Book Reviews: 'The Big Short' (Michael Lewis) and 'Freefall' (Joseph Stiglitz)
*Anarcissie*
G. Pascal Zachary
Sunday, March 14, 2010
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/14/RV7D1CCONQ.DTL
The big short
Inside the doomsday machine
By michael lewis
Norton; 266 pages; $27.95.
Freefall america, free markets, and the sinking of the
world economy
By joseph e. stiglitz
Norton; 361 pages; $27.95
In "The Big Short: Inside the Doomsday Machine," Michael
Lewis adds to his impressive collection of beautifully
written books with a fascinating tale about professional
investors who foresaw the financial debacle - and
profited from it. In presenting a quirky array of smart,
self-serving characters, Lewis intends to help fans of
his storytelling understand what went wrong with
American capitalism in the early 21st century.
The stars of "The Big Short," whom Lewis describes with
meticulous detail, definitely see beyond the curve and
around the bend. Contrarians, they bet against the real
estate market and the very companies that the U.S.
government so expensively bailed out in 2008 and 2009.
They even wonder aloud about whether the pillars of
American finance committed crimes as well as technical
errors and moral outrages by peddling financial
instruments - designed to "hide the risk by complicating
it," Lewis smartly says - that seem destined, sooner or
later, to fail miserably.
"That's fraud," one of Lewis' heroes exclaims after
divining the flaws in a particularly abusive investment
vehicle. But rather than call the police, regulators or
the media, this shrewd investor benefits from what he
describes as "a stunning opportunity." None of the other
investors chronicled by Lewis blow the whistle to
authorities either, behaving instead like bystanders in
a crowded theater who, when fire erupts, sell
extinguishers to people who unexpectedly find themselves
ablaze.
The moral blindness of the characters in "The Big Short"
never becomes a subject of rumination for Lewis, who is
content to see Wall Street's crackup as a kind of Greek
tragedy. Talented individuals pursue narrow self-
interest and collectively create forces that unleash a
whirlwind of trouble for total strangers. Lewis even
gives space for his short-sellers to crow about their
own perspicacity. In his clever depictions of their
lives, moreover, he neglects the obvious task of
identifying the deeper causes underlying the mayhem.
Joseph Stiglitz, a Nobel Prize-winning economist, is not
so shy. In "Freefall: America, Free Markets, and the
Sinking of the World Economy," Stiglitz essentially
writes, "I told you so" over and over again. He presents
a familiar set of villains, notably former Federal
Reserve Chairman Alan Greenspan, guilty of flooding the
country with cheap money and permitting banks to do
anything they wanted. President Obama comes in for harsh
criticism for simply continuing his predecessor's bank
bailout. He even accuses Obama of a "whitewash" of big
banks whose failures were tragically rewarded by the
president's belief that they were "too big to fail."
Stiglitz disagrees. Instead of giving more piles of free
money to wounded giants, Washington could have seized
the sickest behemoths, such as Bank of America and
Citibank, and either run them as government trusts or
sold them off in pieces. Other countries have done so,
he points out. In a stinging indictment of the
government's response under both George W. Bush and
Obama, he concludes: "The U.S. taxpayer put out hundreds
of billions of dollars and didn't even get the right to
know what the money was being spent on." The result was
awful: "U.S. banks carried on paying out dividends and
bonuses and didn't even pretend to resume lending."
Six months ago, Stiglitz's boldest ideas might have been
easily dismissed as too radical. But today, with
joblessness stubbornly high and the economy stagnating,
the financial crisis is clearly not over. A new wave of
foreclosures and sinking real estate prices call into
question rosy forecasts of newfound stability.
While he allows that the "free fall" of the U.S. economy
has ended, Stiglitz expects long-term declines in
American living standards, for instance, and thinks that
the government must borrow even more heavily to support
current consumption and investment in infrastructure.
The obvious question is if Stiglitz is so smart, why
isn't Obama listening to this guy? The main reason is
that the president's leading economic advisers, notably
Treasury Secretary Timothy Geithner and Fed Chairman Ben
Bernanke, engineered the tragically flawed financial
bailout. From reading Stiglitz, these Obama buddies
appear to be the equivalent of war criminals who, in a
more just world, would be awaiting trial and
imprisonment.
Only by pressing the presidential restart button might
Obama get a handle on the nation's economic woes,
starting with the reinvention of financial regulation.
Unlikely. Since Wall Street seems to own both the
Democratic and Republican parties, the chance for any
reforms seems slim to none, at least under the current
president and Congress.
