Customer Reviews

Debt and Delusion: Central Bank Follies that Threaten Economic Disaster (Deluxe Edition)

5 star:		(5)
4 star:		(1)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

If someone were to say to me, "Prove that the 2007-2009 financial crisis had its origins long before George Bush, Alan Greenspan, the 2001 rate cuts, subprime mortgages and greedy Wall Street CEOs" I would have them read this book. Written in 1999, it's staggering how much Peter Warburton, who I had never heard of before reading this book, understood. It's dense but fairly short, less than 300 pages not counting appendices. One of his key insights is explaining how the credit growth of the 1980s and 1990s didn't lead to inflation. Namely, businesses borrowed huge sums of money in order to increase productive capacity, and by increasing supply, prices were held in check. This book should appeal to Austrians and Keynesians alike, which is a rarity for these types of books. Highly recommended.

If you want to know how the economy got so screwed up, spend some time reading this book and you will know MUCH more than you would in 20 years of watching the talking heads on TV trying to feed you the party line via the news or wall street shows!!

This is the bottom line : Peter Warburton was / is 100% right.
It is ironic and sad that his book went out of print. It would be great to have an up to date version with the latest data.

This was a prophetic and correct book.

This book describes in detail how debt is created and controlled. There are a few who control the money flow. This was an interesting read although I think you might get confused if you do not know "What LIBOR rate is" and so on. Not a basic book to start with unless you use a computer to look up words that you would not understand. This is a very good book that I would recommend reading who want to understand debt and the delusion of debt.

How have the American and European economies managed to combine a 30 year boom with low interest rates and a tame money supply?
In this excellent book, Peter Warburton convincingly shows that massive asset price inflation ( - not consumer price inflation) has been funded by corporate and government bond issues on an unprecedented scale. Private individuals are also heavy borrowers as interest rates have fallen and bank deposits provide low returns in comparison to speculative investments in stocks and property.
He wrote the book in 1999 and identifies different scenarios under which the debt mountain could unwind, leading to falling bond prices and rising interest rates.
In fact two of his scenarios have come to pass, namely loan quality problems in mortgage backed securities causing a seizure in the credit markets, and the collapse of property lending in the face of falling collateral values. However, in both cases, governments chose to provide liquidity and protect creditors (bondholders) from their bad investments.
Following the argument of the book, continual low interest rate bond issuance leads to repeated boom and bust asset bubbles until it becomes impossible to refinance the astronomic level of debt. At this point we get default or fast inflation (repayment in devalued currency).
In theory, governments and citizens could stop the process and settle down to deflation, debt reduction and many years of high unemployment, but this is more of a political question.

I am currently [2011] reading Warburton's book and I am amazed by the accuracy and clarity of his analysis and the potential consequences from the swift of power from Central Banks and the banking sector in general, to the investments, which are hidden behind the rediculous, but so popular among certain financial circles, moto of "too big to fail".
If not anything else, Warburton's book provides a plausible explanation of the systemic crisis that hit Europe and was , conveniently, masked under the misleading title of "the Greek crisis". I strongly recommend reading this book especially by those who are still reluctant to recognize the need for a better regulation of this financial "No Laws Land".