both views of hedge funds, with examples: They make markets more efficient and stable and led the flow of capital to the developing world. Their aggression and high leverage can be a destabilizing force, and their history is not free of underhanded tactics.

Mallaby lets the larger-than-life personalities of hedge fund magnates lead us through his history. He chooses hedge fund managers whose innovations influenced the industry: Alfred Winslow Jones' hedged fund that made 5000% in 20 years of the post-war era, Michael Steinhardt's success in the 1960s and 1970s with contrarian ideas, monetary analysis, and block trading, the econometrics of Commodities Corporation, Bruce Kovner's "carry trade", George Soros and Stan Druckenmiller's currency speculation in the 1990s, the superior stock-picking of Julian Hart Robertson's Tiger Fund, Paul Tudor Jones II's market moving, Long-Term Capital Management's lesson in leveraged finance, James Simon's Medallion Fund and David Shaw's fund as different styles of quantitative trading, Ken Griffin's multi-strategy Citidel, Amaranth's 2006 blow-up, August 2007's "quant quake", and more.

Mallaby admires hedge funds, because they find more success than investment banks with less systemic risk and no taxpayer-funded bailouts, but he doesn't avoid legitimate qualms about their role. Mallaby concludes by making a case against regulating funds with fewer than $120 billion in assets. He points out the hedge funds blow up all the time (5,000 failed between 2000 and 2009) but still fare better than investment banks or the S&P, even after correcting for survivorship bias. Mallaby's approach to the good and bad of hedge funds is thoughtful and engaging. I was surprised how much I enjoyed this book. It's a gold mine of information for those who are not sure what a hedge fund is or what they do, and it can serve as a (patchy) introduction to global finance. For those who read the Financial Times every day, "More Money Than God" is a compelling history of the industry and a fun read, even if some of it will be old news.

Easy Read
It can become a guily pleasure reading about Hedge Fund managers success and extrodinary wealth. Mallaby's book does something bold in that is stands up for what is often a villified segment of the investment world. Mallaby humanizes characters like George Soros and Julian Robertson but also gives tremendous insight into their strategies, why those strategies worked, and how they occasionally failed. Whether you work in finance or are just a casual follower of the markets this book has a narrative flair that makes it an easy read but the depth to leave you with some important lessons and views.

Lack of Fear Itself


Inverting Franklin Roosevelt "...investors should fear the lack of fear itself". This is just one insight Sebastian Mallaby gives us in `More Money Than God'. In fact, he gives a nuts and bolts feel for Hedge Funds, their history and the people - the masters of the universe - who operate them. It is a history of leverage, short selling and size characterized by major success and catastrophic failure.

Strangely, it also gives the small investor an insight into the share market. Is the market efficient? Can the market be beaten? If the market is not `efficient', hedge funds (and the small investor) can be successful. But sadly for an ongoing hedge fund, success removes the imperfections that it was profitably exploiting. "Sooner or later, every great investor's edge is destined to unravel" and often "quant brainiacs follow their computers to a well-deserved doom" because "the rocket scientists had blown up their rockets".

Success means a flood of money into the hedge fund. But "an analyst might identify a promising small company and figure that its value could double over three years, but if there were only $20 million worth of shares available to buy, it was hardly worth bothering with." Not so for the small investor, but then again the hedge funds seem to be able to short sell flexibly at will - a facility that should democratically be available to the small investor.

Starting in the 1990's, hedge funds became large enough to move markets of all kinds. They could even overpower governments. This allowed the Tiger Fund in 1998 to approach "Russian friends...to buy the entire stock of nongold precious metals held by the central bank and finance ministry...take the palladium, the rhodium, and the silver. All of it." leaving the logistics problem of getting it into a Swiss bank with Tiger's name on it.

For the small investor there is sound advice:

- it is often dangerous to trade on statistical evidence unless it can be intuitively explained". "Visceral" is the word meaning deep inward feelings rather than just an intellectual focus.

- "The whole point of leverage, the very definition of the term, is that investors feel ripples of the economy in a magnified way."

- We all rationalize success. One position by the Chanos Fund only worked out because the April 1989 Tiananmen Square demonstration broke out. This earned the comment "The way Ah see it, is that it took a revolution of a bihl-lion people for your darn short to work out."

- "Event driven" investing at Farallon Fund specialized in predicting events that cause existing prices to be wrong e.g. takeover announcements, demergers, avoiding bankruptcy, meeting banking covenants, major economic events, hybrid security maturity dates etc.

- `Pattern investing' used by the Medallion fund looking for patterns in the market. This applies research on French/English translation where the computer finds the grammatical rules not the programmer (using the Canadian Hansard which is conveniently in both languages).

- A Tiger Fund manager "should manage the portfolio aggressively, removing good companies to make way for better ones; should avoid risking more than 5 percent of capital on more than one bet; and should keep swinging through bad times until luck returned".

- Remember that "...the market can stay irrational longer than you can stay solvent".

- "If one of these stocks fell ... it was probably being pushed by an institutional block trader that needed to raise cash...the price would soon revert, creating an opportunity to profit." In other words, why is the seller selling?

- "the biggest danger for buyers of illiquid assets is that in a crisis these assets will collapse the hardest."

- "...the larger an investment fund, the harder it was for a fund manager to generate returns" meaning the small investor has more opportunity.

- And remember, "LTCM calculated that this loss should have occurred less than once in the lifetime of the universe. But it happened anyway." The market does not follow a normal distribution; often it is not random; but then is it often predictable?

Mallaby grapples with the variety of thought behind the success of the hedge funds giving us a workmanlike insight. This attempt to describe how the hedge funds actually operate - as far as he is able (and he tells us when he cannot) - makes this a valuable book indeed.

Wonderful trading insight

If you have read books like "stock Market wizard" and still feel that you don't have good idea how those people made so much money, this book is for you. Initially, I thought this book was just another hedge fund book without much substance. However, the author beautifully explains the trading methodologies of these star traders(and also their misses)- I was blown away. The author's insight into trading, leverage/economic history is remarkable, and by the reference list it is clear that he has put enormous efforts into this book. Compare this book with other hedge funds books and you will soon see the difference. I think this book may soon become a classic. ... Read more

Editorial Review

Top economist Gary Shilling shows you how to prosper in the slow-growing and deflationary times that lie ahead.

While many investors fear a rapid rise in inflation, author Gary Shilling, an award-winning economic forecaster, argues that the global economy is going through a long period of de-leveraging and weak growth, which makes deflation far more likely and a far greater threat to investors than inflation. Shilling explains in clear language and compelling logic why the U.S. and world economy will struggle for several more years and what investors can do to protect and grow their wealth in the difficult times ahead. The investment strategies that worked for last 25 years will not work in the next 10 years. Shilling advises readers to avoid broad exposure to stocks, real estate, and commodities and to focus on high-quality bonds, high-dividend stocks, and consumer staple and food stocks. .

• Written by one of today's best forecasters of economic trends-twice voted by Institutional Investor as Wall Street's top economist
• Clearly explains what to invest in, what to avoid, and how to cope with a deflationary, slow-growth economy
• Demonstrates how Shilling has been consistently right about major economic trends since he began forecasting in the early 1980s

Filled with in-depth insights and practical advice, this timely guide lays out a convincing case for why investors need to be prepared for a long period of weak growth and deflation-not inflation-and what you can do to prosper in the difficult times ahead. ... Read more

Reviews

Did I Tell You I'm A Genius?
I've admired Gary Shilling's writing and insights for years and eagerly looked forward to this book. But, wow ... I have to be honest: I never realized what a vain blowhard this guy is. The first 158 pages of this booked should have been cut out by a good editor, or, better yet, sub-titled, "Let Me Count The Ways I'm Uniquely Right About Everything."

My recommendation is that you start reading the very lively part of this otherwise interesting book, which begins on page 159. This part of the book might be entitled, "I'm Smarter Than Everybody Else So I'm Going to be Right About Everything Again." As is so happens, I think I kind of agree with him but, sheesh, a little modesty, please. This guy makes Donald Trump sound self-deprecating.

Gary Schilling Gets It !
Gary Schilling and Bernake are the only ones telling us that DEFLATION is the problem. I believe they are right. Look around, everyone is saying how Bernake is wrong, and inflation is the problem. But Bernake and Schilling are correct. DEFLATION really is the problem.

Americans are the primary consumers for the world, and we are about to embark on a new prolonged era of extreme frugality.

The city and state governments are laying off workers like crazy. There are no new jobs to replace these jobs. Private sector employees are lucky just to have their jobs.

And globalism is causing the price of products to deflate as an open arena of competitiveness will tend to do.

And when we have QE2, it will do more to inflate the developing econimies than the American Economy, as the US banks are only feeling free to fund to fund the emerging markets. All bailout money fill filter overseas so DEFLATION will still hit hard in USA.

Stocks are bad, Real Estate is bad, Developing Economies are bad, Junk Bonds are bad. And if you think gold is good look at all your 'clever' friends that own gold, have they ever made money in the market before? Gold is a bubble too.

Only Long Term US treasuries and high dividend low p/e stocks have any potential to provide capital preservation. US treasuries are the best as even stable stocks will suffer from the deflation to come.

Gary Schilling Gets it! Most other people don't and they will lose much of their assets.

The Singular Gary Shilling at his best
Great book. Full of stats and history. Maybe he will be right again, and we are headed for deflation and a 3% or less yield on the 30 year treasuries. In any case, of all the investment advisories and financial sources that I follow, Gary Shilling is one of the few whose predictions I give my full attention.

Good ideas and strategies
Always very interesting to read Gary Shilling's insights and advice. I'll refer to this a few times over the next few years, I'm sure, as we continue to go through these economic times. ... Read more

Editorial Review

"A magisterial work...You can't help thinking about the economic crisis we're living through now." --The New York Times Book Review

It is commonly believed that the Great Depression that began in 1929 resulted from a confluence of events beyond any one person's or government's control. In fact, as Liaquat Ahamed reveals, it was the decisions made by a small number of central bankers that were the primary cause of that economic meltdown, the effects of which set the stage for World War II and reverberated for decades. As yet another period of economic turmoil makes headlines today, Lords of Finance is a potent reminder of the enormous impact that the decisions of central bankers can have, their fallibility, and the terrible human consequences that can result when they are wrong.

... Read more

Reviews

The Four Bankers of Apocalypse
Liaquat Ahamed, a former World Bank economist and investment fund manager, began research on this book long before the current financial crisis, having no idea of the relevance it would have upon its publication. It is a history of the financial and economic turmoil that began in 1914 and didn't really end until after World War II. He traces the development of this crisis through the lives and actions of four central bankers: Benjamin Strong of the Federal Reserve of New York, Montagu Norman of the Bank of England, Emile Morceau of the Banque de France, and Hjalmer Schacht of the Reichsbank of Germany. The liquidity crisis of 1914 has suddenly become a subject of interest as it bears relevance to today's problems.

Ahamed's central thesis is that the critical decisions made by these four bankers not only caused the Great Depression but also created the conditions for World War II. The most fateful event of all was the decision to adhere to the gold standard. In retrospect, tying the amount of currency a country has in circulation to the amount of gold it has in its vaults appears arbitrary and nonsensical. However, it seemed like a good idea at the time, it provided a universal standard against which countries could stablize their currencies. Unfortunately it became a straight jacket which gave them little room to maneuver.

When the big four bankers came into power in the mid-1920s, the use of the gold standard actually seemed to be working, currencies were stabalized and capital was once again flowing. The problem however was that there was not enough gold in existence to proide enough capital to finance world trade. According to Ahamed, this was the central flaw in the financial system that led to the Crash of 1929 and the subsequent Great Depression. Of course, the chain of events was more complicated than that and Ahamed recognizes the complexity. Each of the four bankers and their respective countries were pursuing their own agendas as opposed to trying to save the system as a whole, the gold standard was the proverbial straw that broke the camel's back.

Ahamed has written an interesting history of what otherwise would be a fairly dull story. It makes one think about flaws in the system - like sub-prime mortgages, derivatives and the excessive use of credit - and how things could have been different if they had been recognized earlier.

Central Banks in the First 40 years of the 20th Century
First, let me say that this is an extremely well written book. I was expecting to have to plow through the usual dreadful writing that finance and economics seems to generate. To my surprise I found a book that was crisp, clear, and interesting. Fun, in fact. Second, the author covers a period and a topic that is sadly neglected in most histories - the inter-war period, and especially the financial events that played a major role in the rise of Hitler and the origins of the Second World War.

The book is primarily the story of 4 Central Banks - those of the US, England, France, and Germany, and of the heads of those banks. The book actually covers a longer span than the inter-war period, it includes important information about the banks just prior to the First World War, their activities during the war, and extends into the Second World War. The lead-in is especially important, because it explains so much of what happened during the inter-war period.

The events are too complicated to review in detail, but the author explains them well and shows how the personalities of the Bankers as well as the politics of the times influenced events. Let us just say, mistakes were made.

My one quibble with the book is that the author is rather unsparing in his criticism of the bankers. Although this is somewhat justified, I ended up feeling sympathetic to at least the heads of the US Federal Reserve and the Governor of the Bank of England. Their primary fault was an inability to see beyond the conventional economic wisdom of the times. In point of fact, the only person who seemed to get it right during this time was Maynard Keynes. If we are to judge everyone against the standard of the most brilliant mind in their field, very very few of us are going to come out well.

The most important point the book makes is how factors other than purely economic issues play a role in making economic decisions, but how the consequences of those economic decisions then rebound onto the wider political history of the times. While the book deals with a different time and political landscape, the parallels to our own times are VERY frightening. The author does not emphasize the parallels, and the book was actually completed before many parallel events occurred. To my mind that just makes them more compelling.

Four Men Could Have Prevented the Depression: Hopefully, Treasury Secretary Geithner and Adviser Larry Summers Have Read It!
Lords of Finance is a gripping story with forgotten yet worthy characters and villains hidden inside the drama of The Great Crash and Depression. It is a lively and fascinating "event by event" look at the slow motion lead up to The Great Crash, and the four men that could have prevented the Depression.

Each thought they were pursuing a reasonable course (think prisoners dilemma), yet their tragic lack of vision and coordination doomed the world to a long and painful decade of decline.

This book will keep you up at night (probably afraid for what is left of your IRA, portfolio, or home value) reading to find out what has happened to these four men and how they continually missed opportunities.

In the end they were overtaken by their biases, rivalries, vacations and countries they represented: The United States, Britain, France and Germany.

Falling stock prices, falling international trade, falling prices, falling commodities, a rush to hold dollars, declining interest rates but lack of loan availability, decisions to save some politically connected banks but not others, and a lack of consensus on an answer, all make 1929 and 2009 have an eerie similarity?

Substitute a real estate bubble for fixed priced gold, reparations for sub prime, Treasury Secretary Henry Paulson for Treasury Secretary Paul Mellon, and the book reads like an echo of the slow motion days leading up to the Great Crash and the Depression that followed.

Lords of Finance
Liaquat Ahamad does a thorough and engaging job of describing the men and the factors that drove us towards the Great Depression. Its' scary to see that history is repeating itself as we see the collapse of the real estate and stock speculative bubbles.

Its' amazing to me that the factors that caused the Great Depression, from the actions of the Federal Reserve, the control of the banks in restricting the flow of money, and the inability of the President to control the actions of these groups is largely overlooked. The easy way is to blame President Hoover and give FDR credit for ending it, when the truth is far more complex and relevant today as we face a similar crisis

We have given the banks and Wall Street the freedom to take advantage of deregulation, and we are once again in a financial crisis. Only when you understand the past, can you prevent repeating it. Ahamad's book should be required reading for every Congressman and media member in the country. Only then, this crisis can be met head-on.

Massive Speculation leads to a Depression.Hoover got it right
The author of this book has done an excellent job in analyzing what the main cause of the Great Depression was.The crucial pages in the book that provide the answer are pp.295-302.It is here that we find Benjamin Strong,in August of 1927, who knew full well that the United States was in the midst of not one ,but two raging, speculative bubbles,one in stocks and the other in real estate,forced through a one half of one percent rate cut that simply fueled the specultive bubbles even further.We find Herbert Hoover,blamed for the Great Depression in the United States,calling the future outcome one hundred percent correctly when he stated that the speculation of the late 1920's would lead to a Depression unless the banker financed speculative build up was stopped.Hoover's attempt to stop the insane rate cut failed.President Coolidge simply pointed out that there was nothing he could do because the Federal Reserve System was independent of the Federal Government.He stated that he had no authority to attempt to get the FRS to reverse the rate cut ,which they eventually did in February ,1928.
Unfortunately,by that time that action was too little and too late.Only a policy of credit restriction applied against speculators might have mitigated the eventual depression.

I highly recommend the book.It puts to rest once and for all the canard ,repeatedly told by Murray Rothbard and Milton Friedman,that the FRS was part of the Federal Government and was controlled by government bureaucrats who told the bankers what to do.It is just the reverse.The bankers were so powerful that they could tell an American president what to do.It is interesting to realize that the bankers have again brought the United States to the edge of financial catastrophe with their highly speculative loan policies

The Mistakes Men Make
How did the world plunge into the financial crisis of 1929-1933 and are we likely to follow that dismal path today? To probe this question, Liaquat Ahmaed, a professional investment manager, has written an absolutely absorbing economic history. He focuses on the principal players ("The Lords of Finance") in the financial world of the 1920's and 1930's, the central bankers of the United States, Britain, France and Germany. They were regarded at the time as members of the world's most exclusive club. Forgotten men today (and all were men,) Montagu Norman (the U.K.), Benjamin Strong (the U.S.), Hjalmar Schacht (Germany) and Emile Moreau (France) struggled with how to deal with the enormous reparation payments due from Germany under The Versailles Treaty, the likewise huge war debts owned by the victorious powers to the United States, and when to return to the gold standard, which had been abandoned during the war.
These financial titans were "the best and the brightest" of their times and they made error after error in dealing with these problems. As Ahmaed writes, they were a "group of men who understood none of this [the Crash of 1929], whose ideas about the economy were at best outmoded and at worst plain wrong." Germany could never realistically repay its reparations debt. Similarly, Britain and France could never pay back the U.S. for money borrowed during the war. (Of all the allied powers, only Finland finally paid of its World War One debt.) Returning to the gold standard was a huge mistake. Among economists, only Britain's Maynard Keynes realized that the gold standard would hamstring economic growth. (Of course Keynes also realized the futility of reparation payments in his famous book, The Economic Consequences of the Peace.) When the financial crisis struck, none of the central banks adequately played the role of "lender of last resort." While under Roosevelt the Federal Reserve was reformed and the U.S. government took an activist role in the economy, it was a case of too little, too late.
By focusing on the lives of these key bankers, each of who was idiosyncratic, Mr. Ahmaed has produced a fascinating volume, full of interesting personalities (Bernard Barauch, Winston Churchill, Herbert Hoover and Dean Acheson, to name a few). Ahmaed speculates that had Benjamin Strong (head of the New York Fed) not died in 1928, there might have been a figure strong enough to pull together the central bankers for a concerted attack on the financial crisis. (It is also scary to consider that our central bankers today are "the best and the brightest" and may also be making terrible but different mistakes, blinded as they are by the orthodoxy of today's economic thinking.)
Ahmaed writes with grace and style. It is a wonderful achievement for a man who apparently is new to the writing of history. He also explains the mysteries of international finance, gold reserves and currency fluctuations in terms anybody can grasp. For an understanding of the financial climate that led to The Great Depression, and for pure entertainment, The Lords of Finance is highly recommended.