The dismal state of affairs brings us back to Lewis,
whose chronicle of how a few people profited from the
misery of many highlights the basic unfairness of life
in an America where justice is mocked by both private
greed and public glory. Even as Obama carries on about
hope and making America great again, the hard evidence
suggests that winners cheat and cheaters win in the land
of free. How else to explain a situation where the
people who caused the crackup, and have failed
repeatedly to fix it, still have their hands on the
steering wheel of the American economy? Even worse,
Lewis dourly concludes, "those same financiers (are)
using the government to enrich themselves."
G. Pascal Zachary, a former writer for the Wall Street
Journal, is the author of "The Diversity Advantage:
Multicultural Identity in the New World Economy." E-mail
him at bo...@sfchronicle.com.
Les Cargill
> 'The Big Short' and 'Freefall'
>
> The dismal state of affairs brings us back to Lewis,
> whose chronicle of how a few people profited from the
> misery of many highlights the basic unfairness of life
> in an America where justice is mocked by both private
> greed and public glory. Even as Obama carries on about
> hope and making America great again, the hard evidence
> suggests that winners cheat and cheaters win in the land
> of free. How else to explain a situation where the
> people who caused the crackup, and have failed
> repeatedly to fix it, still have their hands on the
> steering wheel of the American economy? Even worse,
> Lewis dourly concludes, "those same financiers (are)
> using the government to enrich themselves."
>
I don't believe G. Pascal Zachary actually read the book.
Er, perhaps he should note that at the very least,
Micheal Lewis has, on his Charlie Rose episode,
explained that he does understand that short selling is
a necessary part of markets. I would have thought that
viewing that episode would have been de riguer for a
reviewer of the book.
My review of this review? FAIL.
> G. Pascal Zachary, a former writer for the Wall Street
> Journal, is the author of "The Diversity Advantage:
> Multicultural Identity in the New World Economy." E-mail
> him at bo...@sfchronicle.com.
So much for the WSJ.
--
Les Cargill
Mason C
Which elicits my comment:
I checked out George Melloan's *Great Money Binge* -- looking
for a good conservative book to balance my liberal ideas.
Melloans is another WSJ writer (54 years and retired)
I couldn't get past page two of the Preface.
It's full of false information (lies) and loaded words.
The great flaw of conservatism is that its good ideas are
buried under simple ignorance and ideological extremism.
Can anyone recommend a good exposition of conservative ideas?
(don't tell me there aren't any)
MasonC
Les Cargill
Oh yeah. This is never limited to one side or the other.
NRO used to be pretty good, but it's declined since Wm.
F Buckley's death.
> The great flaw of conservatism is that its good ideas are
> buried under simple ignorance and ideological extremism.
>
Beautifully put. Which is, IMO, completely antithetical to what
Burke sought, which is moderation.
> Can anyone recommend a good exposition of conservative ideas?
> (don't tell me there aren't any)
>
I have had pretty good luck with Don Boudreaux and Russ Roberts from
"Cafe Hayek" and Arnold Kling, Bryan Caplan, and David Henderson from
EconLog. But they're more Libertarian than conservative. Russ and
Arnold seem to know best how to communicate with liberals.
Peter A. Taylor has a neat ( and rather long) website essay "The Dog Ate
My Manifesto".
http://home.earthlink.net/~peter.a.taylor/manifes2.htm
He seems to have worked out a lot of survey of the
differences between the Progressives and the libertarians.
Don B. has been writing lots of letters to editors
lately, so bear with him.
Other than that, I really enjoy anything by Thomas Sowell, who
is an easy read and has a strong tone of common sense to his work.
He's really easy to disagree with - you don't get the feeling he's
claiming a monopoly on the truth. He's clear about his assumptions,
and rarely given to polemic.
Likewise, other than Ezra Klein, who on the Left makes any sense
these days?
Lessee... a couple others I have caught on BookTV... Chris Hedges is
very well filling the role of a Jeremiah, John Derbyshire is
good enough at times ( he actually wrote a Conservative book
complaining about Conservatism, "We Are Doomed", which dovetails
nicely with Barbara Ehrenreich's "Bright Sided").
Oh, and Micheal Medved. And the inimitable Tim Worstall, who has a very
nice blog.
The series "Uncommon Knowlege" on National Review is a good place to
pick up interviews.
> MasonC
--
Les Cargill
Me, ...again!
What good ideas? Where? When?
are
> buried under simple ignorance and ideological extremism.
