The End of AlchemyMervyn King was the governor of the Bank of England during the 2008 financial crisis. Unlike other books about the crisis, this one does not set out to describe Mr. King as the hero who single-handedly saved the world from economic doom, and does not seek to find someone to blamde for the crisis, but instead points out inherent flaws in the banking system which led to the crisis. While Mr. King goes far beyond what one would expect from someone who held his position, for me, the conclusions he did not reach were far more telling.

Mr. King blames the financial crisis on the banking sector, which he sees as the weakest link in capitalism. Specifically, he lays the blame on what he calls "alchemy" - how banks transform long-term stable assets into short-term risky assets. After the bank runs at the onset of the Great Depression, the US Federal Reserve started the FDIC to guarantee bank deposits. The thinking was that by reassuring people that they could get their money out of the bank, the government could forestall future bank runs. In practice, however, this ended up giving the banks leeway to use the deposits of their customers for high-risk, high-yield investments or loans - as they know that the government will bail out their customers should the investments or loans go bad. What this leads to is the banks making riskier and riskier investments in search of high yields, with the knowledge that they aren't really risking anything. As one bank starts to make higher and higher risk investments, others must do the same to remain competitive. This directly led to the sub-prime mortgage crisis.

Mr. King points out many flaws in the banking system, but doesn't suggest many solutions. One solution he does make is to force banks to have assets to back their liabilities. The Reserve Rate, set by the Federal Reserve, says how much money banks must keep on their books to back their liabilities. Currently it is a very small percentage, between 3% and 10% based on the size of the bank. This means that if I deposit $100 in the bank, the bank only needs to keep between $3 and $10 of that, the rest they can lend out. If I go to the bank and ask for my money, and the bank doesn't have it, the FDIC will guarantee the rest. Lending out deposits is how banks create money - if I put $100 in the bank, theoretically I still have the $100 dollars, but so does the person the bank lent the money to. A 100% reserve rate would mean that the bank would be gambling with its own money, instead of with the tax payers money as the tax payers are currently guaranteeing the bank. Mr. King admits that this is very unlikely to ever happen.

Mr. King says that one of the flaws with economic theory is that it does not account for "radical uncertainty." The Chicago School of economics basically says that a completely free market is completely efficient - meaning that all available information is factored into all prices and the economy will tend towards equilibrium. However this model leaves no room for "radical uncertainty," which refers to how no one can ever know what the future holds. This is the reason we need money at all - to store purchasing power for an unknown future. Mr. King is clearly no fan of this school of economic theory, which advocates that the government should not be involved in the economy at all, and should let the market sort itself out.

When I was in business school we were taught economics as if it was a hard science. Reading this book made me aware of how much what we accept as axioms influence our thinking. While Mr. King goes far beyond what one would expect of a government official as far as the flaws he identifies in the political and economic system, he never questions some basic assumptions of economics which probably should be questioned.

In the United States, in my opinion, one of the government's top priorities is protecting the financial interests of large corporations. This is something that very few elected officials would ever question as doing so would result in them losing millions of dollars in campaign contributions from said corporations. Mr. King does question this, and for that I give him a lot of credit. However, Mr. King is still under the assumption that capitalism as an economic system can and does work, and that the flaws in it can be corrected. While I disagree with this, reading this book almost convinced me otherwise. Not because he argued that point, but because his arguments are based on assumptions which he sees no need to question, and his arguments are well reasoned enough that it almost makes one forget that the bases on which they rest are far from as sure as they are assumed to be. 

While a myriad of other books have been written about the crisis, I have not read one that goes beyond the superficial causes to try to analyze the deeper root causes. It was also very refreshing to read a book written by someone intimately involved in the response to the meltdown who does not set himself as a hero fighting to save the world economy from certain disaster. When I started reading this book I was not expecting Mr. King to offer as deep an evaluation and critique of the world economic and banking system as the book does. While the book was at times rather technical, I still highly recommend it.

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Book: Unspeakable by Chris Hedges

Tuesday 28 February 2017

Chris Hedges is someone I respect a hell of a lot. He is one of the few people today who is not afraid of really just speaking the truth. Despite all of Trump's talk about how the media is all fake news, the mainstream media in fact really just toes the party line as far as corporate interests. The sad truth in American politics today is that once you get past all the little details that the two political parties try to get people all worked up about the two parties really agree on most economic issues. The two parties get their constituents all riled up about issues that honestly won't really effect people's lives that much - and while everyone is busy arguing over who can urinate in what bathroom they conduct the real work of the government which essentially is catering to large corporations.

