I read this book by Michael Lewis several years ago at the recommendation of our son who had worked as an intern at Merrill Lynch. He knew I was working hard to understand the stock market, or at least to understand it well enough to not make too many bad investment decisions. Lewis writes that the stock market is well enough regulated that it is almost fair to investors. The same was not true of the bond market. Lewis somehow bluffed his way into a Salomon Brothers training program despite his degree in art appreciation and became a bond trader making incredible amounts of money. They paid him very well indeed to pretend he knew what he was doing. “Never before had so many unskilled twenty-four-year-olds made so much money in so little time…” He says he set “…out to write this book only because I thought it would be better to tell the story than to go on living the story.” I particularly liked the statement at the end of the Preface that his parents “…are, of course, directly responsible for any errors, sins, or omissions herein.” Continue reading
Category Archives: Economics
The Great Degeneration
This book by Niall Ferguson (a Brit) has the subtitle “How Institutions Decay and Economies Die.” The title and the subtitle tell you that this is not a book with a happy ending. I had trouble reading the book, but recommend it to people who are interesting in economics and the history of important writers who have analyzed economics. I’m not in that camp, but I still worked my way through the book and decided it has value. My suggestion is that you shouldn’t pick up this book if you want light reading or a clear picture of what must be done to solve the degeneration of the U.S. economy. The problems are clearly presented in the dust cover. “Symptoms of decline are all around us today: slowing growth, crushing debt, increasing inequality, aging population, antisocial behavior.” The author says these problems are caused by degeneration of institutions, and presents evidence to back up his conclusion. However, I was frustrated with the lack of solutions. My reaction was something like, “It is inevitable. Deal with it!” Continue reading
The Next Economy and America’s Future
Aftershock – by Robert B. Reich
There are many ways to learn about Reich’s views on the economy. He starred in a recent documentary, in theaters last September http://inequalityforall.com/. A lengthy interview with Reich regarding the movie is here. He has also been interviewed in many places; I recently heard him on the Commonwealth Club radio program.
I suggest you read his book. It is current (copyright 2010, 2011, 2013) and, especially in the appendix, has informative graphs that present well on my e-reader. The short book (136 pages in the main body) is so packed with information that it makes for a long review.
Reich says the basic bargain of America is that workers receive a proportionate share of economic growth; that wages correlate with productivity. He disputes Fox News’ Bill O’Reilly who called him a communist who secretly adores Karl Marx: “I’m not, and I don’t” Reich says. “Inequality is inevitable and desirable. It gives people incentive… But at some point inequality of income and wealth becomes so wide as to harm society.” Continue reading
AARP Opposition to Changes in Social Security
The AARP organization is asking for people to sign a petition addressed to President Obama and their representatives in Congress to not change the way the cost-of-living adjustments (COLAs) are made for Social Security. President Obama has said he would be willing to accept using what is called the “chained” consumer price index to calculate the COLAs in the future.
I’ve read a few descriptions of why the COLAs should be changed. One is that retired people don’t have some of the expenses involved in standard inflation calculation. For example, retired people typically aren’t looking for a new home, so an increase in the price of housing doesn’t need to be used to calculate their new benefit. Another reason is that people can shop around and buy a less expensive substitute. An AARP explanation of chained CPI gives the example that if beef prices go up people can buy more chicken. Continue reading
Dodd-Frank
The subtitle of this book is “What It Does and Why It’s Flawed.” It was edited by Hester Pierce and James Broughel and was written by them and others at the Mercatus Center at George Mason University. I recommend it to anyone who has even the slightest interest in the legislative response to the financial crises that began in mid-2006. You don’t even need to read the entire book to be better informed about the Dodd-Frank Wall Street Reform and Consumer Protection Act. There is a short description of what each of the sixteen “Titles” comprising the act were intended to do followed by a brief summary of why the approach is flawed. “The act requires the creation—by one count—of 398 new rules and will affect the U.S. economy by restricting or requiring specific activity.” Only a small fraction of the regulations that are required by the act have been finalized. “Assuming the remaining regulations are proportionately restrictive…Dodd-Frank would create 13,323 new restrictions in total.” Continue reading
Wal-Mart versus Dodd-Frank
Family members watch for subjects for the commentary part of this web site. That led me to an article from the March 2013 North Carolina Banking Institute Journal by V. Gerald Comizio. The article discusses how the Dodd-Frank law included a moratorium on Industrial Loan Company (IFC) charters after Wal-Mart tried to get one. The focus of the article is what will happen when the moratorium expires, but I was more interested the fact Congress passed a law that included prevention of Wal-Mart or anyone else obtaining a charter to operate what is commonly called an Industrial Bank. I should give attribution that the articles published in the journal “…are written by professionals in the banking industry and Notes and Comments are written by law students at the University of North Carolina School of Law.” Continue reading