A Masterpiece
Mr. Ahamed has written a wonderful book on both the financiers who dominated money policy in the period between the two world wars and the economic history of that period. Mr. Ahamed writes very clearly and well about both the bankers and the period. His writing is also as vivid and interesting as it is clear. And Mr. Ahamed's writing imparts a extremely vast amount of detail and information on the economics of the 1920s and the Great Depression. He has provided an extensive list of references along with a vast amount of footnotes. Mr. Ahamed's work is history and economic history at its best.

Among the major gems of information provided by Mr. Ahamed is the baneful effect of the gold standard between the world wars. As other economists such as Peter Temin have indicated, each economy began to recover from the Great Depression when the economy left the gold standard almost invariably. Mr. Ahamed demonstrates the absurdity of Montagu Norman's policy of restoring the British pound to its pre World War I value in gold.

Mr. Ahamed also demonstrates how World War I drastically changed economic conditions so that the British led prewar gold standard was an impossibility. He also demonstrates the pernicious and poisonous effect of the reparations imposed on the former Central Powers by the Treaty of Versailles. These reparations gravely hindered international cooperation. And Mr. Ahamed makes evident that the central bankers have a colossal impact on the economy and the lives of individuals all over the world.

This book is a must read for all Americans, particularly those who have studied economics.

Spellbinding tale of world finance leading to the Great Depression
This book tells the story of Western European and American international finance between the First World War War and the Great Depression. Ahamed focuses upon the most important central bankers of Britain, America, France and Germany, as well as on John Maynard Keynes. The book is a collective biography of the five individuals, a history of Western finance in the 1920s and an argument about the causes of the Great Depression.

The book reads well. Ahamed gives detailed stories about very important events, about which I knew very little. He describes the people involved and their motivations. He makes the whole bygone era come alive again.

But it is not just a good read; it is an important, and unjustly neglected, subject. If you ask, what caused the Great Depression, you tend to get dropped immediately into a vast and contentious literature that mostly focuses on economic theory. Economic theory, of almost all perspectives, tends to approach its subject, as if is unrelated to time or to place. We are discussing "the economy", not the particular economy of Germany in the early 1920s or whatever it might be.

This ahistorical approach tends to lump situations together, which do not belong together, and to neglect facts which are of obvious importance, once you think about them. In the case of the Great Depression, there is a critical historical context, which Ahamed stresses. Before World War One, Great Britain was the dominant financial power of the world. It maintained its system through the old-fashioned gold standard. The gold standard created monetary discipline and restraint by tying the amount of currency which any nation could issue to the amount of gold which it had. Those with gold could issue more currency and enjoy a rising standard of living; those without gold had to issue little currency and were forced to work hard to make do with less. The system, in theory, was self-adjusting. As a nation got a lot of gold, its currency increased, which drove up its prices. As its prices went higher, that nation attracted imports but had trouble exporting, which caused it to lose gold.

It all sounded good, and there are those, even today, who wish we would go back onto the gold standard. But, as Ahamed makes clear, the gold standard died in 1914, when the Great War started. The war was so absurdly expensive that it forced every European power off of gold. It also forced every European power to borrow massively, and to print so much currency that there were greater or lesser amounts of inflation all over Europe.

European leaders mostly believed that, once the war was over, they could restore the pre-1914 world. They tried to do so for many years, but they were never successful. The war resulted in a decisive shift in financial and economic power from Britain to America. Britain and France borrowed huge sums from America, to finance the war. They tried to get these debts repaid, by imposing on Germany the obligation to pay equally vast sums in reparations.

In retrospect, it is obvious that the war-torn nations of Europe could neither pay their debts to America nor reparations from Germany to the Western allies. The obvious solution was that America forgive the debts to the Western allies, on condition that they forgive the reparations from Germany.

America did not do that. It insisted on payment by France and Britain, which, in turn, insisted on payment by Germany. All of these nations were gravely weakened by an impossible debt load.

And, on top of that, America had most of the world's gold. This made it impossible for the world to go back on the gold standard, since no one had gold except America. America said that it was going back on the gold standard, except that it did not, at least not in the old way. With so much gold, under the old rules, America should have issued a vast amount of currency, which would have driven up American prices, encouraged imports from Europe and thus allowed Europe to get back on its feet.

Except we didn't follow the old rules. Faced with a vast amount of gold, the Federal Reserve "sterilized" most of it. In other words, we got the gold, but we issued no currency backed by it. Fearing inflation, we simply took the gold and buried it. While we used the old name of the gold standard, the old rules were torn up and replaced with illogic. Europe had little gold, so its currency could not expand. America had lots and lots of gold, but we refused to use either it to expand our currency or to help European recovery.

This made the global system of finance hopelessly unstable. Germany made things worse by running the printing press to solve its problems, and bringing on hyperinflation. Britain made things worse, by going back on the gold standard, at the old rate and acting as if it were still an economic super-power, when it simply did not have the money to sustain the role any more. France was consumed by hatred and fear of Germany, which lead it to play a very irresponsble role in the whole drama. Ultimately, it all blew up, lead to the Second World War, after which the US got it right, with the Marshall Plan and the Bretton Woods agreement.

Ahamed tells this whole story very well. Anyone interested in the Great Depression should know this story. The best way to get to know this story is to read this book.

Twentieth Century Nightmare
I bought this book expecting (and dreading) a boring technical tome on banking (a subject that I find intriguing but difficult). To my delight it was not boring. On the contrary it is an exciting and riveting book, from cover to cover. It goes very far to explain the twentieth century. I am afraid that the title will turn people away. It should have a title more like "The Twentieth Century Nightmare." ... Read more

Editorial Review

In the post-meltdown world, it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve.

Most people think of the Fed as an indispensable institution without which the country's economy could not properly function.But in END THE FED, Ron Paul draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional.It is inflating currency today at nearly a Weimar or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless.What most people don't realize is that the Fed -- created by the Morgans and Rockefellers at a private club off the coast of Georgia -- is actually working against their own personal interests. Congressman Paul's urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America's economic policy for future generations.
... Read more

Reviews

not a Ron Paul fan
I am certainly not an avid Ron Paul supporter by any means, and in fact I disagree with him on numerous points. But, I have respect for him because he is one of the only politicians who seems to actually, truly believe what he says. I really respect that, it's refreshing. He seems to be unswayed by lobbies, outside influences etc, and he has a fully-formed belief system.

So I read this book. I find his argument somewhat extreme at times and I do not agree with every point he makes (though I do agree with a lot). BUT in any case, the book made me think. A lot. And I think that is what's important about it. Reading it added a whole new perspective to looking at the federal govt (and specifically the federal reserve) that I had never really considered before. I still don't agree with everything he says, but I applaud him for being in Congress and having the courage to say it. I'm very glad I read End The Fed, if only to make me think long and hard about beliefs I had. Even if you are not a fan of his or disagree with him, it's really worth the time just to get you thinking in some new ways.

Ron Paul Hits a Homerun
Andrew Jackson ended his Fed in 1836. Ron Paul can do the same for us, if we make it possible. Read this book and work to end the central economic and political evil in America, the central bank that fuels recessions and depressions, the warfare state, the redistributionist state, and the police state. End the Fed!

Deals With Difficult Political Problems and Enlarges the Debate About Monetary Policy
In its first response to the global financial crisis, the Fed disbursed trillions in secrecy. This was during the critical period when so many were financially squeezed. Cash went to Goldman Sachs and others. Some beneficiaries used these funds to short the markets. Some was used for executive bonus commitments. We still don't know where it all went.

The Federal Reserve Act delegates money power to a private banking monopoly. Ron Paul introduced H.R. 833 to abolish the Federal Reserve System. He wrote this book to outline reasons to end the Fed. This doesn't mean he wants politicians to operate the money supply. While it doesn't appear likely the status of the Fed will be changed soon, it's possible that Congress will act to require full disclosure on Fed distributions with regard to the Global Financial Crisis.

The main counter argument is that it would be a terrible mistake to trust Fed oversight to politicians. The late Milton Friedman offered an alternative to the current system which might satisfy a broader constituency. The U.S. in theory could have its own currency called U.S. Notes (instead of Federal Reserve Notes). Friedman thought this could work if physical money were created only to match population increase or else align increases of money supply to a price index. The system that Friedman talked about would leave physical money creation independent of political control. Currently, physical money is created through Treasury debt. Nevertheless, Friedman acknowledged that it may not be politically possible to take money power away from the Fed.

Under President Abraham Lincoln, money power was vested in the Treasury Department. If money power were returned to the Treasury, perhaps under Friedman's plan, the federal deficit could be completely paid off with debt-free U.S. Notes. Ron Paul does not seem radical if the idea of issuing our own currency, using U.S. Notes instead of Federal Reserve Notes, is not radical.

End the Fed explains harmful consequences of our monetary policy and fractional reserve banking. In this system, money comes into existence only through debt and is then used to create more debt. There is an overreliance on debt and too much debt can be harmful to most citizens.

Why does the Fed resist telling us where the money went that it disbursed in the early stage of the global financial crisis - when a little liquidity allowed beneficiaries to buy any assets at fire sale prices? This is the question I return to most often.

The Fed makes funds available for government spending far in excess of what could sustainably be raised through direct taxation. Paul posits that our military engagements would not have played out as they did if government had to pay at least in part by raising taxes. Seen this way, the Fed influences political policy far more than people are generally aware.

Recall also earlier concerns of whether Fed-led credit creation was creating a housing bubble. Then Fed Chairman Greenspan would only allow that in isolated parts things were "frothy." He denied the bubble and encouraged mortgage equity withdrawals by homeowners. This turned out to be a trap for trusting citizens as documented in Dr. Paul's book.

Paul wrote about conflicts of interests between the powers behind the Federal Reserve and the American people. This is not a partisan issue. Even Chairman Ben Bernanke blames the severity and duration of the Great Depression on the Federal Reserve.

Like Paul, I got interested in coins since they seem to have intrinsic value. I like to collect nickels. Some from the 1920s are circulating. They last because they're 75% copper and 25% nickel - very durable.

It's not difficult to accumulate literally hundreds of pounds of nickels. Anybody can get $100 boxes of nickels at a cooperative bank without having to pay a service fee. These boxes arrive off the armored truck in neatly packed rolls. One box weighs 22 pounds so make sure to use a dolly to wheel and not carry them. Like Paul, I believe the U.S. Mint will eventually make steel coins and maybe these nickels are not a bad thing to have.

I think those nickels should be kept safe in a relatively inexpensive site box such as this one: Jobox 48" Long Heavy-Duty Steel Chest With Site-Vault(tm) Security System 1-654990.

Economics 101
Finally, a no-holds-barred, plain English explanation of the "Crime of the Century." Dr. Paul explains very clearly how the Federal Reserve has not helped our economy, but has virtually destroyed it. It's so clear, in fact, that maybe even our Congressmen and Senators will finally get it.

Economics 101: When you create more of something, the value decreases.

Economics 201: The Federal Reserve printing (Liquidity Injections) of Federal Reserve Notes (Dollars) has decreased their value.

Economics 301: The dramatic increase of Federal Reserve money printing in the last couple of decades has devalued our money and caused the current economic crisis.

Economics 401: The Fed is trying to solve the problem with more of the same thing that caused the problem.

Of course it's more complicated than this, and that's where this book is so important. Dr. Paul explains the history of the Fed, its relationship to modern wars and a myriad of other societal ills, the inevitable failure of a fiat currency and, more importantly, how we can get out of this mess.

The Federal Reserve system is nothing less than the most brilliant tool ever for the transfer of wealth and power from the average citizen to the wealthy and powerful, and we must rein it in to preserve our freedom. I know I must sound dramatic, but I can not stress enough the importance of honest, realistic, economic education. This book is a great first step. It should be required reading in all our schools.

A blueprint for economic repair
Ron Paul's "End the Fed" is equal parts an indictment of the Federal Reserve System actions in the last 96 years and a blueprint to repair the damage that the actions have caused. Unfortunately, the remedy can't be accomplished in half measures. Either the people audit the Fed and consqeuently destroy it, or future generations will be doomed to relive the central banking tactics that have proved Paul correct. We'll have just one chance to get this revolution right.

The Most Important Book of Our Generation
The Federal Reserve will no longer be just the name on the front of our dollar bills. Thanks to Ron Paul, millions of Americans are waking up to the true nature of this institution. Drawing on history, economics, and his personal experiences as a congressman, Dr. Paul shows us why the Federal Reserve cannot exist in a truly free and prosperous society. "End the Fed" is an interesting and engaging book that every American who cares about this country should read.

What Time Is It? Time To "End The Fed!"
I just finished reading the latest book from the great Dr. Ron Paul, Republican Representative from Texas' 14th Congressional District, titled End The Fed. With a title like this, it doesn't take a rocket scientist to deduce what Dr. Paul is advocating.

"Of course, Congress could abolish the Fed tomorrow if it wanted to. The Representatives' ignorance of economics, as well as the benefits they enjoy from irresponsible spending, prevent this." - p. 117

With President Woodrow Wilson's signing of the Federal Reserve Act in 1913, a central banking system was created. That system was granted the ability to create credit and money out of thin air, and to do so with no oversight whatsoever. The framers of that legislative piece of garbage, as well as current supporters, would have you believe it was created to provide liquidity in the market in times of financial panic. What it has really done is weaken the dollar by artificially keeping interest rates low and inflating the money supply.

"Artificially low interest rates are achieved by inflating the money supply, and the penalize the thrifty and cheat those who save.

Manipulating the money supply and interest rates rejects all the principles of the free market, and so it cannot be said that too free a market caused this mess. The market was not free at all. It was manipulated and distorted. Ironically, free markets and sound money generate low rates, but unlike the artificially low rates orchestrated by the Fed, the information conveyed is beneficial to investors and savers. Only the Federal Reserve can inflate the currency, creating new money and credit out of thin air, in secrecy, without oversight or supervision." - p. 133

Any kid that has collected sports cards of any kind will tell you, the more a card a printed, the less it's worth. The same principle applies to money. The more the dollar is printed with nothing to back it, the less it is worth.

"When the printing presses are available to the government and the banking cartel, they will use them rather than do the right thing" - p. 127

I could go on and on quoting the good Doctor and this great book, but you should really check it out for yourself. In my opinion, Dr. Paul put pen to paper and easily illustrates the ways the Federal Reserve has hurt the US dollar and the economy since its inception and why we as American citizens must petition our elected officials to "End The Fed".

Action Item for Freedom Lovers
Want your representatives and senators to get the message? Order extra copies of this book and send one to each congressperson...maybe even highlight some interesting sections. Think about it, if just 50 people from each state were to do this, imagine the impact when the senate offices are flooded with this book! Let's send them a MANDATE FROM THE PEOPLE!!

Oh, and by the way, the book is excellent.

Educate yourself on monetary policy and you too will want to End the Fed!
I think a major reason Ron Paul's books are so compelling and effective is because they quite literally give you an inside look at how our current system of government operates. I think most people remain indifferent because they simply don't realize how truly awful things are. Ron Paul first began shedding the light in his masterpiece, "The Revolution" and now he turns his attention specifically to the Federal Reserve Bank. I'll be honest and admit that since I understand Austrian Economics I went into this book with a bias and mindset already that the Fed should be abolished. But wow after finishing this book, the urgency and desire that I have to help see this vision come true, and have a sound monetary policy in line with the Founders and the framework of the Constitution to be restored to America has increased tenfold. End the Fed! And take the first step back towards true and sustainable prosperity. ... Read more

Editorial Review

A time-tested guide to stock trading

Published every year since 1968, the Stock Trader's Almanac is a practical investment tool with a wealth of information organized in calendar format. Everyone from well-known money managers to savvy traders and investors relies upon this annual resource for its in-depth analyses and insights. The Stock Trader's Almanac 2011 contains essential historical price information on the stock market, provides monthly and daily reminders, and highlights seasonal trading opportunities and dangers.

• Alerts you to little-known market patterns and tendencies to help forecast market trends with accuracy and confidence
• An indispensable annual resource, trusted for over 40 years by traders and investors
• The data in the Almanac is some of the cleanest in the business

For its wealth of information and the authority of its sources, the Stock Trader's Almanac stands alone as the guide to intelligent investing. ... Read more

Reviews

Great Seasonal Investment Ideas, November 3, 2010
Excellent desktop reference full of ideas on how to capitalize on seasonal trends in the market.
Provides good reference source for historical market data. ... Read more

Editorial Review

Q&A with Author John C. Bogle

In Don’t Count on It, you discuss how we deceive ourselves, particularly with numbers.Can you describe what you consider to be the absolute worst illusion investors fall prey to?
The most damaging illusion for investors is their belief that they capture the stock market's return. For example, if the stock market provides an annual return of 7%, we know that the average investor's return will fall short of that by the amount of fees they pay. Those fees amount to about 2.5% annually for the typical investor, so their net return is down to 4.5%. Taxes might knock another 1% off of that, reducing the investor's annual return to 3.5% -- just half of the market's return. If you compound those figures over 50 years, $1 grows by $4.60 at 3.5%, and by $28.50 at 7%. In other words, the investor's cumulative return is less than 20% of the market's return. That's an enormous gap; one that can easily mean the difference between achieving one's long-term financial goals and falling well short of them.