Very few people in America are willing to even acknowledge this. Third party candidates are dismissed as "throwing your vote away," which is largely true, but only because the media doesn't take any third party seriously enough to give them any real chance. Granted this is largely due to the US winner-take-all electoral system, which I would argue only exists because the founding father's didn't foresee the rise of political parties, but the end result is that if you disagree with the two parties in any substantial way you won't be heard and won't be covered.

With Donald Trump calling any negative media coverage of him "fake news" he is distracting from the very real biases of the press. Hedges describes one example which was how the media was basically forced to act as a proganda arm of the Bush administration in selling their now disproven fiction about Iraq having WMDs in the early 2000s. The media was not forced to do this by the government, but by the corporate elite who own and run the media. After 9/11, in the ensuing wave of patriotism, any questioning of government policy was viewed as un-American, and strongly discouraged by the media, as Hedges personally experienced when he tried to protest the war.

The political parties can squabble all they want over whether to build a border wall, but when it comes to promoting the interests of multinational corporations there is little to no disagreement. When it comes to promoting unfettered free-market capitalism they are in lock step. The Republicans and Democrats may disagree on how much regulation there should be on Wall Street, and how high the corporate tax rate should be, but they will never question whether corporate interests are really best for the country, much less question whether capitalism as a system has inherent flaws.

Unspeakable: Chris Hedges on the Most Forbidden Topics in America is a rather short book, but it touches on many of the issues that I think about a lot. I think we are lucky that someone like him exists and is not afraid to question the prevailing economic dogma although he will be ostracized and ridiculed for it.

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Book: The Reactionary Mind

Sunday 26 February 2017

The Reactionary Mind: Conservatism from Edmund Burke to Sarah Palin, by Corey Robin, is a book of essays about conservatism from the 17th century to today. I have often struggled to try to figure out exactly what "conservatism" as a political philosophy actually means and I thought this book might shed some light. While it did have some interesting ideas, it didn't really do that great of a job answering my question.

The traditional idea of conservatism is about trying to preserve existing orders and traditions. Robin argues that modern conservatism is more of a reaction to radical ideas and movements than any real sort of ideology. While there are serious conservative thinkers, he draws a distinction between them and th conservative political movement, which seem more aimed making sure that those with money and power keep their wealth and influence than in instigating any real cultural or social changes. 

He says that traditional conservatism, as epitomized by Edmund Burke, was about having change be gradual and organic, about being more pragmatic than idealistic and in general preferring the known, no matter how good or bad, to the unknown - which has the potential to be much better, but also to be worse. Essentially it is a fear of change. Traditionally conservative movements have arisen in reaction to revolutionary ideas - when things start to change people start to mobilize against change, and in favor of keeping things they way they were. These types of counterrevolutionary movements have occured in reaction to things ranging from the French Revolution, to abolitionism, to women's suffrage, to civil rights, and even to the 1960's anti-war movement. Taken in this context, the recent radical populist conservatism in the US is just another reaction to social and economic changes, not a new ideological movement as the Tea Party, the "Alt Right" and Donald Trump like to think of themselves as.

In this book Robin gives some interesting analyses and thoughts on conservative movements through the years, but he is largely preaching to the choir. The book is not going to change anyone's mind, nor does it really aim to. It is an interesting read, and I agree with most of his points, but I didn't really get much out of it that I didn't already have going in.

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Book: The Trial of Henry Kissinger

Wednesday 08 February 2017

There's nothing I dislike more than people who are always 100% sure that their opinion is correct. When people are sure that they are right they tend to disregard any facts or evidence that contradict their beliefs and grab onto anything, however flimsy, that supports their beliefs. This leads to a situation which we see in the US now where "alternative facts" are made up to support an existing position, in clear contradiction of the actual evidence. This is why I hate so much that I so often agree with Christopher Hitchens - he comes across as so sure of his position that it just unsettles me, and it unsettles me even more that I usually can't argue with his reasoning.

