The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
by Charles R. Morris
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Book Summary Information
Author: Charles R. MorrisEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2008-03-04
ISBN: 1586485636
Number of pages: 224
Publisher: PublicAffairs
Book Reviews of The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
Book Review: Mammonology
Summary: 5 Stars
As every schoolboy knows, there's nothing worse than a dull book, so (after painfully crawling through Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips, and before that the inane Rogue Economics: Capitalism's New Reality by Madame Napoleoni) when "The Trillion Dollar Meltdown" by Charles R. Morris arrived I had scant enthusiasm for reading yet another book about finance. I was about to throw it onto the pile, when I took a peek, and it was immediately apparent that this guy knows how to write in clear, plain and precise English, qualities quite unusual in writings about economics. In the dismal science of finance, it's as though Charles R. Morris has kindly come into your room and turned on the light.
Not, though, that he makes the economy effortless to comprehend for those of us outside the temples of finance. Despite Morris's gift with words, even a well-crafted book about finance is as simple to absorb as one written about particle physics or string theory. Morris takes pains to decipher all the argot (except for Alt-A loans) in detail, and such abstruse terms as "tranching" (including the inverse tranch and the floating tranch) and "leveraging" are explained several times in case they escaped you the first time around. I would fain confess, however, that by the time he came to "synthetic credit-default swaps" and such passages as "In mid-October 2007 a midcredit 'A' swap on the ABX was trading at about 60, down from a par of 100," I was hanging onto the the side of the pool, struggling to keep my head above water.
Not that all that should deter you from tackling the book, because it is also tempered by humor in the form of Charles R. Morris's sardonic wit. He knows the subject of finance well enough to point out that the masters of the financial universe are not above chicanery and self-deception, and that " . . . advanced mathematics fostered the illusion that economics is a science."
It's amusing to note that almost all the negative reviews here are from the zealots of the Libertarian Synod and the cabal of the Objectiveists. Mr. Morris is a heretic in their glaring eyes because he posits the idea that there can be a balance between too much government regulation and too little. For the rest of us, however, Morris is remarkably evenhanded and nonpartisan in his assessments. I confess that, because I was living large during the Clinton administration, I thought highly of "Rubinomics," with its old-fashioned remedy of paying-down the debt. Morris, however, debunks all that. After reading this book, I watch the talking heads on PBS with new, somewhat jaded, eyes.
The book's major shortcoming is mentioned in other reviews. There's no escaping the fact that the book is, for all practical purposes, now a year old, and on page 105, we find the erroneous conjecture, "As the credit crunch works its way through banks and investment funds over the next year or so, there will be no soothing fountains of new dollars coming out of Washington. The days of a universal put to the Federal Reserve are over." No, there are no soothing fountains; instead the Federal Reserve and the Secretary of the Treasury have turned on a firehose of cash, and it's astounding that anyone would be surprised by this. What else would anyone expect? That's always been the government's sole answer to any problem.
But a far more serious issue is missing from this book, too. It seems unrealistic, to expect that the government, no matter how well-intentioned, can solve the all problems of mortgage default and evictions, credit card delinquencies, commercial mortgage securities, monoline insurers, credit default swaps and insolvent banks -- the entire army of ravenous debt-zombies marching at once-- but now that the great unraveling is in progress they must also face an even greater problem -- fear.
Everyone reading this has recently lost, or knows someone who has lost, a massive portion of his or her net worth. A friend of mine (retired, no job prospects) lost $15k in the last quarter alone. The City of Detroit Pension System lost $52 million when Lehman Brothers sank. (This is actually not my friend, but I'm too embarrassed to admit it's me.) Bankruptcies called for in the auto industries will relieve those companies of their fixed obligations for retirees, and many other companies are defaulting on their pensions, too. Unemployment is rising daily. In the midst of such catastrophic circumstances, can we realistically expect the housing market (or any other market) to rebound? Who, other than dope dealers laundering money, would be foolish enough to apply for a mortgage during times of deflation?
The information in this book is almost trivial in comparison to the general consensus of where we're headed, the name of which no one dares speak -- the forbidden D-word. Fear has gripped the markets, and quite sensibly so. Others here have criticized Mr. Morris for not proposing more solutions (his sole suggestion is to reinstate the old Glass-Steagall Act), but there may, in fact, be no solutions. Because of the multiplier effect of the derivatives, there isn't enough money in the galaxy to pay off all the debt.
Other alert critics here have noticed that this book doesn't end very well, and yes, it veers off the rails into a standard-newsweekly discussion of general (non-financial) social woes such as inequality, high tuition and health care (NOTE TO AUTHORS: REMAIN ON TOPIC), but those stories have been told more thoroughly elsewhere. (I pay $3200 annually for hospitalization insurance, extra for doctor's visits, yet I would never want to trade that for the "free" [ha-ha!] health system of Canada or the UK with their 18-month waits.) Future editions of the book should jettison these pages and in their place address the vital question of What Is to Be Done?
In the meantime, I've wisely prepared for the future by obtaining a large cardboard box (with blue plastic tarp) to live in, and I recommend Hans Fallada's 1932 book,What Now, Little Man? to all readers.
(Added December, 2008:) I see that Charles R. Morris will soon issue a new edition now titled The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. That'd be the edition to purchase.
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Summary of The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions. According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it.
The Trillion Dollar Meltdown explains how we got here, and what is about to happen. After the crash our priorities will be quite different. But things are likely to get worse before they better. Whether you are an active investor, a homeowner, or a contributor to your 401(k) plan, The Trillion Dollar Meltdown will be indispensable to understanding the gross excess that has put the world economy on the brink?and what the new landscape will look like.
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