If you could change just one thing about the practice of capitalism today, what would it be, and why is it the most important?
The biggest problem with capitalism today is our tremendous focus on the short-term. Institutional investors--who own 70% of our corporations--are predominantly concerned with whether or not the quarterly earnings of the companies they own will meet the stock market's expectations. As a result, our corporate managers move heaven and earth to try to meet those targets, so as to keep their firm's stock price high and maximize their stock-based compensation. But building corporate value over the long-term is hard; there are no quick or easy shortcuts. And as the past decade has demonstrated, decisions made to boost earnings and stock prices in the short-term tend to end up destroying shareholder value over the long-term. The sooner we can realign our focus from the short-term to the long-term, the better for all concerned.

What do you think about ETFs?
I like some; I am appalled by others. Specifically, I favor low cost ETFs that are focused on broadly diversified portfolios of stocks and bonds that investors can hold for a lifetime. These ETFs should provide investors with their fair share of whatever the returns our financial markets will provide. That's a winner's game.

On the other hand, I'm not happy with ETFs--the vast majority--that exist to enable investors to speculate, to play their hunches on which country or market sector will outperform or underperform over the short term. The turnover rates are enormous, holding periods are measured in mere days, and costs are far higher than those levied by broad market ETFs. That kind of speculation is a loser's game.So I believe that ETFs have the potential to play a significant role in the portfolios of long-term investors. Unfortunately, to this point their use seems to be dominated by those engaged in far more destructive investment approaches.

You talk about inspiring the next generation of leaders and your mentors in Don’t Count on It.What did your mentors have in common that you think is the most important trait in inspiring young people today? In other words, how can each of us be better mentors?
I think at the most basic level, my mentors were good people; men of strong character who loved their work. They realized that the work they did made a difference in people's lives, and they did that work with a great deal of ability, pride, and professionalism. They woke up every day and tried their best to make the world a little bit better. That's what I took away from the relationships I had with my mentors, and the extent that I've been able to emulate them, I think, explains a great deal of what I've been able to accomplish in my own career.

My views on mentoring have a lot in common with the themes of Don't Count on It. That is, these relationships are largely built upon trust, and attempts to quantify them are doomed to failure. Mentoring, in my mind, is less about helping someone fill out a checklist of accomplishments, and much more about passing along the immeasurable qualities one needs to be successful in their field --character, professionalism, honesty, intellectual curiosity, even humor. If you possess sufficient amounts of those characteristics, you're likely to be successful in whatever field you work in.

"This collection of Jack Bogle's writings couldn't be more timely. The clarity of his thinking—and his insistence on the relevance of ethical standards—are totally relevant as we strive to rebuild a broken financial system. For too many years, his strong voice has been lost amid the cacophony of competing self-interests, misdirected complexity, and unbounded greed. Read, learn, and support Jack's mission to reform the industry that has been his life's work."
—PAUL VOLCKER, Chairman of the President's Economic Recovery Advisory Board and former Chairman of the Federal Reserve (1979–1987)

"Jack Bogle has given investors throughout the world more wisdom and plain financial 'horse sense' than any person in the history of markets. This compendium of his best writings, particularly his post-crisis guidance, is absolutely essential reading for investors and those who care about the future of our society."
—ARTHUR LEVITT, former Chairman, U.S. Securities and Exchange Commission

"Jack Bogle is one of the most lucid men in finance."
—NASSIM N.TALEB, PhD, author of The Black Swan

"Jack Bogle is one of the financial wise men whose experience spans the post–World War II years. This book, encompassing his insights on financial behavior, pitfalls, and remedies, with a special focus on mutual funds, is an essential read. We can only benefit from his observations."
—HENRY KAUFMAN, President, Henry Kaufman & Company, Inc.

"It was not an easy sell. The joke at first was that only finance professors invested in Vanguard's original index fund. But what a triumph it has been. And what a focused and passionate drive it took: it is a zero-sum game and only costs are certain. Thank you, Jack."
—JEREMY GRANTHAM, Cofounder and Chairman, GMO

"On finance, Jack Bogle thinks unconventionally. So, this sound rebel turns out to be right most of the time. Meanwhile, many of us sometimes engage in self-deception. So, this book will set us straight. And in the last few pages, Jack writes, and I agree, that Peter Bernstein was a giant. So is Jack Bogle."
—JEAN-MARIE EVEILLARD, Senior Adviser, First Eagle Investment Management

Insights into investing and leadership from the founder of The Vanguard Group

Throughout his legendary career, John Bogle-founder of the Vanguard mutual fund group and creator of the first index mutual fund-has helped investors build wealth the right way, while, at the same time, leading a tireless campaign to restore common sense to the investment world.

A collection of essays based on speeches delivered to professional groups and college students in recent years, in Don't Count on It is organized around eight themes

• Illusion versus reality in investing
• Indexing to market returns
• Failures of capitalism
• The flawed structure of the mutual fund industry
• The spirit of entrepreneurship
• What is enough in business, and in life
• Advice to America's future leaders
• The unforgettable characters who have shaped his career

Widely acclaimed for his role as the conscience of the mutual fund industry and a relentless advocate for individual investors, in Don't Count on It, Bogle continues to inspire, while pushing the mutual fund industry to measure up to their promise. ... Read more

Reviews

Commuting home from Boglestock 9 . . .
My recent journey to Bogleheads 9 was special for one and only one reason: the opportunity to see Jack Bogle enter the room to a standing ovation of Bogleheads and speak his mind, as he always does. His god-given sportscaster's voice is truly something special--and it is always worth the price of the trip to listen to him. (If Jack had ever decided to do play-by-play for the Phillies, there is no doubt that he would have ended up in a different sort of Hall of Fame).

The commute back from Philly to Chicago only made the latest Boglestock meeting even more memorable, since it gave me a few uninterrupted hours to read his new book, in the way he suggested, by moving directly to the chapter of interest, rather than reading the book as a continuum. I'll let you find your own personal gems, but let me share a few that I enjoyed.

No one speaks more eloquently to Americans--particularly young Americans--in my view than Bogle. I encourage everyone, whatever your age, to read Chapters 26-30, first to yourself and then to your children. His commencement speeches, packed with sage advice, are well crafted homilies for America's youth. I'm glad they are published in a book for all to read. Part VII, "Heroes and Mentors," is also deeply personal, an acknowledgement of 29 heroes and mentors who changed his own life for the better. The obit for Dr. Bernard Lown, who at one point served as Jack's doctor, also gave me a window into a part of Jack's personal journey that I did not know about. Dare I say that Bogle writes as well about all things non-investment as he does the investment world itself?

As poet Wallace Stevens once noted, "to get to the universal, you must go through the local." How else can I explain how poetic and moving it is to see a man of Bogle's success spend the time to thank Jim Harrington in the Princeton Athletic Association Ticket Office for giving him a break or two, or Taylor Larimore, a member of the Greatest Generation who served as a soldier in the Battle of the Bulge in World War II, for starting the Bogleheads? We all have heroes of this sort in our life, but how many of us take the time to give thanks? No man is an island, entire of itself, as John Donne wrote and Jack Bogle reminds us.

As a card-carrying member of Bogleheads, I was most intrigued by one central theme in the book, what Bogle calls "The Perils of Numeracy". I agree numbers and statistics can often lie. But I want more numbers as an investor from people I can trust, not less. I personally find some of the numbers and information on Vanguard's own website to be quite useful, for example, when I'm trying to get a handle on the risks I'm taking in my own 401(k) portfolio. I often go to other sources such as financialengines.com, which I find useful as do-it-myself investor. Some of these numbers are extremely helpful, even if, as Jack warns, there's an inherent risk to using them. I'd like to think the numbers coming from a reliable source, such as Vanguard or Financial Engines, are much more useful to me than numbers spoon fed by less trustworthy charlatans in the investment world.

* Full disclosure: For those who might question a review done by an editor at Wiley (publisher of this particular book), please note I did not personally work on this book. I simply share my thoughts as a Boglehead, who continues to enjoy virtually everything Jack writes or says -- speech, book or otherwise. Some day, my kids will inherent my personal library of Bogle books and be very happy they did.

A Passionate Advocate for Investors
This book covers a lot of ground, with 35 chapters addressing seven main themes over a total of 586 pages. If you are already very familiar with John Bogle (who has written many books and delivered countless speeches addressing investment topics over a very long career in investments), then there is precious little in this book that you don't already know. However, if you are an investor who isn't quite that familiar with Bogle, then you may find this anthology of his major essays and speeches over the last decade to be a very helpful introduction to important investment-related topics of today.

Without divulging too much detail about the book, here's a relatively short guide to Bogle's topics. The seven parts of the book address:

1. Investment illusions. For example, as Bogle makes clear mutual funds taken as a whole simply cannot earn the markets' returns--because mutual funds have their own expenses. Indeed, Bogle's simple formula--net returns to investors = gross returns on assets minus the costs of operating the financial system--is pretty obvious, but one that investors tend to forget. Another illusion cited by Bogle is that mutual fund investors actually earn the returns of their funds. That is, if the XYZ mutual fund earns an average annual return of 8% over a 10-year period, chances are that XYZ's shareholders didn't achieve that 8% annual return, due to the well-documented tendency of investors to add to their investments when they feel optimistic (and markets are high) and reduce their investments when they feel pessimistic (and markets are low). Simply put, buying high and selling low reduces one's return.

2. The failure of capitalism. Bogle is actually a champion of capitalism, not some anti-capitalist critic. However, Bogle maintains that self interest and free markets alone won't necessarily guide an economy effectively. Rather, he says, there is a need for a broad fiduciary standard applicable to market participants, so that corporate managers, brokers, etc. put the interests of their shareholders and clients before themselves. (Some would argue that sufficient fiduciary standards already exist, but Bogle doesn't buy that argument.)

3. What's wrong with "mutual" funds? For starters, Bogle observes that "mutual" typically refers to an entity that's owned by its participants. In that case, only the Vanguard Group of mutual funds, Bogle maintains, is truly "mutual." Surprise, surprise--Bogle helped found the Vanguard Group.

4. What's right with indexing? Traditional indexing has taken a lot of flack in recent years, so Bogle (who helped start the indexing movement) fights back. He says the intellectual theory of indexing is not dependent on the notion of "efficient" markets, but rather on the concepts of low cost, diversification and tax efficiency. I admire Bogle as an honest and passionate advocate for investors, but I should note that not everyone will agree about the importance of the efficiency argument to the concept of indexing.

5. Entrepreneurship and innovation. I am taking more of your time than I planned, so I'll become briefer. In this part of the book, expect yet more of Bogle's characteristic idealism concerning the determinants of innovation.

6. Idealism and the new generation. Here we go again. More of Bogle's passionate arguments.

7. Heroes and mentors. We all owe a lot to those who have inspired and guided us, and here Bogle describes four men who were influential to him: Walter Morgan, Paul Samuelson, Peter Bernstein and Bernard Lown.

In conclusion, if you are an investor who is concerned about the economic and investing environment in which you participant, and if you are not already familiar with John Bogle's thoughtful commentaries on a host of relevant topics, then this book would be well worth your careful consideration.

If Investors have a better FRIEND on WALL STREET - Tell me who he is? Five Stars!!!!


When I write reviews I do not usually read the other reviews, but in this case there were a limited number of reviews and they were EXCELLENT. I therefore will not cover the same ground but come at John Bogle's work from a different angle if you will permit me.


By way of disclosure I am a market professional, with 40 years of experience working with billions of dollars and performing an advising function which includes not just wealthy individuals but heads of state and finance ministers. Having said that, it is my belief that this book is extraordinary. It is a breath of fresh air in an industry of incompetence. You will learn more from reading, and re-reading this book than any course you could probably take at Harvard or Wharton in portfolio analysis, and valuation - been there, done that.


Keep in mind that Wall Street is by definition the worse managed industry in America, and whose basic function is to judge the managements of other companies in other industries. For 200 years they haven't gotten it right, and my fellow Wall Streeter's are so CONFLICTED between their need to make money, and their fiduciary responsibilities that they fail in both. John Bogle is the only author I know that lays it out for you. Warren Buffett is always polite politically to Washington. He does not want to make waves just like the jovial uncle he wants to portray himself as. Bogle on the other hand has a desperate need to get the truth out there, and he writes as he speaks. This book is his voice, no question about it.


Only John Bogle will hit you in the face with the truth on every topic that he writes. There are no punches pulled here. You can start to read this book anywhere you like. Throw darts at the pages and start there, just be prepared to be enlightened. Come at with an open mind, and you will receive a financial education like no other. I do recommend that you read the first 20 pages or so to set the tone, before moving around in the book.


Here are just a few fabulous revelations you will learn:


* Bogle often speaks about the high cost of financial intermediation. This simply means, what are the commissions and fees you are paying on top of the actual investment you are making. As an example in private real estate transactions I look at, the sales charge can be 15%. This means if you put up $100,000, only $85,000 is actually being invested in the product. It's a lot of ground to make up.


* The master talks about 2007 in particular because the numbers are available for that year. The actual commissions and take-outs for all investments in the United States that year was $528 billion, which is equivalent to 3.8% of Gross Domestic Product. Now the question you have to ask yourself is whether or not Wall Street added $528 billion of value added advice to the investment process. The answer is no way.


* Again in 2007, companies reported $1.67 trillion in operating earnings whereas reported earnings were 1.17 trillion. Where did $500 billion in earnings go? It simply disappeared in accounting gimmicks sanctified by independent public accounting firms, and condoned by government regulators. Now if there is that much leeway in the how you can report your numbers, the whole deck of cards is stacked against the investor.


* The author speaks of the absence of normal fiduciary standards, and he could not be more right. The answer seems to be to make billions, and wind up paying fines of a hundred million or so for conflicts. Then change the name of the game and make billions again. Only in America my friends can this happen, and Bogle lays it all out with the unvarnished truth of how the game is rigged against the average investor.



CONCLUSION:


Is there hope, of course there is. You need to educate yourself, not by reading the popular press that will simply earn you the same returns as the masses get. Actually, you will lose principal with that approach. You must study the works of the masters, and I cannot think of a better place to start than with this new book by legendary investment professional John Bogle. Good luck in all your investments and thank you for reading this review.


Richard C. Stoyeck


SUPPLEMENT:


I'm sitting in a private club in Manhattan recently and a brilliant young lady I mentor tells me she just got her Masters from NYU about two years ago. She got all A's and one B. I ask her what did she get the B in, and the answer is banking. I inquired as to the problem. She tells me that she wrote a thesis on how the banks were taking on too much risk at the time. This is early 2008. The professor tells her that the basis of her paper isn't plausible because the banks have professional risk management teams that are averse to taking on too much risk.


As you know the financial markets blew up shortly thereafter. Here's what you need to take away from this. Economists know a thousand ways to make love, but they have never been with a woman. You as an investor have to learn your own truth yourself about what you are investing in. It will take time and effort but the rewards are substantial. Good luck.

Great book!
Bogle maintains his reputation as the brightest investor in history. He breaks down investing into its simplist form with insights that it seems the entire industry either ignores or intentially obfuscates in order to take more money from investors. Why anyone would be invested in anything other than index funds after they really understand the facts is beyond me.

Don't Count On It!

Reading the works of John Bogle has changed my life. After spending a lifetime investing with various companies and working with at least three different financial advisors with only marginal success, I finally encountered my first Bogle book some dozen years ago. I began reading Bogle then and have continued through these past dozen years continuing with his latest title Don't Count On It. In each of his works he speaks to the layman in a clear, well documented style with occasional references to figures from history or literature. None of his writing is dry economics text. His major emphasis on "costs matter" are eye opening to investors trying the accumulate a nestegg for retirement. He shows in great detail the impact of various fees and transaction costs charged by actively managed mutual funds. Intermediation costs ultimately detract from whatever the market is able to deliver, and investors realize only the sum available after these various fees are imposed. Bogle discourages frequent trading because of the costs involved and counsels investors to diversify in low cost stock and bond funds and then "stand still" with an eye toward investing for the long term in order to accumulate the market's returns for retirement. Young and old alike with learn from the wisdom of John Bogle. He is the founder of index giant Vanguard, and yet he has no equity position in the company. Don't Count On It is a summation of this great man's philosophy and sage investment adivce.

A national treasure
In Japan, individuals who embody intangible national cultural values are called living human treasures. Jack Bogle is one of ours. ... Read more

Editorial Review

Reviews

those who ignore history are condemned to repeat it
This is a frightening account of the German, Austrian and Hungarian hyperinflations of the early 1920's. It includes blow-by-blow accounts by diplomats, bankers, and ordinary folk who survived the total annihilation of their currencies. Fergusson has done an outstanding job of documentation and must have spent thousands of hours in archives. It is indeed a shame that this book is out-of-print.