I sure thought conservatism was just made up of ignorance and ideological
extremism.
> Can anyone recommend a good exposition of conservative ideas?
> (don't tell me there aren't any)
OK, when you find a good book on conservatism, let the rest of us know.
I had the same idea you had: be fair to conservative thought. So, I picked
up (at a book sale for a buck) a copy of "The Way The World Works" by Jude
Wanneiski, where he quoted on the front cover about how Ronald Reagun said
real nice things about Wanneiski (Does Reagan qualify to you as a good
enough conservative?).
So, I started reading and got up to page 20-25 and almost none of it made
sense. Meanings were off the wall, implications that these guys were out
of touch with reality. Around the middle of the book is a chapter starting
out with the Laffer curve and I wanted a quotable source for what the
Laffer curve was all about. Nice figure, and I read the one paragraph that
described what the curve was all about and it was totally off-the-wall.
Laffer was brilliant in one creative sense: take the conclusion you want
to prove (anything to show taxes are bad and should be abolished), and
then come up with a kludge Rube-Goldberg rationalization to support it.
Arguments without reasoned comparison with reality and the natural world
are worthless.
I don't think you have to give conservatism much attention; all you need
to know is that the world is made up of screwORS and screwEES and the
first strategy you use is: CYA.
> MasonC
>
Rod Speed
Mininising govt to what govt does significantly better than non govt.
>> are buried under simple ignorance and ideological extremism.
> I sure thought conservatism was just made up of ignorance and ideological extremism.
No surprises there.
>> Can anyone recommend a good exposition of conservative ideas?
>>(don't tell me there aren't any)
> OK, when you find a good book on conservatism, let the rest of us know.
Les already did.
> I had the same idea you had: be fair to conservative thought. So, I picked up (at a book sale for a buck) a copy of
> "The Way The World Works" by Jude Wanneiski, where he quoted on the front cover about how Ronald Reagun said real nice
> things about Wanneiski (Does Reagan qualify to you as a good enough conservative?).
Nope. Maggie Thatcher did it a lot better. Corse she
had other problems too, she's a drunk for starters.
> So, I started reading and got up to page 20-25 and almost none of it made sense. Meanings were off the wall,
> implications that these guys were out of touch with reality. Around the middle of the book is a chapter starting out
> with the Laffer curve and I wanted a quotable source for what the Laffer curve was all about.
Try wikipedia.
> Nice figure, and I read the one paragraph that described what the curve was all about and it was totally off-the-wall.
> Laffer was brilliant in one creative sense: take the conclusion you want to prove (anything to show taxes are bad and
> should be abolished), and then come up with a kludge Rube-Goldberg rationalization to support it.
> Arguments without reasoned comparison with reality and the natural world are worthless.
Odd that you dont do that with conservatism.
> I don't think you have to give conservatism much attention; all you need to know is that the world is made up of
> screwORS and screwEES and the first strategy you use is: CYA.
Mindlessly superficial.
Mason C
Mason C
(reconstructed post to suit my purpose)
>> The great flaw of conservatism is that its good ideas
>> buried under simple ignorance and ideological extremism.
>
>What good ideas? Where? When?
The idea of personal responsibility, for example.
In East "Communist" Germany the people lost that and
their integration into West Germany proved difficult for
them. This was a lesson in anthropology we would do
well to learn.
MasonC, raging liberal
P.S. for my reason, see:
http://frontal-lobe.info/econ/economics.html
especially view:
"Liberal - Conservative Comparison "
=====
Rod Speed
> Me, ...again! <arth...@mv.com> wrote
> (reconstructed post to suit my purpose)
>>> The great flaw of conservatism is that its good ideas
>>> buried under simple ignorance and ideological extremism.
>> What good ideas? Where? When?
> The idea of personal responsibility, for example.
That has nothing to do with conservatism.
> In East "Communist" Germany the people lost that
Like hell they did.
> and their integration into West Germany proved difficult for them.
Nothing to do with personal responsibility.
> This was a lesson in anthropology we would do well to learn.
Like hell it was.
> MasonC, raging liberal
Stop raging or we will hose you down with a fire hose.
> P.S. for my reason, see:
> http://frontal-lobe.info/econ/economics.html
> especially view:
> "Liberal - Conservative Comparison "
Mindlessly superficial.
Mason C
( MasonC had asked:
"Can anyone recommend a good exposition of conservative ideas?" )
and the erudite Les Cargill responed (below)
Thanks, Les, I've printed your recommendations for my future reading.
MasonC
========