This book is actually more of a long essay outlining alleged war crimes committed by Henry Kissinger. The biggest one is how he gave Richard Nixon information that allowed Nixon to torpedo the 1968 peace talks aimed at ending the Vietnam War. Nixon, at the time a private citizen, passed along information to the South Vietnam government that if they did not agree to a peaceful settlement he would be elected, and after election would provide better terms for them. So South Vietnam boycotted the talks and the Vietnam War went on for an additional four years before the exact same terms were finally agreed to, at a cost of twenty thousand American troops and maybe half a million or more Vietnamese casualties. Hitchens claims that Kissinger also provided information to the Humphrey campaign, playing boths sides so that no matter who became President he would have an in with them. I'm not sure who comes across worse in this whole mess - Nixon for meddling in foreign affairs as a private citizen and sacrificing an enormous number of lives for his political ambitions, or Kissinger who played both sides, again for the sake of his own ambitions.

This is not the only case of Kissinger doing things that would seem more appropriate for a murderous dictator than for the government of a supposedly democratic country. He was also complicit in the Indonesian massacre in East Timbor, the military coups in multiple South American countries, the coup in Cyprus, and others.

What strikes me the most about this long list of atrocities, most of which were justified in the name of anti-communism, is that the American government got the problem with communism exactly wrong. In my mind the problem with Soviet communism was the fact that it was actually a repressive authoritarian dictatorship, not the fact that this dictatorship was paying lip service to a different economic model. Kissinger and Nixon apparently took the exact opposite viewpoint - the US supported numerous brutal, murderous, totalitarian dictatorships - so long as they espoused free market philosophies. In Chile they supported a coup against a democratically elected government which had slight socialist leanings - Kissinger said that there was no need to let the country "go Marxist" just because the people "were irresponsible" - and supported Pinochet's government which was later charged for numerous war crimes and crimes against humanity stemming from it's brutal repression of any dissent and political opposition.

Who benefits from US support for repressive military dictatorships? Certainly not the people of the country who trade in democratic government for totalitarianism. The people who benefit are the multinational corporations who want to either privatize industry or keep their own business from being socialized. The US is supposed to be an example of "freedom" on the world stage - but in reality what they advocated was freedom for corporations and individuals to make money at the expense of the people, who were systematically impoverished and repressed, or in the worst case tortured and "disappeared." 

While I knew of some of Nixon and Kissinger's misdeeds in foreign affairs, reading this list of the worst of them made me horrified and ashamed to be an American, and glad I no longer live there.

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Book: Insane Clown President

Tuesday 07 February 2017

When I first heard of this book I assumed it was an anti-Trump gimmick, designed and written solely to sell copies by capitalizing on the anger at Trump's election. It wasn't until I discovered that the book was written by Matt Taibbi that I actually decided to read it. Matt Taibbi is the author of what I consider to be one of the most important books on politics in this century "The Great Derangement," which analyzes recent fringe conspiracy movements in the light of what US politics have become. In "The Great Derangement" Taibbi investigates one right-wing movement - apocalyptic religious fundamentalists - and one left-wing movement - 9/11 Truthers - and concludes that both stem from the fact that the American political system has become so corrupt and so removed from any real democratic influence. Rather than getting angry that the government acts mostly in the interest of the multinational corporations and monied interests who fund the politicians and agitating for any real change, people instead focus on fringe conspiracy theories and become obsessed with the coming of the rapture or trying to figure out who was "really" behind 9/11. In the meantime the political parties promote the idea that they are idealogical opposites by getting the people to focus on and get angry about social issues like what bathrooms transgender people can use, gay marriage and abortion while both parties take jam through their agenda which benefits the very wealthy and the multinationals. But enough about that book...

This book seems styled after the campaign work of Hunter Thompson and consists of a series of dispatches written by Taibbi during the campaign of Donald Trump. I was pleased to see that the dispatches were printed as they were originally written and not updated with the benefit of hindsight. The fact that after the release of Trump's comments on grabbing the genitals of women, Taibbi writes as if the campaign is over, as most people thought at the time, makes the fact that somehow Trump went on to win even more shocking and upsetting.

Even Taibbi's writing style seems very reminiscent of Thompson - full of bizarre and sometimes obscene descriptions of things - like describing Donald Trump's speeches as "turd clouds". Like Thompson's work, this book is fun to read, yet inside the florid metaphors it contains deep and profound analyses of the state of politics and the world. The only gripe I have with the book is the title, which to me seems more appropriate to tabloid journalism than to a serious political work like this. Even so, I highly recommend this book, and also highly recommend "The Great Derangement."

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