Review of the 1st Edition "Making the Same Old Mistakes, but not Makin' Mo' Money" or "Zeros in -- Zeros out. Naught is Naught."
Review of the First Edition (rare hardcover) of When Money Dies, written by me on May 25, 2006, & not reedited:

I first read this book some 25 years ago. I was so impressed I immediately bought a dozen copies & gave them to pals. (In 1980 they were 3-4 pounds sterling each--it's ironic & interesting that the price of this out-of-print book now fetches multiple zeros).
Here are some parallels with our time:
The Germany of the '20s finds it cannot meet the costs of war reparations. The US of the 2000s starts a war intending to pay reparations before it begins, and then finds itself unable to meet the mounting costs of war reparations it originally thought would leap out of the ground and just pay themselves. (Meanwhile, the US's wounded soldiers [& the families of its dead soldiers] are going to require entire lifetimes of domestic reparations).
The Germany of the '20s attempted to buy/finance prosperity with ballooning deficits. The US of the 2000s wants to buy/finance prosperity with ballooning deficits. Neither nation-State can be told it is wrong--and neither admits (or even recognizes) inflation is a hidden and pernicious tax.
Germany before the '20s had every confidence in the mark. The US in the 2000s believes the only currency in the world is the dollar, & the only thing money can be made of is paper and ink (never gold or silver). But as one mixes ink with paper, hoping the mixture will have exchange value, one finds that one has given value to neither material.
As Germany becomes more unhinged in the '20s, it moves towards a strong man as a moth to a flame. As the US grows more unhinged, it loses faith in its 'strong man' (even if he does not lose faith in himself). If the US should subsequently shun whoever wants to be the next 'strong man', there may yet be be hope. Since it is possible for the next wannabe 'strong man' to be laughed off the stage, it is yet possible the US will not succumb. The jury is still out.
At times the mark strenghthens (goes against the ultimate trend, for short periods): the Germans of the '20s (and other investors) think the crisis is over and it is time to buy. At times the dollar strengthens (goes against the ultmate trend [?], for short periods): the world of the 2000s thinks the crisis may end--isn't it now time to buy cheap US assets?
The Germans of the '20s can add more zeros to their paper--but paper production does not keep up with the 'demand' for money. The US of the 2000s has but to generate a computer entry and like magic, the 'demand' for money is met. The paper of Germany leaves a trail [Fergusson proves this]--computer entries can be a hidden and dirty little State Secret [until prices rise as the money actually depreciates, the state can suppress much of the evidence].
At many levels, this book about a frightening past speaks to a menacing present. Because of its price, many will not get to read that message. Between the Germany of the '20s and the US of the 2000s, there are differences too, but not differences that necessarily help. The potential for money supply to soar (the Fed's ability to create credit by computer without even having to buy ink, paper, and printers) has never been so boundless. We of the 2000s prefer to believe we are more intellegent than the Germans of the 20s. We live with the hope that our enlightened leaders [!] comprehend inflation & understand that deficit spending shall ruin us. Enlighted people that they are, from government top to government bottom, we know and rely upon our leaders' fiscal responsibility. Just look at how enlightenment runs through the Nation--budgetary constraints are placed upon our brilliant leader, by those guardians of the Public Purse & Trust, a US legislature that checks and balances all his raw power. In truthiness [that is, if one buys their spin], they all do their utmost to preserve & protect the currency, while shouldering their duties to preserve and protect our Constitution. Tonight, can I sleep contentedly, knowing both these National Treasures are safe and sound?
Read this book: it is still found in libraries. You will be witness to ink on paper that actually has and holds its value.
May 25, 2006

Everybody talks about inflation, but nobody knows anything about it
This book tells the story of the hyperinflation in Weimar Germany and its aftermath (1919-1926) and, to some extent, the ensuing rise of Hitler's Nazi Germany. It is a story which is so complex and convoluted that it takes a historian to even begin to do it justice. Fortunately, this book's author is not only an accomplished historian, well versed in his subject, but also a gifted writer. The result is a remarkable book about an almost indescribable and incomprehensible period in the world's history.

So, if you've ever wondered about the hyperinflation in Germany following the Great War (WWI), and by extension what the REAL consequences of inflation, hyperinflation, deflation and depression might be, this is the book you've been looking for. In fact, I've only read one other book which even comes close; that being `The Fiat Money Inflation in France: How It Came, What it Brought, and How It Ended' by Andrew Dickson White. But this book is much more timely, much broader in scope, much more comprehensive, and much easier to relate to our more modern times.

In it, you'll learn a lot and find the answers to many puzzling questions. Among them: what caused the inflation, what were its impacts, and why it was allowed to continue; which groups and social classes fared the best, which the worst, and why; how the inflation resulted in the redistribution of wealth; what happened to landlords, shop owners, government employees, members of unions, free workers, and pensioners, as well as the middle-class; what the man or woman on the street had to do simply to survive; who prospered, who lost everything, and why; what the government did and didn't do and what the impacts were on people at all social levels, and on industry; how the hyperinflation was finally ended, why the resulting deflation and depression was worse in many ways, and why; and what those living through the deflation/depression period had then to do in order to survive and, in some cases, prosper.

There is also much anecdotal evidence as to just how much misery both inflation and deflation can cause. For example: the well dressed elderly man who couldn't afford two cents (American money) for a bag of apples; the little old lady who supported herself by selling her crucifix chain one tiny gold link at a tme; the foreign students who bought rows of houses out of their allowance; the substitution of paste-board coffins for wooden ones; the life insurance policies that eventually were worth less than their annual premiums; the banks that did away with smaller savings accounts because the paper required to book them was worth more that the money in the accounts; the man who said it was better to have a prostitute in the house than the corpse of a dead baby; the beggars who, in October 1923, purportedly wouldn't accept anything smaller than a one million mark note; and finally, that even with the first "billiard" [a thousand million million] and five billiard notes being printed in November 1923, people still clamored for more.

Apart from the Weimar Republic: This book is essentially a case study in inflation and its aftermath which should be of interest to anyone contemplating or concerned about the current state of America's, and the world's economic future, and the direction America is headed. In reading it, it is well to keep in mind what Gunter Schmolders articulates (pg. 248), "With inflation alone can a government extinguish debt without repayment, or wage war and engage in other non-productive activities on a large scale: it is still not recognized as a tax by the tax-payer."

In any event, if you do read this book, and if you are anything like me: You'll likely conclude, as I did, that everyone talks about inflation, but no one, especially the politicians who cause it, really knows what they are dealing with or what the consequences may be.

Can history repeat?
"When Money Dies" is very well written, and historically accurate. What a terrible situation that the German government put their people in! ... Read more

Editorial Review

Americans as a whole view themselves as reasonably prudent and sober people when it comes to matters of money, reflecting the puritan roots of the earliest European settlers. Yet as a community, we also seem to believe that we are entitled to a lifestyle that is well-beyond our current income, a tendency that goes back to the earliest days of the United States and particularly to get rich quick experiences ranging from the Gold Rush of the 1840s to the real estate bubble of the early 21st Century.
Inflated examines this apparent conflict and makes the argument that such a world view  is so ingrained in us that to expect the United States to live in a “deflated” world is simply unrealistic. It skillfully seeks to tell the story of, money inflation and public debt as enduring (and perhaps endearing) features of American life, rather than something we can one day overcome as our policy makers constantly promise.
•    Features interviews with today’s top financial industry leaders and insiders.
•    Offer a glimpse into the future of the Federal Reserve and the role it will play in the coming years
•    Examines what the future may hold for the value of the U.S. dollar and the real incomes of future generations of Americans
The gradual result of the situation we find ourselves in will inevitably lead to inflation, loss of economic opportunity, and a decline in the value of the dollar. This book will show you why, and reveal how we might be able to deal with it.
... Read more

Reviews

A Brilliant One Stop Shop Read Through Financial History, November 22, 2010
I first noticed the brains and talent in R. Christopher Whalen in 2007. I was a trader at Lehman and every time I saw Chris on CNBC I was blown away by his straight forward common sense approach to the inner workings of the world of modern finance. Chris called many ills of the financial crisis over a year before they happened. He's made me a lot of money on more than one occasion. His book is much like his personality and intellect. He traces the deep roots of our financial system soiled years ago and brings them right into the 21st century. The book is a MUST read for anyone in finance or someone who wants to learn how we got here. I really like the way the book ties together a behind the scenes look in Washington and Wall St. The book should be required reading for every Federal Reserve board governor as well, lets learn from history instead of repeating it.

Buy "Inflated" it's a great read.

Lawrence G. McDonald


New York Times Best Selling Author of "A Colossal Failure of Common Sense - The Inside Story of the Collapse of Lehman Brothers"

A Must Read!, December 8, 2010
I've read an insane number of books on the current economic crisis (I was Michael Lewis' research assistant for The Big Short) and this is one of the few that I would put in the "must read" category.

Very few of the recent published books on the US economic crisis have an adequate historical perspective. In Inflated, Chris gives us a very full history -- he starts at the founding of the Republic! The book is nonetheless extremely entertaining. I found myself captivated by it, and finished it fairly quickly.

Chris is an endearing narrator who is obviously more detail-oriented than many of his fellow commentators -- he clearly brings a high level of understanding to this work.

The book is very much of the Austrian School. I don't fully agree with some of Chris' views -- I think I'm generally more tolerant of inflation and inflation risk than he is.

Chris is quite pessimistic about the long future of the American economy, but I think I'm more pessimistic. He believes that austerity measures are required in the US and that the US will be able to weather these austerity measures fairly well socially and politically. I believe that the US cannot deal with austerity measures socially or politically -- therefore, they will not occur. The consequences of a lack of austerity are anyone's guess. Chris believes that high rates of inflation are inevitable without austerity -- I think high inflation and declining living standards are likely but not inevitable.

I find Chris overall views on debt and inflation quite similar to those of Peter Warburton, author of the truly incredible book, Debt and Delusion. The views of both of these authors are wholly different than the New Keynesian thinking of Ben Bernanke. I tend to slightly favor the Warburton/Whalen side of the debate.

Brandon

Largely Disappointing, December 19, 2010
I have followed Whalen in the media and at conferences over the past two years. I found him to be insightful but more importantly highly objective and independently minded. This did not come through in his book. The second half read slightly better than the first but the first came off as an inconsistent recitation of facts. The booked lacked first-hand thought which can be seen in the sheer number of footnotes, but what's worse, the few opinions he provided often didn't relate to his area of expertise (Lincoln's sole motivation was unity). I believe a number of statements were not properly researched as well, as was the case with his contention that FDR could not bring himself to raise taxes, while in fact the top income tax bracket was raised three times from 1932 to 1940 (going from 25% to 81%). I still believe Whalen is an outstanding analyst, just not a good author.

waste of time and money, December 26, 2010
I saw some of the recent Whalen's interviews on the corporate balance sheets, which I found logical and insightful, so I was enthusiastic to read his book. Unfortunately, there is nothing of that in it.
The book is painful to read. There is no data in it. I haven't counted, but I think there are less then 10 graphs in the whole book. The few numbers in the text are pretty random in terms of relevance to the point he is making and usually out of context. It is full of names and dates (person x became the y of z in year ... and he was bad for the US because he...). According to the author no one in power made anything right; not that he provides an alternative choice that is correct or even better. There is no science in the book; no theory, no logic, no analysis, no arguments. Only his personal conclusion, backed up by nothing or at best, obscure quotes from largely irrelevant people.
His whole position is that big government is bad, as well as debt, inflation, the FED, taxes, etc.
The good stuff? Hard money, Gold Standard, Milton Friedman / Anna Schwartz and even hints at deflation.
All in all a huge disappointment and a waste of time.
... Read more

Editorial Review

Harry Markopolos and his team of financial sleuths discuss first-hand how they cracked the Madoff Ponzi scheme

No One Would Listen is the thrilling story of how the Harry Markopolos, a little-known number cruncher from a Boston equity derivatives firm, and his investigative team uncovered Bernie Madoff's scam years before it made headlines, and how they desperately tried to warn the government, the industry, and the financial press.

Page by page, Markopolos details his pursuit of the greatest financial criminal in history, and reveals the massive fraud, governmental incompetence, and criminal collusion that has changed thousands of lives forever-as well as the world's financial system.

• The only book to tell the story of Madoff's scam and the SEC's failings by those who saw both first hand
• Describes how Madoff was enabled by investors and fiduciaries alike
• Discusses how the SEC missed the red flags raised by Markopolos

Despite repeated written and verbal warnings to the SEC by Harry Markopolos, Bernie Madoff was allowed to continue his operations. No One Would Listen paints a vivid portrait of Markopolos and his determined team of financial sleuths, and what impact Madoff's scam will have on financial markets and regulation for decades to come. ... Read more

Reviews

A true David and Goliath story, March 6, 2010
Although I was not an investor, I have been intrigued by the Madoff scandal since it exploded in December 2008. Ever since then, I have spent hours poring over articles written in the press and documents released by the government and watched (and rewatched) all the hearings on this massive fraud. I even attended one of Harry Markopolos' speaking events to make sure that my television screen did not conjure up such a noble public servant. Of course, it is only appropriate that I would have a copy of "No One Would Listen" in my hands on the first day of its release. Admittedly, I expected the book to be more or less a summary of everything I have learned thus far - I was very wrong. "No One Would Listen, " a true David and Goliath story, is one of the most riveting nonfiction I have ever read.

In the book, young innocent David is portrayed as a "wildly eccentric quant" from Boston named Harry Markopolos who tried to defend his country from the nine feet tall Philistine giant Goliath, portrayed as Bernie Madoff. King Saul of Israel and his army (the SEC) were terrified of Goliath. "No One Would Listen" is a 10-year firsthand account of how Harry and his three friends tried to warn the government, the industry, and the press that the founder of the most successful broker-dealers in the financial industry was actually the biggest crook in history. Unfortunately, "No One Would Listen" does not have the same happy ending as the biblical David v. Goliath battle.

For the past few days, I have been reading reviews on the book and found a lot of derogatory comments about Harry's character and his book. I have to wonder to myself if these reporters read the same book that I did and why they would want to tag their name with such unsubstantiated assertions. Before I continue on the book, I have to point out some false information printed by some media outlets. These book reviews only reconfirm the financial mediocrity in the press that Harry and his team had to deal with the past 10 years - that is why no one would listen.

First, we know that in its 73 years of existence, the SEC has a history of treating whistleblowers like dirt and has only paid 2 whistleblower bounties. One reward, as told in the book, was in the amount of $3,500. I'm sick and tired of people throwing that Harry only went to the SEC because he was looking for a bounty. He knew from the start that his chance of receiving a bounty was remote. Even if he did receive a bounty, is $3,500 worth hundreds of hours of investigative research while he was most likely making a comfortable 6-figure salary at his previous employment?

Second, some reporters claimed that the reason why no one would listen is because Harry is some sort of nut that rubbed the SEC the wrong way and that he was overly paranoid for fearing that Madoff may come after him. One only has to watch Harry's Feb. 4, 2009 testimony to Congress to confirm this man's articulate manner and brilliance. Do your research on his background, and you will see how aware people are of his talents and credibility. The reason why no one would listen is because the fraud was so unbelievable - Bernie Madoff was filthy rich, why would he need to steal? The second reason, as the world now knows, is due to the arrogance and investigative ineptitude of the SEC and the press. In addressing his fear for Madoff, why wouldn't he fear Madoff? People have killed for much less. There are pending investigations with the FBI undisclosed to the public. Why would the FBI announce to the bad guys that they're about to be investigated, unlike the SEC, who called Madoff to give him a heads up on the 2006 investigation.

Third, a major media outlet criticized how Harry had made a career of being "a professional whistleblower facilitator," turning corporate employees into spies when they should be reporting problems internally. After the collapse of Enron, the SEC was charged with reviewing incidents of financial statement fraud from 1997 to 2002. Of the 515 enforcement actions for financial reporting and disclosure fraud, charges were brought against 466 managers: 75 chairmen of the board, 111 CEOs, 111 presidents, 105 CFOs, 21 COOs, 16 CAOs, and 27 VPs of finance. You tell me how a lonely staff member at the bottom of the totem pole would come up against these big honchos.

Throughout the book, if I was not cracking up laughing at Harry's oddball sense of humor, I was pounding my fist from mortification at the horrors that Harry and his team had witnessed the past 10 years. "No One Would Listen" is a reflection of the culture of greed infected on Wall Street. One event that stuck to my mind was Neil Chelo's phone interview with the head of risk management at Fairfield Greenwich Sentry Fund in Chapter 7. I was completely appalled that he could not answer any of Neil's questions on how Madoff was getting his returns, why he was always holding T-bills at year end, and why the audits only show $160MM worth of T-bills on a $1.47BB portfolio. Where did the remaining $1.31BB go? This is the same egghead that manages the risk of a $7BB fund. It was absurd how he had the gall to follow up with Neil if he still wanted to invest with the fund even after Neil had called him out for an hour straight.

Another event that had me almost vomiting was regarding 20 market-timing scandals that Harry had worked on for 1.5 years and eventually presented to the SEC. The scandals cost investors $20BB, yet the SEC decided that they were done with market timing scandals so the crooks all walked away scotch-free. Keep in mind that this all happened after Peter Scannell already testified against the SEC on how the agency missed the market timing scandal at Putnam Investments even with his repeated warnings. Our tax dollars at work. And we wonder why our country is in the midst of economic meltdown today.

As Frank Casey pointed out, Mother Teresa did not work on Wall Street. Even so, the book details the sacrifices that Harry and his team went through to expose the evil man that is Bernie Madoff, even if it means losing money to a competitor or risk getting shot in the head. These four men are the rare gems in the financial industry. If more people like them exist, perhaps Wall Street would not be such a bad place.

Toward the end, Harry revealed the nature of some of the cases he has been working on the past few years and recommendations on how the SEC could improve. He is truly blessed - a self-taught fraud investigator accomplishing more for our country in five years than the entire SEC staff has done in decades. And for that, we owe him our gratitude.

Go get 'em, Harry.

The definitive story, March 3, 2010
When the SEC was asleep at the wheel, Markopolos was there. It blew my mind when I read just how many times Markopolos tried to contact the SEC and the media, and so many times, he was ignored. To think of the money and the lives that could have been saved! When I wasn't baffled and educated by the contents of the book, I was laughing. Markopolos has managed to write a TRUE thriller with charm and humor. It comforts me to know that this book is out there, for all to read, and I hope it brings a lot of change to our financial watchdogs. Harry Markopolos is a hero.

Well Written Account of Harry's Efforts, March 3, 2010
Excellent account of the efforts of Harry Markopolos and his team in uncovering Bernie Madoff's fraud and then trying to expose him and get the government to act. The book is well written and documents the the abysmal failures of an SEC relying too heavily on lawyers and accountants who lack the sophistication to understand how the investment industry works and the investment solutions the industry markets to investors.

Harry's account of when Noelle Frangipane, a member of the SEC's Inspector General's team investigating the SEC's failings, broke down and cried was indeed a particularly human moment and an account I'm glad Harry put in the book. There are people at the SEC who care. The agency clearly lacks investment professionals and people with investment industry operational experience. Lawyers and accountants have their role, but they are not trained as investment professionals.

Great read! Good job Harry!

I Listened, March 3, 2010
If you are attuned, you can hear the tree fall from the edge of the forest, and you know a tsunami is coming before you can see it. And so it is that master sleuth Markopolos saw what so many failed to see. I highly recommend that all but the master sleuths out there read this book. I would also recommend "What Greenspan Can't Tell You", which was published in Jan '08, and warned of "Madoff"-like schemes, and instructed readers on how they might spot them.

Pure Harry, March 4, 2010
I had the honor of "sitting across" from Harry on the Trading Desk. I feel extremely lucky to have learned the business from the best derivatives practitioner in Boston. There are very few derivatives-related books that approach required case study readings for rookies and veterans alike. Regardless of your industry, this book is one of those rare gems that will implore you to question conventional assumptions and challenge the supposed institutional wisdom that defines your professional circles. However, unlike most biz school case studies, you won't be bored. This book reads like its master in the shadows...

Good and educated read, March 3, 2010
In spite/despite the "flaming" by a fellow Kindle owner over the Kindle price, I found myself amused and horrified by Mr. Markopolos' well presented account of Madoff's scheme; as a member of the Bar, I live in disbelief at the non-action of the SEC. Mr. Markopolos was vainly trying to "herd chickens"!

A REAL LIVE HERO, March 7, 2010
Harry Markopolos doesn't consider himself a hero. That's about the only thing he's wrong about though. He is indeed a hero. This is the story of how a man and his small group of associates, at great personal risk, tried to prevent the greatest scam of our times. That they failed is tragic for Madoff's victims in particular and in general illustrates the failure of our institutions to protect us from even the most egregious and obvious fraud. The SEC(with 2 notable exceptions) were the biggest bunch of fools you could imagine. If you didn't know this book was absolutely true it would strain credulity to the utmost.

He relates in agonizing detail how for the better part of a decade his group handed the fraudster to the SEC on a golden platter. They presented proof after proof (red flags they called them) to the SEC proving unequivocally that Madoff was a total con, running a gigantic Ponzi scheme. And as the title indicates, "No One Would Listen". Though my math skills are fair to poor, his presentations to the SEC were crystal clear to me. You just couldn't miss it...yet they did.

I would compare what happened to a citizen finding a bloody arm from the Madoff residence and bringing it into the police station being told by the police that the arm didn't exist and 'to get our of here you're bothering me'.

He also points out how corrupt our financial system is in general, skewering the mutual fund and banking industries in particular. It seems we live in a nation of thieves. Well Harry and his group do give us cause for hope. Thank you Harry and friends for your efforts. For honest folks, you guys are heroes. This book deserves to be a best-seller now and for many weeks to come.

The Fox Hounds Salute Their Ghost Writer, March 7, 2010
Transparency, I am one of the Fox Hounds: David Fisher was the ghost writer for Harry Markopolos and the Fox Hounds Team. David produced an easily read financial thriller, balancing the complexities of financial derivatives required to understand why Bernie Madoff was able to dupe investors with the thrill-fear of the hunt for the tentacles of this criminal monster. I salute David Fisher for his talent and dedication to the cause of uncovering the ineptness of regulatory powers while informing the public as to the greed and willful blindness of Wall Street.

Bravo! Bravo! Bravo!, March 6, 2010
"It's Bernie in the parlor with $5 billion!" (ref Markopolos)

I really enjoyed this book. I read it in two sittings and will be re-reading it to absorb it again. I followed the Madoff story closely through the various media outlets, but the content of this book fills in all the gaps and does not obfuscate any of the details or emotions. I will not be re-selling this book to the discount bookstore.

A diamond in the rough, March 4, 2010
No One Would Listen should be a required reading for everyone working in the financial services industry. As well as I know the Madoff case by now, over a year after its collapse, the book still left me in tears at the end. Words cannot describe the anger I felt throughout the book toward all who saw this fraud but did nothing to stop it. In a world full of injustices and greed, Harry and his team give hope that good people still exist; although they did not always feel brave, Harry and his team were willing to do whatever it takes to expose the truth, even if it costs them their lives.

Kudos to Harry and his team.

... Read more

Editorial Review

Now in a striking new hardcover edition, Fooled by Randomness is the word-of-mouth sensation that will change the way you think about business and the world. Nassim Nicholas Taleb–veteran trader, renowned risk expert, polymathic scholar, erudite raconteur, and New York Times bestselling author of The Black Swan–has written a modern classic that turns on its head what we believe about luck and skill.

This book is about luck–or more precisely, about how we perceive and deal with luck in life and business. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of trading–Fooled by Randomness provides captivating insight into one of the least understood factors in all our lives. Writing in an entertaining narrative style, the author tackles major intellectual issues related to the underestimation of the influence of happenstance on our lives.

The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: the baseball legend Yogi Berra; the philosopher of knowledge Karl Popper; the ancient world’s wisest man, Solon; the modern financier George Soros; and the Greek voyager Odysseus. We also meet the fictional Nero, who seems to understand the role of randomness in his professional life but falls victim to his own superstitious foolishness.

However, the most recognizable character of all remains unnamed–the lucky fool who happens to be in the right place at the right time–he embodies the “survival of the least fit.” Such individuals attract devoted followers who believe in their guru’s insights and methods. But no one can replicate what is obtained by chance.

Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent messages in random events? It may be impossible to guard ourselves against the vagaries of the goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.

PRAISE FOR FOOLED BY RANDOMNESS:

Named by Fortune One of the Smartest Books of All Time

A Financial Times Best Business Book of the Year

“[Fooled by Randomness] is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-five theses were to the Catholic Church.”
–Malcolm Gladwell, author of Blink

“The book that rolled down Wall Street like a hand grenade.”
–Maggie Mahar, author of Bull! A History of the Boom, 1982—1999

“Fascinating . . . Taleb will grab you.”
–Peter L. Bernstein, author of Capital Ideas Evolving

“Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould.”
–Michael Schrage, author of Serious Play: How the World’s Best Companies Simulate to Innovate

“We need a book like this. . . . Fun to read, refreshingly independent-minded.”
–Robert J. Shiller, author of Irrational Exuberance

“Powerful . . . loaded with crackling little insights [and] extreme brilliance.”
–National Review

“If asked to name the five best books written about markets, Fooled by Randomness would be on my list.”
–Jack D. Schwager, author of Market Wizards: Interviews with Top Traders

“Excellent and thought-provoking . . . an entertaining book.”
–Financial Times ... Read more

Reviews

Critical review from a trader, October 26, 2001
I picked up this book because I read Mr. Taleb's quantitative derivatives book, Dynamic Hedging. Dynamic Hedging was an extremely insightful and intuitive foray into vanilla and exotic options. It was enhanced by Mr. Taleb's occasional commentary on life in the markets. I imagined that an entire book containing Mr. Taleb's viewpoints on probability would be compelling.

It was indeed compelling. But I did not wholly agree with him. I suppose that is my right.

At risk of great oversimplification, Taleb argues quite articulately that extreme occurrences in a distribution happen a lot more frequently than humans are prone to believe. Ergo, in derivatives trading, it makes no sense for one to be "frontspread" (short gamma/vega). Ever.

My experience is in equity derivatives. Mr. Taleb's is presumably in fixed income and FX. Without knowing much about the world of FX options, I can assert that in the equity listed options markets, downdrafts in volatility can be almost as deadly as explosions in volatility. The vol crush of the summer of 2000 wiped out as many traders as the Russian debt default of 1998. Out of the money options are never cheap; lots of people buy them for the protection that Taleb seeks. Sometimes even they are too expensive to own.

Going further, I found Mr. Taleb's insights on the role of luck in human performance to be EXTREMELY unsettling. He talks at length about the rich idiot trader and the vastly more competent but underpaid trader (presumably himself). He goes on to ascribe most of those who are wildly successful in life to LUCK, and that individuals ascribe way too much of their own success to their own ability and hard work (which he scorns).

I find this to be frightening. I'm sure Mr. Taleb would find this reaction entirely predictable. The implications are most frightening, from a political standpoint: if most wealth is undeserved, then therefore it can be rightfully taxed (expropriated) and redistributed to those are not so lucky. Furthermore, most individuals who despise hard work do so not because they are brilliant, but because they are lazy. Evaluation of a particular person's work ethic is an imperfect but reasonably good indicator of performance.

Many of the MBAs he derides as being shallow thinkers and pluggers, while may not be (ahem) the intellectual giant that Taleb is, are no slouches themselves. They do not represent the legions of clueless option sellers that Mr. Taleb has somehow encountered throughout his career. Most young associates do have the luxury of telling their boss they did not read the Wall Street Journal in the morning because it represents nothing but random noise.

As you can tell from this review, I enjoyed the book. Otherwise I wouldn't be so critical of it. I couldn't put it down. You probably won't agree with all of it, but it will cause you to think about things in a very different way for a long time.

Intiguing but ultimately unsatisfying, April 30, 2002
I bought FOOLED BY RANDOMNESS after reading the Malcolm Gladwell profile on Nassim Nicholas Taleb in the April issue of the New Yorker. Like others who have reviewed this book, I found that Gladwell captured the most important details of Taleb's thoughts in a shorter, more entertaining way. However, I thought that this book can be a worthwhile read for those with a passion for this type of book.

FOOLED BY RANDOMNESS is an introduction to the difficulties human beings have at reasoning around probability. Taleb argues that human beings are genetically hardwired to misattribute the results of human endeavors to skill and knowledge that are, in fact, just coincidental, random events. Taleb discusses the results of this embedded flaw in human reasoning in three areas.

In part 1, Taleb discusses impacts of `rare events' on both financial markets and on human history. Taleb argues we should beware seemingly successful strategies if they are not proven by the test of history. In particular, we should examine human history in the long term for general trends and treat skeptically claims that humanity has reached `the end of history' or `a new economic model' where the old, proven rules do not apply.

In part 2, Taleb discusses the `survivor effect', or mistaking success based on luck for success based on skill. In particular, Taleb warns against judging a strategy by its actual results. Instead, we should judge strategies based upon a sum of all possible outcomes.

In part 3, Taleb briefly discusses `tricks' he has developed to try and derail his flawed, ingrained, statistical reasoning and live a rational and, to a great degree, classical life based upon a good understanding of the effect of randomness on our lives.

The book is peppered with classical references to ancient philosophers and literature, as well as humorous anecdotes to Taleb's own experience in the world of Wall Street. Unfortunately, interesting nuggets and provocative thoughts throughout the book are rarely fully explored. While I was entertained and intrigued, when I got to an end of a chapter or section, I often felt dissatisfied, as if I was trying to wrap my arms around some meaty ideas and came away with empty air.

Unlike other reviewers, however, I did not find Taleb particularly pretentious. In fact, I often felt that Taleb was more than open with his own particular foibles and failings. His only source of pride seemed to be in realizing that he had these failings. Ironically, Taleb attributes this understanding to the experiences suffered in his own personal, contingent history.

Overall, I found the book to be like a good Chinese dinner: entertaining at the time of reading, but left hungry an hour later.

Dav's Rating System:
5 stars - Loved it, and kept it on my bookshelf.
4 stars - Liked it, and gave it to a friend.
3 stars - OK, finished it and gave it to the library.
2 stars - Not good, finished it, but felt guilty and/or cheated by it.
1 star - I want my hour back! Didn't finish the book

Essential for understanding the workings of the world, March 11, 2002
Anyone who holds any doubts in regards to the validity of this book must read Edward Chancellor's 'Devil Take the Hindmost,' which provides a history of financial markets from the dawn of the Roman Empire up to now. After reading such a sweeping historical account, one sees the financial markets for exactly what they have always been: one vast bubble machine where people have even invested in, according to Chancellor, a company that refused to explain anything about what it did but simply assured the investors that it had a great idea for making money. Sounds rather similar to some of the dot coms in recent years. Through a compliation of both antecdotes and thoughts, Taleb provides an explanation as to why the markets work in this way, why so many fail to realize this, and how these issues are mirrored in our everyday lives. He addresses many issues that everyone should understand in order to view the world in a realistic manner. Evolution is not a one way road to nirvana but rather the process through which those adapted to the current situation fare better, and they may not be best adopted when things change. When judging the validity of any strategy in business or in life one must consider that the winners write the history books; you can only talk to survivors of war but that certainly doesn't mean that everyone survives it. When deducing anything from viewing a sample you must consider the forces that created that sample: should you consider yourself unintelligent because you're behind your classmates at a top law school? Are a good outcome and a good decision the same thing, and likewise for a bad outcome and a bad decision? And the list goes on.

While Taleb does not fully dive into this issue until later in the book, the primary conjecture of the piece is that human beings are psychologically prone to misinterpret random events. We need to explain things, whether it be in the social sciences, art and literature, or the natural sciences, so we find ways to explain them. Considering the infinite quantities of data at our disposal, no statistician denies that extremely powerful correlations will occur simply out of chance. Certain aspects of an author's life will be almost identical to passages in his or her novels, certains stocks will share perfect correlations, and we are creatures in need of explanation, and whole industries have been created to mine the data and tell us why things occur.

Prior to this book, Taleb had already written 'Dynamic Hedging,' considered by many, including myself, to be one of the best books ever written on exotic and vanilla options. That book is not for anyone who has not spent years studying (or preferably practicing) options, but in 'Fooled by Randomness' he illustrates his ideas in terms that anyone could understand. In 'Dynamic Hedging' he provides more insights into his trading strategies than he would have done had he been solely profit motivated, and likewise, as the boss of a fund that profits from other people's misconceptions of probability, he cannot have any reason to try to increase people's awareness of how the world really works other than a genuine desire to play the role of the teacher. Many have attacked the book as arrogant, but it must be remembered that anyone who goes against the common ways of thinking is essentially suggesting that he or she understands things better than do most people and therefore cannot help but come off as arrogant. Several times in the book Taleb specifically states that he falls victim to the tendencies that he condemns, and that the main difference that he sees between himself and others is that he is at least aware of it.

Considering the fact that Taleb blatantly argues that many who consider themselves the rulers of the universe were in fact a group of lucky fools, it is inevitable that many will come away from it with a sense of anger and a refusal to believe it. I am therefore almost surprised that the book has not drawn harsher reviews than it has, for Taleb was certainly not seeking to make friends through the publication of it. I suspect that those who rate the book as poor fall into two general categories: those who were troubled by the thought that a considerable portion of their success may have resulted from luck, and those who are attached to their current views on the workings of the markets and are hostile to any new views on them. These two categories naturally overlap quite often. An important thing to remember is that even if you work very hard, not only are the outcomes of your projects the result, to varying extents, of chance, but chance also played a role in getting you to the position where you can work hard and actaully see it pay off. Considering the complexity of the world we live in, and the infinite forces that push and pull on our lives, this book is critical to anyone who desires an objective veiw of how things come to be...

Solid assessment - poor presentation, September 18, 2002
This is an tough book to review. I give it 3 stars because the points he makes are valid and should be more widely understood. Unfortunately you must wade through much rambling to find them. He seems more interested in proving that he's as arrogant as people expect him to be than in discussing the key points at any length. With a fairly strong background in probablility assessment and risk evaluation I was able to follow his arguments reasonably well but I suspect anyone who does not already understand probabilities and Monte Carlo modeling will not understand the points he is trying to make. This is because the explanatory points are almost always one sentence buried in a rambling paragraph. Our society would be better off if every citizen understood his points but I don't think this book will enlighten many people. On a side note - I don't know what book several of the other reviewers read but it wasn't this one. Nowhere does this book discuss specific trading strategies or approaches or taxes. Several reviewers also clearly didn't follow the discussion. The point of survivorship bias is not that it proves LUCK is responsible for a given individuals success in any of the many areas where it holds. The point is that you don't KNOW the source (luck or skill) and you can't PREDICT future results.

Some interesting discussion, but plenty of Taleb's large ego, May 31, 2003
As a professional options trader and familiar with Taleb's "Dynamic Options Hedging", I expected a very professional book with interesting insights into the human and mathematical aspects of probability and randomness.

And while the book does provide some of that, the valuable information is embedded in writing that is overly self-centered if not egomaniacal.

I'd like to point out that I REALLY wanted to love this book. But I didn't.

Taleb writes about interesting ways in which people do not understand randomness but he does it in a way which is unnecessarily insulting and condescending.

Even worse, I find him hypocritical. He spends a lot of energy talking about the value of being able to change one's mind, as well as the value of large sample sizes in probability-based decision making. But then he describes how far out of his way he goes to avoid information (which might cause him to change his mind or which would increase his sample size.) Further he implies that anyone who takes in certain information, like almost any form of news broadcast, must be an idiot and lives in a world of self-delusion.

Taleb writes like a smart but anti-social and holier-than-thou trader. He writes some very useful stuff about randomness and its misapplication in modern thinking. But then he goes on psychological tangents which are nothing more than trying (and failing) to find a mathematical basis on which to defend his personality foibles (flaws?).

He over-generalizes about trading in a style which he does not employ, i.e. selling premium or making bets based on past occurrences. He writes as if his way is the only way that makes sense, and implies that in the long run it is only because of randomness that anyone who does not trade the same way he does could be successful. ("Ergoditic" is definitely the best word in the book....)

Taleb gets very close to interesting discussions of a non-mathematical nature as well, such as the level of emotion involved with success or failure, as well as some interesting historical information. But he lessens the effect of the good writing by then telling us how all this fits into how he lives his life, using as many obscure references as possible, in an ongoing attempt to justify (to the reader or to himself?) the lifestyle he has created for himself. For example, he uses the above discussion to explain why he does not like to look at his own trading profit or loss statements. And he writes it in a way that shows he expects us to think he's brilliant or heroic for having such discipline. Very silly stuff....

Taleb describes his hero worship (of a philosopher named Popper) and it becomes clear that at least a partial goal of this book is to get the reader to revere (or emulate) Taleb the way he reveres (and tries to emulate) Popper. Unfortunately, it doesn't work that way.

Overall I found the probability discussion interesting, but not worth the tedium of having to listen as if the reader is Taleb's (badly needed) therapist.

Luckily for Taleb, he says directly in the book that he will ignore all reviews. I think you should be able to find a less tedious source for the bits of valuable information "Fooled By Randomness" provides without having to suffer the insufferable smugness of the author.

Managing Unpredictable Variations in Order to Prosper!, September 19, 2001
Every person who is interested in investing should read this book!

In investing, few can tell the difference between being lucky and smart. Being successful in the short term can come from either source. If it is coming from unrecognized sources of luck, however, the behavior that the investor associates with success can sink the ship. The cautionary tale of Long Term Capital Management is cited in the book as an example of this point. If youre so rich, why arent you smart? is the wonderful reversal here on the old saw.

I see this effect all the time in my consulting practice with helping companies understand how their decisions affect their stock price. A large percentage of people feel that they know all the answers when their stock price is rising. They keep doing the same things when the stocks are falling. Few survive to still have top jobs when the cycle shifts again. Then a new group of self-confident people take over who often dont know any more than those who preceded them. Its just that their track records look better.

Fooled by Randomness will help make you more knowledgeably humble about what you can expect to accomplish with investments. Not only do fewer than one percent outperform the market averages over long time periods, the ones who do are probably often being aided by luck as well. Get thee to the index funds as soon as possible is the message that most should take away from this book. Better yet, buy them when multiples are low!

The books fundamental point is that there is tremendous volatility in any investment. Ignore that volatility to your peril.

At the same time, you should be cautious about how well you understand the volatility. Stocks at their lows can still go to zero. There are all kinds of events that can happen, that have not done so yet. When they do, throw out all the old rules of investing. The terrorist attacks on the United States last week are probably an example of this. So each investment must be made as though you could be totally wrong. This means that you have to manage your risk exposure to events you dont even know how to expect.

I loved his example of the joint probabilities of having a rare disease if you get a positive result on a test for that disease. Even most doctors apparently dont know how to evaluate that one. If even well educated people cannot quantify two known risks occurring simultaneously in their own field, how can investors be expected to make good decisions?

Dr. Taleb has some very good advice for how to handle the psychology of being able to do this. He upholds the Stoic ideal -- the attempt by man to get even with probability which encourages wisdom, upright dealing, and courage. This means not chasing the latest investment fad or fashion, not looking at your investments very often, and being open to both sides of any idea (it could go wrong as well as right --what are the consequences of both?). I especially liked his idea of watching CNBC with the sound off so that the experts seem humorous and you are less likely to hear and follow their advice. Even more poignant was his advice not to live on Park Avenue where living with all of the arrogant, temporarily lucky can make you feel small. Instead, live somewhere that the results of your cautious approach will cause you to be the envy of all.

Dr. Taleb impressed me with his willingness to tell stories on himself about how quickly he can become superstitious when things are going well, take on excess risks, and start looking too short term. After all, we are only human!

The importance of this book can only be appreciated if you go back and think about your biggest investing successes. How much was luck versus skill? A good way to test is to see if the same approach has continued to work for you whenever you use it. Another good test is to see how often it would have backfired in the past.

In my research on good decision making, I find that those who guard the downside first make the most money in the long run. They are able to find ways to get the best of both worlds!

Remember that the two-edged sword can cut in either direction!

Fun read + thoughtful ideas, March 11, 2002
I am a trader myself, and ran into this book as, ironically, a lucky coincidence: I happened to read the emerging markets chapter as a draft that was getting emailed around the office, and enjoyed it so much i purchased the rest of the book...

I found the book to be well written, opinionated and with some great ideas that frankly are hard to argue against. His book, at the core, is about the problem of induction. Statistics, for how useful they may be day to day, certainly do not solve this problem, and indeed, luck and skill are hard to differentiate in the markets.

He exposes a problem of a philosophical nature, and he is certainly not suggesting to drop all induced laws and redefine a day to day life full of uncertainty and incapable of establishing practical rules.

This book is not meant to be a textbook so i am not sure why Taleb's flair as a writer is getting attacked so repeatedly here. I think his writing style is elegant, amusing and smooth. This book is about opinion, so accusing him of having an opinion seems a misplaced objection. Also, i believe his writing is being somewhat misinterpreted. While there is an undertone of arrogance, it is self mocking. He does not claim to know better. His only, somewhat socratic claim is that he at least knows he does not know...I am surrounded by arrogance at work, and i can tell you, Taleb's ain't so!

Ironically, Opportunity Lost, December 31, 2002
I'm very much of two minds about this book. There's little need to offer further comment on:

1. The author's ego (in one paragraph on page 59, he uses the perpendicular pronoun 7 times; the possessive first person another 5); or his hyperbolistic writing style: this might be too easily dismissed as an ad hominem attack.

2. The many glaring contradictions in this book: they appear so often (sometimes in the next sentence), they can hardly be viewed as a random event: this would take too long, and any intelligent reader can spot them.

3. The superfluous material: with so much impertinent opinion found between the covers, this would take too much effort.

4. The missed opportunities: another author can capitalize on this.

5. The delicious irony between the thesis and the content: this is for the discerning reader to perceive and enjoy.

If people wanted to be as nasty as Taleb is in dismissing those he disagrees with, they could use a subject line like "Clearly, not a Swan Song," or "A Highly Masturbatory Essay" or "This book is as fat as the argument is thin".

While there is much to complain about in this nauseatingly self-centered book, so filled with noise and so little signal (seriously estimated at 85:15), such comments would miss the point: this is actually a highly original work and is certainly thought-provoking. Although I give it only 2 stars, it's still worth reading, if only to argue against. A three-paragraph summary of his 200 pages follows:

1. Thesis: Today's virtual world measures success without sufficiently discerning luck from skill. Intelligence alone is deemed the necessary condition for wealth.

2. Antithesis: Too much of what is widely held to be worldly success should actually be attributed to luck; i.e., results hidden inside the vicissitudes of random variation. This "common sense" approach is na�ve because it fails to establish the link between cause and effect and ignores the effect of variation, which, in one of its tails, can produce extraordinary results. Taleb explores the problem of induction and confronts the non-linearity of regret.

3. Synthesis: The trick is, of course, to determine post facto, what was random and what was skill, and more critically, to assess the nature of risk going into a decision. Mistakes in these areas can be extremely costly. Beware of the tails, especially if they are fat. If you want to be probabilistic, don't bet more than you can happily afford to lose. Question everything. Be humble. Accept adversity with good grace.

This is an interesting thesis; too bad Taleb doesn't focus on examining the evidence instead of talking about himself and offering unsupported opinions. He dabbles with epistemology, but equivocates on whether knowledge is arrived at by rational or empirical means. Despite frequent and inappropriate abuse of the word "clearly," he doesn't clarify the ontological considerations that lie at the heart of this book: sufficient cause and non-contradiction. Though he's personally fond of the Monte Carlo technique, many of us could be spared much of that bother by answering a few simple questions:

1. What is the worst-case scenario?
2. What is the best-case scenario?
3. What is the most likely scenario?
4. How confident am I in the assessments?
5. What can I afford to lose?

The author raises the work of Kahneman and Tversky, but hardly surveys it; the work of other key economic thinkers is ignored: Thaler and Arrow come to mind immediately; many others should appear but do not. No wonder Japanese librarians classify this work as literature: it's little more than an essay, largely devoid of footnotes or a meaningful bibliography.

Being unlettered in mathematical sciences, I ought to be cautious about questioning his math, as simple as it is, but must nonetheless question both Taleb's assumptions and his logic in the few examples he provides. He rails against "pseudo-science" but dabbles happily in many disciplines in which he lacks formal qualifications, jumping from lily-pad to lily-pad, seemingly unaware that his dilettantism is evident to even the fellow layperson. Despite his professed aversion for "borrowed wisdom," it abounds in this tome. Taleb's editor took a vacation, especially towards the end of the book, where there are many errors of punctuation.

Incidentally, in one of many delicious ironies of this book, Taleb uses the very Hegelian logic he rails against to make his point. It would be interesting to see John Horgan (he of The End of Science fame) interview Taleb. The ultimate irony is that Taleb has actually co-written a concise account of his thesis in 26 pages at his own web page.

Intriguingly, in some of the interviews also linked to his web page, he comes across as being lucid and pithy, and also a polished and gracious reviewer. Some of his other writings show a keen insight into human and abstract sensibilities. Sadly, the same cannot be said of this book, which appears to be more a transcript of a session with his psychoanalyst. This is an opportunity lost. A severe edit of this book could likely bring it up to the level (5 stars) for which it has the potential. But it's nowhere near there, yet.

Rare, useful advice, November 8, 2003
This is a book about probability and the way we misunderstand it. Author Taleb introduces the concept of the `lucky fool', and reflects on how we (wrongly) ascribe positive characteristics to the schmuck who succeeds purely as the result of luck.

Taleb's domain (and that of the book) is the world of finance. He is quite rightfully scornful of financial journalism, which attempts to fit rationales to the most insignificant movements in asset prices. According to Taleb, most of this price activity is purely random, pointless to predict and futile to explain. The flip side is the tendency of markets (and natural phenomena) to exhibit extreme, unusual behaviour that confounds conventional theory. The occurrence of this skewed behaviour (referred to as the `Black Swan' problem) has plenty of precedents in financial markets and has bankrupted numerous traders and former experts.

As a general rule, practical advice on financial speculation is almost always useless. If Taleb has a core belief, it is that `I may be a fool, but my edge is that I know I am'. This recognition is not an exercise in humility; it is a prerequisite for success in a world where we are continually fooled by uncertainty and causation.

Taleb's book is a convincing, entertaining lecture on probability and human nature. His written style is little difficult to digest, possibly because of his classical influences. His insights are fantastic, though. Anyone who trades or invests should read this book, and reread it until the message sinks in.

...like giving or getting Galileo's book on the solar system as a Christmas gift in 1632, September 27, 2006
My professional work involves evaluating money managers and trying to "understand" a manager's skill vs luck and where the manager might fit in an overall portfolio. So I have spent 30+ years slashing my way through the jungle made by academics who think they can put markets and reality into nice, predictable models; and worse, listening to the sales pitches of money managers and other financial salesmen who want you to believe they are predictably worth paying very high fees and subjecting your money to untold risks.

It is fabulously refreshing that Taleb has razed a small piece of that jungle and raised those important questions that few in the academic, financial, or political establishment dare. If he comes across as insufferably arrogant, so what! Some of the negative reviews herein are a bit feeble - if you want to learn something about this very rich topic, do you really want your freshman economics professor spoon-feeding you strained pablum to make you feel comfortable your first time away from home? Buck up!

This books gives the reader plenty of amunition to take on the many people who are maliciously or inadvertently fooling you - stock brokers making more commissions than your investment returns; politicians pounding the table that their Social Security plan will have in 30 years, $1.00 more than their opponent's; or whatever your position on the war in Iraq, you have to admit that there was no planning for random outcomes. The public is just too uncomfortable with the truth about how random the world can be.

And if you don't want to read this book like a textbook on randomness or to make your own polemical points in the world, read it for the philosophical, hysterical and entertaining romp through reality that it is. Taleb has obviously traveled and lived around the world; the fact that he has personally and professionally experienced a lot of complexity and randomness and is sharing it in this book, is quite fun.

Finally, I know some very smart and rather daring financial advisors who have given this book to their clients as mandatory reading - kind of like giving or getting Galileo's book on the solar system as a Christmas gift in 1632. ... Read more

Editorial Review

First time in paperback. The #1 New York Times bestseller from the phenomenal author of The Courage to Be Rich.

The world's most trusted expert on money matters answers a generation's cry for help-and gives advice on

- Credit card debt
- Student loans
- Credit scores
- The first real job
- Buying a first home
- Insurance facts: auto, home, renters, health
- Financial issues of the self-employed

And much more advice that fits the realities of "Generation Broke." ... Read more

Reviews

Why isn't this required reading in high school?
How many people graduate from high school and even college within knowing the basics of financial literacy - deciphering credit ratings, maintaining and balancing a bank account, getting through college with a minimum of student debt, making the most of that first job and, eventually, buying a home and planning for retirement?
Orman strives to close this "financial illiteracy" gap by providing invaluable info for those just starting out - although I found plenty of information I needed to know as well - and I'm well outside the "young and broke" range she seems to be targeting.
The info is not only cutting edge but many of the websites have NOT appeared in other books. One example of how new the info is: Orman notes the recent changes in credit rules noting that EVERYONE has access to a FREE credit report once a year.
Because she knows younger adults may be intimidated by a ton of financial info, Orman (wisely) delivers her advice in innovative, user-friendly ways. Each page is short, easy to read and yet chock full of info. In short, she doesn't waste words.
Each section is launched with a Lowdown on what will be covered in the chapter and there is a quick summary at the end with checklists to make sure readers know what they shouldn't have missed. A Glossary at the back of the book explains some of the more complex terms. Important website resources and key terms are boldfaced in green, a great asset when looking for important info.
Reading this book could help young people avoid many pitfalls, since Orman covers the basics such as:
* Understanding that all important credit rating and deciphering your FICO score

*Making a small paycheck stretch as far as possible while maximizing opportunites for career advancement.

* A special area on her website where buyers of the book can get UPDATES on info in the book and CONNECT with others on message boards, a great way to get info and share viewpoints (and Suze stops in regularly to answer a few select questions, giving readers an opportunity to have her answer YOUR questions)

* Current websites to get information quickly and fill in gaps. She even notes that readers can now get their FICO score FREE once a year, valuable information that is on the cutting edge of new legislation. This info alone could well be worth the price of the book.

* The rignt and wrong way to handle student debt

* How to start investing and the best funds for ROth IRAs and 401(k) accoutns.

* Buying a car, auto insurance and a home.

I consider this MUST reading for anyoone just starting an independent life and this will definitely be at the top of my gift list for any high school or college graduate. What better gift than to give someone the tools for an independent and financially secure future?

GOOD EVEN FOR US FORTY-SOMETHINGS
I haven't watched Suze on TV for that long but she always seems to make sense and what's more, common sense when it comes to making financial decisions. I guess I am a bit outside of the age range that this is intended for being in my early 40's but I still found a lot of very valuable information inside. Granted the book is squarely aimed at younger people who have just gotten out out college and are maybe a few years or more into their careers and faced with the bills of student loans. The information though is of great value to me as my first child is only 5 years away from going to college and the information about financial assistance was invaluable.

Thus while the information inside my not help me directly, I think it sets up a wonderful plan that we can use to its fullest extent when my son starts college as well as the years after. This is always a very hard time, especially when "kids" get their first lines of credit and often make the same extent of forgetting that at some point the bills have to be paid. I had some $15,000 in credit card debts, small compared to many I know, when I was in my early 30's and now have less than $2,000 which is very manageable. If i had had this book 15 years ago I might not have found myself in such a rough position. And certainly had I had the book I would have taken the advice about retirement plans much earlier than I did. As Suze puts forth, getting that 401K setup as early as you can will make life much easier down the road. Great Book!

I wish it were common sense
I purchased this book because I work for a student loan and financial literacy nonprofit organization. Having reviewed the student loan chapter of the book in its early stages, I was interested in the final product.

Not being so young or so broke (of course, I'm not satisfied with my money, but am better off than many), I still enjoyed and respected this book. It is written appropriately for this audience and addresses a number of hot topics.

Before considering this review, I read several others. Many indicated that Suze's advice is just "common sense". If only this were true. Unfortunately, studies show that the average student graduates from high school lacking basic financial literacy skills. To them, "balancing a checkbook" means using a calculator to ensure your adding and subtracking is correct. Even worse, a small percentage of the population thinks that checks in their checkbook mean they have money to spend!

Knowing this, I highly recommend Suzie's book! In addition to her clear writing and good examples, you have access to even more information on her web site, including excellent and FREE resources.

Here's to good reading and financial savvy!

The LAST of my Available Credit-Chinese Food or Orman's Book
Faced with a true financial conundrum, with a mere $30.00 in available credit on my Student Platinum Visa, I chose to purchase Suze Orman's book and settle for a doctored up frozen pizza instead. I made an incredible choice and found myself engulfed in reading a book that seemed to answer ALL of my questions and concerns about my finances wtih REAL SOLUTIONS!

I can remember how intimidated I was at completing my first Federal Student Loan Applications and Pell Grant Requests. I was terrified at the consequences of answering one of those "trick questions" improperly and ending up with little or no financial assistance. Little did I know how easy it was to get loans and to later learn that I could use a portion of the funds for material things that likely were not necessary for the completion of my degree. This is a common mistake that Ms. Orman describes in her book. Again, she turns our anxiety into UNDERSTANDING and helps us to TAKE BACK CONTROL OF OUR MONEY!

The Financial Aid Office was full of credit card offers that seemed almost too good to be true. Within a month I had accumulated 3 credit cards. Could it really be this simple? How could I manage to get extremely high credit limits from banks that knew little or nothing about me? I take full responsibility for overextending myself, but what were they thinking when they offered a Junior College Student a $4000 line of credit, especially when my source of income read "Full Time Student with No Income?"

The job market is quite anemic right now, so I settled for a position that offers great benefits in exchange for a salary that makes flipping burgers appear to look better and better! So much for ranking in the 98th percentile in the field of International Relations! Instead of working abroad, helping to make the world a better place, I'm working for a bank in the collections department for their credit card division. SUZE ADDRESSES SIMILAR ISSUES, ABOUT THE LACK OF JOBS FOR COLLEGE GRADUATES, AND HELPS US TACKLE THIS PROBLEM WITH EASE!

Enough of the negativity as my career is just beginning and I'm being productive and making payments towards the debts I owe. "I Owe, I Owe, So Off to Work I Go...!" This is one of the best books, of this important genre, that I've ever read and been so enlightened by-in every possible way. I finished reading it this evening and had so much energy that I went for a run, focused on her many strategies for making positive changes in my life, and arrived home to sit down and face all of my "Debt Demons" head on. ORMAN REACHES THE HIGHEST LEVEL EVER AND TEACHES US HOW TO RECOVER FROM ANY TEMPORARY BUMP IN THE ROAD!

In the typical financial sense, I might be considered "...Young...and Broke!" But money is only one form of currency in life. It is NOT everything and there are many other important forms of "Currency" in life. I'm blessed with a good amount of spiritual currency and friendship currency-so I'm far from being broke. I'm still Young and, for the first time in a very long time, I feel Fabulous about myself and my future. Orman's book gives each of us every possible tool we need to start saving money AND to help us take action steps to start making positive changes in many aspects of our lives.

For a long time I felt as if I was no longer the conductor of my life. "The Money Book for the Young, Fabulous and Broke" has instilled in me that I AM in control of my life and the outlook of my future is Fabulous.

If any of this makes sense to you, my suggestion is that you either purchase this book or check a copy out at the library. Because the book has so many useful tips and strategies for guaranteed success, you'll probably want to make some notes in your own personal copy.

THIS IS A BOOK THAT IS FULL OF SOLUTIONS. I review books that I think others will either enjoy or benefit from in some way. This is a book for young and old, students and parents of students, educators and financial aid planners. Don't spend another dime on another book that addresses our "Generation Debt" until you give this comprehensive and intelligent book a thorough read.

Good luck to all of you! If I can make it through this financial mess that I have created, so too can the rest of the world. And one day, I'll hear from someone who is seeking a really nice, intelligent, YOUNG and FABULOUS employee for a position in any form of International Relations.

Feel free to contact me, Peter Cannice, of Scottsdale, Arizona, at Horsepete@aol.com for additional comments or a copy of my entensive review.

I may not exactly be YF&B...
I'm thirty-something. I have a wife and two children. I've been extremely fortunate in my life to have side-stepped many of the financial potholes that Suze mentions in this book. So...Young? I'm probably topping out the range. Fabulous? In my children's eyes, yes. Broke? In a sense, but I'm doing all right.

Now, even though I may not be truly YF&B, this book has really opened my eyes. With two young children, I think more and more about obtaining a secure financial future for my family. To be honest, I've always been a little confused as to what I should really be doing to achieve that goal. Suze has made it so very clear in her book. She has confirmed in my mind that some of the things I am doing are right. In other areas (like "Big Ticket Purchases", investing and insurance) I see opportunity and room for improvement. I've already taken action. Out of all this, I finally feel confident that I'm doing the right thing for my family and myself. Thank you, Suze.

Better than the rest!
I have read many financial books, and this one by far is the most refreshing. I am learning step by step how to secure a successful, and non-broke future even after acquiring enough school loans that would make most people faint. Suze gives the young the tools to not get lost in the shuffle and to take control of their own destiny. I am very excited to no longer be broke...Thanks to Suze I am definitly on the right track!!! I highly recommend this book to ANYONE, It is very user friendly and easy to understand...not your typical money-ease.

Absolutely Fabulous
With all personal finance books, you should take the writing with a grain of salt. You have your own experiences to draw on to see if whether the advice offered is something feasible. The vast majority of personal finance books I read are not only totally unsuitable for my financial situation, they are also incredibly boring to read. To quote the author, "This is definitely not your parents' money book."

Personal finance is not the most "sexy" topic out there. It happens to be something most of us have had to figure out for ourselves through mistakes made or through the few fiscally responsibly parents who take the time to teach these things to their children. Most schools do not require a mandatory course in money managment before we graduate, although we could all benefit highly if this were added to the curriculm of high schools across the country (while I am still skeptical on the physical eduation requirement being necessary). These are lessons we need in order to get ahead in life. These are things we can not afford to not know.

Suze Orman recognizes the changing economy and realized the right financial advice for our parents is not right for us, the younger generation. She aims this book at those of us in our 20s and 30s, although it would not be a bad idea for the older generation to read it to understand the younger generation's financial situation. She understands many of us are starting out and we managed to build up a lot of debt due to the nature of the current consumer and economic environment. She does not hold these actions against us, preaching to us on how horrible we are to mishandle our finances. She tells us how to fix these problems we created for ourselves. She seems to understand the change in economic status in this country means, unlike our parents, we will not have social security, pensions, and other legitimate avenues our parents persued to fall back on.

Ms. Orman also realizes not everyone is a spreadsheet geek. Budgeting is not the grand solution to all our problems. She's still kind to those of us who are spreadsheet geeks and who like to see the numbers in front of us, but it's not a requirement to have a successful personal finance plan.

There are several surprising key points Ms. Orman makes, especially if you have read other personal finance books:

* Learn your FICO score and make sure you maintain it at a high level. This score not only effects your ability to get loans, but also the interest rate you'll pay once you get them!
* Do not close credit card accounts even if the balance is $0. These hold your credit history and effects your FICO score. Instead, keep the accounts open and destroy the physical card if you feel you can not trust yourself not to use it. Credit card companies are always happy to issue new cards.
* We are currently paying the lowest tax rates in the history of our country for our earned income. There is a very high chance these rates can not be maintained for when we retire and need to withdraw our retirement funds. This makes economic sense given the state of the country's economy. Since traditional IRAs and 401(k)s and other similar plans are taxed when you remove the money later, it makes sense to instead only invest in your 401(k) (or similar plan) for what your employer will match (never say no to free money) and then put whatever else you would put into the 401(k) into a Roth IRA. In a Roth IRA, you pay your taxes now, at a lower rate. You will not pay tax on the interest or dividends earned in the Roth IRA or the money you put in when you take it out during retirement.
* Always pay at least the minimum amounts on your credit card debt. Just missing one payment can have severe detrimental effects on your FICO score
* Do not even think of defaulting on your student loans. This is the best deal in unsecured debt you will ever get and the government will not let you get away with not paying. You are better off paying the miniums or working out a deferral if you are in financial hardship.
* Once you place your finances in order, and get your credit card interest rates on your unpaid balances (and any other loans) below 8% (it just takes a couple of phone calls), then concentrate on building savings. You should work on having 8 months of living expenses available to you.
* Once you set up your 8 months of savings, then concentrate on putting savings into a Roth IRA for retirement.

There are, of course, many other points, but these are the main highlights I was able to pull from the reading. Ms. Orman also understands it might take time to complete each of these steps. She reiterates time and time again to not rush moving on to the next step before completing the one before it, even if it takes several years to do so.

One wonderful feature of this book is the way it is organized. Instead of expecting you to read the book straight through (like I did), Ms. Orman expects you will use it as a guide to answer your specific financial questions. She does not expect people will want to read every situation in her book. After all, not every situation is the same. Customize the book to match your situation and read it. I do say this with a caveat. Reading the book in this manner would have had me skip the part about trusts. I now realize, as a single home owner, it would be a good idea to set up a revocable living trust and transfer title to my home to this trust in order to not burden my family with probate issues in the case of my death. So, there is something to be said to reading the book cover to cover. You might learn something new.

The material in this book is extremely important to read and understand. The way this book is written, in plain English, helps make this the most readable and understandable personal finance book I have ever come across. If you find the Amazon.com price is too much for you, ask for it at your local public library and borrow it. Take notes on the pertinent parts. Ask your parents to get it for you for Christmas, Hanukkah, or your next birthday. They could not buy you a better gift. Just having it as reference material has been invaluable. If you find you will not be able to get the book right away, Ms. Orman's website has an action planner where you can fill in a questionaire and have a customized action plan set for your particular financial situation. There are also forums and material updates for the book available at the website. Above all, the key to maintaining sound personal finances is to pay attention to your situation. Ignoring the problem will not make it go away. Reading this book could be your first, positive step in the right direction.

This Ain't Your Parents' Money Book
Suze's book caught my eye as I was browsing my local bookstore. Young, Fabulous, and Broke is the perfect descriptor for my life right now. The cover price was ridiculous--why ask $25 for a book for broke people? Because the first thing you read in the book will make you at least that much back.

I've read dozens of personal finance books that tell you how to "just save" this much money and how life is better when you can just control your spending. Until this book, there has been nothing out there on what to do when you already are controlling your spending, and you can't make ends meet.

Suze offers advice on how to find out your credit score, how to keep it pristine (the drilldown of the components of the FICO score and how you can take advantage of each part is just fantastic). She doesn't say, "Pay off your balance every month," because she knows that a lot of the younger crew just honestly can't do that. This is about how to manage your debt, realistically, how to bank on career advances, how to understand everything from credit scores to government bonds to mortgages to 401(k)s and IRAs.

This is the book that will tell you when to prioritize saving over paying down debt, when to withdraw money from your savings and which savings, and to pay for what, how to understand the fine print on all those applications for this money fund and credit card, and what pitfalls to avoid. This is the book that generation broke has been waiting for.

Tells you exactly what to do and gives clear reasons why
My mother is a fanatic of Suze's show, so she bought this book for my sisters and me. So far I am the only one to pick it up, and I'm glad I did and I will be suggesting my sisters do the same. I don't know much about finances beyond common sense (I have no debt and pay off my credit cards every month). This book gives excellent descriptions of how to and where to invest, giving the exact information you need -- there is no need for ridiculous amounts of research since this book gives you the info you need (these companies are good companies -- the one I looked at that was highly recommended had a very low cost rate and it faired much better than my current investiments in the high rate cost company that invests my money... it won't have my money for more than another month since these other companies will as well). This book thoroughly covers 401k's and Roth IRAs, which were the two things I really wanted to look at since I am not looking to get out any serious loans in the next few years.

This book also covers a plethera of other topics, such as 403b, which loans to take in what situations, what your FICO score is and why you should care (Suze's obsession with FICO is justified -- if you don't know why, just another reason to read this book), life insurance, car insurance and car purchasing (explains why not to lease -- if you lease, you need to read at least that part of this book), advice on purchasing a home, and many other topics. If you find yourself in a tough situation, perhaps her dozens of scenarios she draws up in her book will apply to you and give you a more direct answer to your question.

This book is essential to pretty much anyone, but especially to those of us who are still reasonably young (but you are never too old to start saving for retirement!). Get up and purchase this book -- take the initiative and use this book to begin giving yourself a solid foundation. Skipping over the portions that didn't apply to me (about half of the book), it only took me about 2-3 hours to read this book. That isn't a lot of time and it has a lot of payoff, so there is no excuse except being lazy about your future. Buy this book now and follow its advice -- it will pay for itself over and over in the money you will both save and make. ... Read more

Editorial Review

One of the world's foremost experts on business leadership distills 25 years of experience and wisdom in this visionary guide to what it will take to lead the organization of the 21st century. "Every business leader can profit from Kotters thinking on change."--Larry Bossidy, Chairman and CEO, AlliedSignal, Inc. Available August 1996. ... Read more

Reviews

"The Eight Steps to Transformation"
"Over the past decade," John P. Kotter writes, "I have watched more than a hundred companies try to remake themselves into significantly better competitors. They have included large organizations (Ford) and small ones (Landmark Communications), companies based in United States (General Motors) and elsewhere (British Airways), corporations that were on their knees (Eastern Airlines), and companies that were earning good money (Bristol-Myers Squibb). Their efforts have gone under many banners: total quality management, reengineering, right-sizing, restructuring, cultural change, and turnaround. But in almost every case the basic goal has been the same: to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment. A few of these corporate change efforts have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. The lessons that can be drawn are interesting and will probably be relevant to even more organizations in the increasingly competitive business environment of the coming decade."

In this context, John P. Kotter lists the most general lessons to be learned from both (I) the more successful cases and (II) the critical mistakes as follows:

I. Lessons from the more successful cases:

1. Establishing a sense of urgency

* Examining market and competitive realities

* Identifying and discursing crises, potential crises, or major opportunities

2. Forming a powerful guiding coalition

* Assembling a group with enough power to lead the change effort

* Encouraging the group to work together as a team

3. Creating a vision

* Creating a vision to help direct the change effort

* Developing strategies for achieving that vision

4. Communicating vision

* Using every vehicle possible to communicate the new vision and strategies

* Teaching new behaviors by the example of the guiding coalition

5. Empowering others to act on the vision

* Getting rid of obstancles to change

* Changing systems or structures that seriously undermine the vision

* Encouraging risk taking and nontraditional ideas, activities, and actions

6. Planning for and creating short-term wins

* Planning for visible performance improvements

* Creating those improvements

* Recognizing and rewarding employees involved in the improvements

7. Consolidating improvements and producing still more change

* Using increased credibility to change systems, structures, and policies that don't fit the vision

* Hiring, promoting, and developing employees who can implement the vision

* Reinvigorating the process with new projects, themes, and change agents

8.Institutionalizing new approaches

* Articulating the connections between the new behaviors and corporate success

* Developing the means to ensure leadership development and succession

II. Lessons from the critical mistakes:

1. Not establishing enough sense of urgency - A transformation program requires the aggressive cooperation of many individuals. Without motivation, people won't help and the effort goes nowhere.

2. Not creating a powerful guiding coalition - Companies that fail in this phase usually underestimate the difficulties of producing change and thus the importance of a powerful quiding coalition.

3. Lacking a vision - Without a sensible vision, a transformation effort can easily dissolve into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all.

4. Undercommunicating the vision - Transformation is impossible unless hundreds or thousands of people are willing to help, often to the point of making short-term sacrifices.

5. Not removing obstacles to the new vision - Sometimes the obstacle is the organizational structure: narrow job categories can seriously undermine efforts to increase productivity or make it very difficult even to think about customers. Sometimes compensation or performance-appraisal systems make people choose between the new vision and their own self-interest. Perhaps worst of all are bosses who refuse to change and who make demands that are inconsistent with the overall effort.

6. Not systematically planning and creating short-term wins - Creating short-term wins is different from hoping for short-term wins. The latter is passive, the former active. In a successful transformation, managers actively look for ways to obtain clear performance improvements, establish goals in the yearly planning system, achieve the objectives, and reward the people involved with recognition, promotions, and even money.

7. Declaring victory too soon - Instead of declaring victory, leaders of successful efforts use the credibility afforded by short-term wins to tackle even bigger problems.

8. Not anchoring changes in the corporation's culture - Change sticks when it becomes "the way we do things around here," when it seeps into the bloodstream of the corporate body. Until new behaviors are rooted in social norms and shared values, they are subject to degradation as soon as the pressure for change is removed.

Finally, John P. Kotter writes, "There are still more mistakes that people make, but these eight are the big ones. In reality, even successful change efforts are messy and full of surprises. But just as a relatively simple vision is needed to guide people through a major change, so a vision of the change process can reduce the error rate. And fewer errors can spell the difference between success and failure."

Highly recommended.

Make Change Irresistibly Attractive
The leaders of some organizations have no idea how to make successful changes, and are likely to waste a lot of resources on unsuccessful efforts. Professor Kotter has done a solid job of outlining the elements that must be addressed, so now your organization will at last know what they should be working on.

On the other hand, if you have not seen this done successfully before, you may need more detailed examples than this book provides or outside facilitators to help you until you have enough experience to go solo. I suspect this book will not be detailed enough by itself to get you where you want to go.

Here's a hint: The Harvard Business Review article by Professor Kotter covers the same material in a much shorter form. You can save time and money by checking this out first before buying the book.

I personally find that measurements are very helpful to create self-stimulation to change, and this book does not pay enough attention in that direction. If you agree that measurements are a useful way to stimulate change, be sure to read The Balanced Scorecard, as well, which will help you understand how to use appropriate measurements to make more successful changes.

If you want to know what changes to make, this book will also not do it for you. I suggest you read Peter Drucker's Management Challenges for the 21st Century and Peter Senge's Fifth Discipline.

Good luck!

Eight-stage process for transformation programs
John P. Kotter is Professor of Leadership at the Harvard Business School. He has written several books and articles on general management and leadership issues. This particular book builds on his 1995 Harvard Business Review-article 'Leading Change: Why Transformation Efforts Fail'.

The book is split up into three parts. In the first part - The Change Problem and Its Solution - Kotter discusses the eight main reasons why in many situations the improvements have been disappointing, with wasted resources and burned-out, scared, or frustrated employees. Each of these eight errors are discussed in detail, using simple, clear examples. "Making any of the eight errors in common to transformation efforts can have serious consequences." But Kotter argues that these errors are not inevitable. And this is why Kotter has written this book. "The key lies in understanding why organizations resist needed change, what exactly is the multistage process that can overcome destructive inertia, and, most of all, how the leadership that is required to drive that process in a socially healthy way means more than good management." In Chapter 2, Kotter discusses the reasons why organizations (can) need changes and improvements. Although some people suggest otherwise, Kotter believes that organizations can implement change successfully. "The methods used in successful transformations are all based on one fundamental insight: that major change will not happen easily for a long list of reasons." Kotter introduces an eight-stage process for creating major change.

This eight-stage process is discussed in Part Two of this book:
(1) The first stage of the process involves the establishment of a sense of urgency, which is required to overcome complacency. The nine sources of complacency are discussed, whereby Kotter emphasizes that "a good rule of thumb in a major change effort is: Never underestimate the magnitude of the forces that reinforce complacency and that help maintain the status quo." He further discusses methods for raising urgency levels, the role of crises, and the role of middle and lower-level managers.
(2) The second stage involves the creation of a guiding coalition. "A strong guiding coalition is always needed - one with the right composition, level of trust, and shared objective." According to the author the four key characteristics to effective guiding coalition are position power, expertise, credibility, and leadership. And he emphasizes that management and leadership must work in tandem, teamwork style.
(3) The third stage requires the development of a vision and strategy. Good vision clarifies the general direction for change, motivates people to take action in the right direction, and it helps coordinate people's actions. The characteristics of an effective vision are imaginable, desirable, feasible, focused, flexible, and communicable. But vision alone is not enough. "This is where strategy plays an important role. Strategy provides both logic and a first level detail to show how a vision can be accomplished."
(4) The power of a vision is most powerful when all people within an organization have a common understanding of its goals and direction. Although the general myth is that failures to communicate vision are attributed to either limited intellectual capabilities among lower-level employees or a general human resistance to change. But that is not really the problem. The vision needs to be communicated in a clear, simple message (focused and jargon-free). Kotter discusses each of the seven key elements in the communication of vision.
(5) Empowering employees for broad-based action - "Discouraged and disempowered employees never make enterprises winners in a globalizing economic environment. But with the right structure, training, systems, and supervisors to build on a well-communicated vision, increasing numbers of firms are finding that they can tap an enormous source of power to improve organizational performance. They can mobilize hundreds or thousands of people to help provide leadership to produce needed changes."
(6) Major change takes time and it is therefore advisable to pay serious attention to short-term wins. Short-term wins should be visible, unambiguous, and related to the change effort. Short-term wins play various roles in a change effort, most notably building the necessary momentum.
(7) Many forces can stall a change process short of the finish line. And we should be aware that irrational and political resistance to change never fully dissipates. We should not let the celebration of short-term wins allow complacency back into the organization. We should also be aware that progress can slip away for two reasons: corporate culture (see more in the next stage) and increased interdependence as a result from interconnections.
(8) "Culture refers to norms of behavior and shared values among a group of people." In large organizations, there are some social forces (corporate culture) that affect everyone. Corporate cultures have a powerful influence on human behavior, since it is almost impossible to change and invisible. Kotter believes that "culture is powerful for three reasons: (i) Because individuals are selected and indoctrinated so well. (ii) Because the culture exerts itself through the actions of hundreds or thousands of people. (iii) Because all of this happens without much conscious intent and thus is difficult to challenge or even discuss." He provides with one other important warning: "most cultural change happens in stage 8, not stage 1."

Part III - Implications for the Twenty-First Century - consists of two chapters. In the first chapter, Kotter discusses the organization of the future. In particular, the impact of the future on the eight stages in the change process. There is an interesting table, which compares the differences in structure, systems, and culture between 20th-century and 21st-century organizations. "The key to creating and sustaining the kind of successful 21st-century organization is leadership - not only at the top of the hierarchy, with a capital L, but also in a more modest sense (l) throughout the enterprise." These two notions are discussed in detail in the final chapter of the book.

Yes, this is an excellent book on controlling change. The book provides an extremely useful framework for a change process and should be kept as a checklist. Although the process looks rigid, the stages are flexible and take place concurrently. I recommend this book to all people involved in a major change process within larger organizations. The author uses simple business US-English.

Clear and direct to the point guide for management success.
This invaluable reading helped me navigate through the numerous challenges encountered when establishing a long term direction for my organization. Kotter does an excellent job in breaking down the basic elements to developing a success vision. Most importantly, his book leads you into a self evaluation of your personal traits, skills , and leadership style and how they support or encumber your goal achieving process. I believe "Leading Change" is a must read for those of us who think we are high performers and certainly recommend it for pre-interview brush ups.

Transforming Organizations is Tough Without Leading Change!
Transforming organizations is tough! It is more difficult than many people realize. Generally, leaders attempt change efforts that are too mild and then give them too little time to succeed. As a result, many transformations fail.

Even though this book was published four years ago, it is still on the cutting edge of modern, linear change in organizations. In my own consulting work I see this book--more than any other--used as a reference point when dicussing change strategies.

Kotter's ideas of establishing a sense of urgency and creating a guiding coalition brought great insight to the part of the change process known as readiness. Another great contribution is the idea that culture--being the most difficult thing to change--is generally the last change tackled, and the capping change that must take place for true lasting change to occur.

John Kotter begins this book by sharing why transformation efforts fail. He then takes the reader on a journey through an eight stage process of creating major change. He concludes this three-part book with a look at the implications for the twenty-first cnetury related to organizations and leadership.

Any facilitator or recipient of change efforts who has not read this book, has missed one of the mandatory books about the change process in North American culture.

Buy it today!

Leading Change by John P. Kotter
The book is terrific if you really intend to move your organization forward through change. The insights proferred by the author are exceptionally pertinent to today's global changes. Provided in the book are step-by-step processes to achieve success as well as pitfalls to avoid. The eight primary mistakes of leading changes are clearly identified and relevant discussions are presented in a clear and concise manner. I would recommend this book to anyone who wishes to accompish change with the least amount of pain to their employees and with the most guarantee of success. Outstanding.

Organizational Diagnosis - Powerful insights
Working in an organization where change stalled, to a point where innovation is absolutely discouraged, there were some sleepless nights when I couldn't stop thinking "Why? What went wrong?" After reading the first chapter of Leading Change, the answers come to surface with surgical precision. In fact, I can now pinpoint almost all reasons why things went wrong, and how one can turn from a leading prince into a caged victim. If I had had this insight earlier in my job, perhaps early warning could have been given. In fact, Mr. Kotter's books reads (for my organization) almost like a case study on "make the 8 basic mistakes, relax and watch chaos emerge". In my particular case, I can even give the names and position for each key player that failed. At the level of this book, I can only place Sun Tzu 's classic, "The Art of War", and I would reccommend this book to every person having management resposibilities, since it gives the necessary insight to diagnose malfunction symptoms clearly and precisely. All that is needed is good sense and fair judgement. ... Read more

Editorial Review

The New York Times bestseller: "A lucid account" (New York Times) of the recent financial crisisand the way forward by the Nobel Prize-winning economist, with a new afterword.The Great Recession, as it has come to be called, has impacted more people worldwide than any crisis since the Great Depression. Flawed government policy and unscrupulous personal and corporate behavior in the United States created the current financial meltdown, which was exported across the globe with devastating consequences. The crisis has sparked an essential debate about America’s economic missteps, the soundness of this country’s economy, and even the appropriate shape of a capitalist system.

Few are more qualified to comment during this turbulent time than Joseph E. Stiglitz. Winner of the 2001 Nobel Prize in Economics, Stiglitz is “an insanely great economist, in ways you can’t really appreciate unless you’re deep into the field” (Paul Krugman, New York Times). In Freefall, Stiglitz traces the origins of the Great Recession, eschewing easy answers and demolishing the contention that America needs more billion-dollar bailouts and free passes to those “too big to fail,” while also outlining the alternatives and revealing that even now there are choices ahead that can make a difference. The system is broken, and we can only fix it by examining the underlying theories that have led us into this new “bubble capitalism.”

Ranging across a host of topics that bear on the crisis, Stiglitz argues convincingly for a restoration of the balance between government and markets. America as a nation faces huge challenges—in health care, energy, the environment, education, and manufacturing—and Stiglitz penetratingly addresses each in light of the newly emerging global economic order. An ongoing war of ideas over the most effective type of capitalist system, as well as a rebalancing of global economic power, is shaping that order. The battle may finally give the lie to theories of a “rational” market or to the view that America’s global economic dominance is inevitable and unassailable.

For anyone watching with indignation while a reckless Wall Street destroyed homes, educations, and jobs; while the government took half-steps hoping for a “just-enough” recovery; and while bankers fell all over themselves claiming not to have seen what was coming, then sought government bailouts while resisting regulation that would make future crises less likely, Freefall offers a clear accounting of why so many Americans feel disillusioned today and how we can realize a prosperous economy and a moral society for the future. ... Read more

Reviews

Excellent and Credible Insights!
Stiglitz believes that markets lie at the heart of every successful economy, but do not work well without government regulation. In "Freefall" he explains how flawed perspectives and incentives lead to the 'Great Recession' of 2008, and brought mistakes that will prolong the downturn.

Between 1996-2006, Americans used over $2 trillion in home equity (HELOC) to pay for home improvements, cars, medical bills, etc., largely because real income had been stagnant since the early 1990s. Economic recovery requires that we repay the remainder of these amounts, overcome stock market losses (10% between 2000-2009), the loss of some 10 million jobs, and reductions in credit card balances, and find an equivalent amount to the former home-equity sourced financing ($975 billion in 2006 alone - about 7% of GDP) to finance another consumer-driven GDP upturn - without the prior boom in housing and commercial building. Stiglitz also points out that the Great Depression coincided with the decline of U.S. agriculture (crop prices were falling before the 1929 crash), and economic growth resumed only after the New Deal and WWII. Similarly, today's recovery from the Great Recession is also hampered by the concomitant shift from manufacturing to services, continued automation and globalization, taxes that have become less progressive (shifting money from those who would spend to those who haven't), and new accounting regulations that discourage mortgage renegotiation.

Stiglitz is particularly critical of the U.S. finance industry - its size (41% of corporate profits in 2007), avarice (maximizing revenues through repeated high fees generated by over-eager and over-sold homeowners needing to refinance adjustable-rate mortgages that repeatedly reset), and 'sophisticated ignorance' (using complex computer models to evaluate risk that failed to account for high correlation within and between housing markets; 'eliminating risk' through buying credit default swaps from AIG - blind to the likelihood AIG could not make good in a housing downturn), and excessive risk (banks leveraged up to 40:1 with increasingly risky mortgage assets - 'liar's loans,' 2nd mortgages, ARMs, no-down-payments; taking advantage of the 'too-big-to-fail' and 'Greenspan/Bernanke put' phenomena). Much of this behavior was driven by lopsided personal financial incentives (bonuses) - if bankers win, they walk off with the proceeds, and if they lose, taxpayers pick up the tab. However, to be fair, any firm that failed to take advantage of every opportunity to boost its earnings and stock price faced the threat of a hostile takeover.

The impact of mortgage defaults is greater than one would otherwise expect because financial wizards found that the highest tranches of securitized mortgages would still earn a AAA rating if some income was provided to the lowest tranches in the 'highly unlikely' event of eg. a 50% overall default, thus boosting the ratings and saleability of lower tranches. (Fortunately for the U.S., many of these mortgages ended up overseas, spreading the disaster.) Another problem is that mortgage speculators make more profit from foreclosure than partial settlements. Meanwhile, investors worried that mortgage servicers might be too soft on borrowers required restrictions that make renegotiation more difficult and lead to more foreclosures. Similarly, those with 2nd-mortgages often found that those holding the second were unwilling to accept a principal write-down as their share of assets would be wiped out. Finally, new government regulations aimed at making banks seem healthier than otherwise allowed changing from 'mark-to-market' valuation of mortgages to long-term 'mark-to-hope' valuation - thus, writing down assets in a renegotiation would generate the very mortgage write-downs the new regulations avoided, and thus increased bank reluctance to do so.

"Freefall" also does an excellent job refuting many of the simple explanations, alibis, and remedies for the 2008 Great Recession. For example, Greenspan's 'nothing he could do' alibi is countered by Stiglitz's 'require higher down payments or margin requirements' (or increase interest rates). To those blaming Community Reinvestment Act requirements for increased mortgages to those with low incomes, Stiglitz says the default rates on those loans was less than in other areas; as for Fannie and Freddie being responsible, they came late into the sub-prime game. Responding to claims that increased regulation would stifle innovation and its role in economic growth, Stiglitz asserts that it is impossible to trace any sustained economic growth to those 'innovative' mortgages. (A 'real' contribution could have been made by less profitable innovative mortgages that helped homeowners stay in their homes.) On the other hand, he also admits that just giving more regulatory power to the Federal Reserve is not a solution - the Federal Reserve didn't use what it did have prior to late 2008; similarly, the SEC boosted leverage limits from 12:1 to 30:1 and higher in 2004 - exactly the wrong move. Banks suggest banning short sales in the future as a preventive measure - Stiglitz, however, points out that the incentive provided short-sellers to discover fraud and reckless lending may actually play a more important role in curbing bad bank behavior than government regulators have.

Other factors, especially government actions, also receive attention from the author. Overall, global supply exceeds demand - thus, the recovery focus needs to be on boosting demand. Stiglitz points out that growing inequality shifts money from those who would have spent it to those who didn't - weakening overall consumer demand. High oil prices have also impacted most those with low incomes, and probably encouraged Greenspan to hold down interest rates to counteract the negative impact. On a broader level, Stiglitz contends that IMF encouragement of national self-discipline and 'rainy-day' funds also weaken consumer demand. As for recommendations for more tax cuts and rebates, Stiglitz says these won't have much impact on consumers saddled with debt and anxiety, and as long as there's excess capacity, businesses will be reluctant to invest (Laffer's supply-curve tax-curve is an irrelevant theory, at best). Stiglitz even suggests elsewhere that the failure of Bush's 2001 tax cuts to stimulate the economy may have also influenced Greenspan to hold down interest rates for too long.

AIG, once bailed out, paid off billions to Goldman Sachs at 100% (Secretary Paulson's former firm), while defunct credit-default-swaps elsewhere were settled at only 13 cents on the dollar, says Stiglitz. Overall, he is very negative on the financial-sector bailout (TARP), believing that the money would much better have been used to capitalize new banks at 12:1 leverage, or not spent at all. The resulting bank subsidies were unfair to taxpayers (Treasury put up most of the money and got short-changed on potential benefits), and implementation was inconsistent - some institutions and stockholders were bailed out, others were not. (The reason lending 'froze up' is that banks didn't know whether they or their peers ere underwater.) The stimulus package, on the other hand, was too small (aimed at 3.6 million jobs, vs. 10 million lost plus 1.5 million new workers/year needing jobs), and was delegated to Congress without clear guidance. The result was a failure to provide mortgage insurance for those losing jobs, while instead creating the 'cash-for-clunkers' (mostly just moved sales from one period to another - [...] estimated only 18% were added sales, costing taxpayers $24,000 apiece; eight of the top ten purchases came from Asian manufacturers), ineffectual tax cuts, putting money into a failing auto industry, and increased road construction (greater global warming) instead of giving even more money to high-speed rail. The stimulus emphasis should have been on fast implementation, high-multiplier impact, and addressing long-term problems (eg. global warming). The employment situation now is worse than just the unemployment rate suggests - there are a record 6 applicants for every opening, the average work week is at 34 hours - the lowest since data was first collected in 1964, many have turned to disability instead of unemployment and are not counted.

Overall, Stiglitz believes there is far too much short-term thinking driving decision-makers, that business lobbies are too strong, and that markets are not naturally efficient. (Other inefficient market areas besides finance include health care, energy, manufacturing.) Meanwhile, we have done nothing to correct the underlying problems (big banks are even bigger) and Stiglitz also fears (reported elsewhere) the U.S. economy faces a "significant chance" of contracting again.

Interesting side-notes: 1)Stiglitz suggests that banks 'too-big-to-fail' should pay higher rates of deposit insurance, and incur restraints on executive incentives. In 1995 our five largest banks' market share was 11%, 40% now. Regardless, the world's largest three banks are now Chinese - #5 is American. (Not to worry - scale economics are no longer a factor for any of those banks, says Stiglitz.) 2)President Reagan made a major mistake in removing Paul Volcker as Chairman of the Federal Reserve Board and appointing Alan Greenspan in his place. Volcker had brought down inflation from more than 11 percent to under 4 percent, which should have assured his reappointment. But Volcker believed financial markets need to be regulated, and Reagan wanted someone who did not. Thus, Stiglitz believes regulations must be mandated, and enforced by a neutral, not political, source. 3)Repealing the Glass-Steagall Act in 1999 changed the culture of banking from conservative to high-risk, and also encouraged even larger institutions. 4)It is ironic that the Bush/Greenspan efforts to minimize government involvement in the economy resulted in our becoming de facto owners of the world's largest auto and insurance companies, and some of the largest banks. 5)Stock options are doubly damaging - they undermine stockholder wealth while remaining largely hidden from stockholders, and they encourage maximum short-term accounting manipulation to move stock prices up. 6)The U.S. national debt will reach 70% of GDP by 2019, and when it hits 90%, paying 5% interest on that debt will consume one-fifth of federal taxes.

Bottom-Line: Most books on current economic issues written for the public are superficial, or even worse, mere demagoguery. Stiglitz's qualifications - Nobel prize-winner in economics (2001), former Chairman of the President's Council of Economic Advisors (1995-97), and former World Bank Chief Economist help provide an important, interesting and credible alternative. "Freefall" was a pleasure to read.

Economics 101
I admit that economics confuses me, so when I read a book written in lucid easy to understand language I can begin to understand a compound-complex idea a little more clearly. Nothing in economics is as it seems because politics can often obfuscate with ideological explanations that are neither simple or even partially true when based on politics. Stiglitz doesn't say that the free market can't work, but that it isn't the entire answer. Regulations, as the banking meltdown of 2009 demonstrates, are necessary to prevent greed from becoming the dominating motivation for Wall Street and big banks, especially investment banks that measure success only in terms of how big their next bonus will be.

"Freefall" doesn't give us all the answers, and again I admit that I still have questions, but for a basic understanding of the markets as they played out in the past couple of years and how deregulation merely increased the problems for most of Main sreet this is a very good place to start. Some critics have already panned this book as a call to socialism, but those critics obviously lack even a basic understanding of what socialism really is and are only looking for a buzz word to sustain the belief that a totally "Free Market" system is the only good thing, when in fact it increases the chances of boom and bust cycles coming even closer together in the future. To begin, modest regulations are all that might be needed, and if bankers once again act trustworthy and preform ethically it could be enough. If greed continues unabated, then the middle class will disappear and only the wealthiest will profit.

Speaking Truth to Power -- Again
Professor Stiglitz has repeatedly spoken truth to power. He wrote about the perils of unchecked globalization, the disaster of the Federal Reserves policies in the 90s and 00s, the wrong-footed solutions to the Asia crisis, and the cost of the Iraq War. Here he lays out in simple, straightforward jargon-free language, what happened to cause the worst economic crisis since the Depression and what steps we need to take to prevent it from happening again. Highly recommended.

Accurate and timely
Stiglitz accurately reflects on the mistakes made by the US government to prevent and address the financial crisis. The book is a must reader for those who want to understand the the economics and politics behind the crisis. This is an enlightening piece of work from one of the world's best economist.

Until Conservatives Produce a Credible Rebuttal, I am Sticking with Joe
Nobel aureate Joseph Stiglitz produces one of his best books, in which he interprets the reasons leading to, and the possible ways out, of the Great Recession that started in October 2008.
Stiglitz wrote: "Growth (in America over the past decade) was based on a mountain of debt." By 2008, Americans had to suffer from their "unsustainable levels of consumption," and the economy crashed.
Sitglitz, a Keynesian economist, had predicted looming problems for the economy in Davos 2006, and according to this book, he felt embarrassed in 2007. He therefore told skeptics that either his theory was wrong, or crisis would hit harder. His second guess proved to be the right asnwer.
In Freefall, Stiglitz blamed most the greedy bank managers, brokers, lenders, rating agencies for what he described as "preying on" what they knew was destined to inevitably collapse: Subprime mortgages, or high risk people who borrowed beyond their means to buy houses.
He argued that many wrong assumptions led to the housing bubble, the first and foremost amongst them being that housing prices would keep on rising. American home owners were therefore engaged in further debt, often borrowing against their houses.
Stiglitz also blamed deregulation that started in 1987 under President Ronald Reagan.
"Interests, ideas, and ideologies" were the main drive behind such deregulation. The Nobel aureate showed some bias, and rightly so, toward former Fed Chairman, Paul Volker, who brought down America's inflation from 11.3 percent in 1979 to 3.6 in 1987, mainly through regulation, before Reagan replaced him with Alan Greenspan in order to reverse the regulation process.
And for those who call him socialist, Stiglitz wrote that he is a staunch capitalist, except that sometimes there are "flaws in the capitalist system," especially in the "American version of capitalism that emerged in the second half of the twentieth century."
According to Stiglitz, America exported its flawed version of capitalism to the world, thus leading to a global crisis that should to be rectified. To do so, "it may be difficult to have a strong global economy do long as part of the world continues to produce far more than it consumes and another part - a part which should be saving to meet the needs of its aging population - continues to consume far more than it produces," he wrote.
On the way President Barack Obama handled the 2008 Great Recession, Stiglitz wrote: "Hope with Obama was only partially fulfilled as the financial system remains less competitive... the too-big-to-fail-banks problem persists, and the [bailout] money to restructure economy was spent to save old and failed firms."
Stiglitz argued that the bailout was too small, and that it was mainly designed by people from the George Bush administration, who led the economy into its current crisis. These include Treasury Secretary Timothy Geithner and Chief Economist Larry Summers.
Stigliz believes that the government should have stepped in to rescue troubled homeowners by offering loans at low interest rates (say 2 percent), as the government was borrowing at zero percent interest rate. He criticized how the government made the cheap money available to banks, who lent it to Americans at an interest rate of 6 percent, therefore making 4 percent profit off the government's cheap money.
The government should also take into consideration the ratio of multipliers (i.e. the return on each dollar it spends), and should invest in long term projects that would certainly update America and make it more competitive - in the world - for the coming century, according to Siglitz.
"Other aspects of Obama's economic policy have been decidedly movements in the right direction," Stiglitz wrote. ... Read more