SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy [Hardcover]

Arun Motianey (Author)

Book Description

Publication Date: January 14, 2010

A brilliantly original assessment of what caused the global crash—and a practical plan for investing accordingly

Supercycles, according to international economist and strategist, Arun Motianey, are the continuous, long waves of boom and bust that undulate through the global economic and financial systems. More often than not, they are the result of policymakers' well-intentioned but misguided attempts to achieve price stability. In Supercycles, Motianey surpasses the traditional business cycle model ("Boom and Bust"), to provide a detailed, objective, and at times surprising explanation of global economics.

Drawing heavily on history and informed by cautious readings of a wide range of economic thought, Motianey critiques the way macroeconomics has been practiced by the major powers' central banks through the years.

Specifically, it was the banks' intervention, ostensibly in the quest for price stability that actually served to entrench price instability. Further, he makes a compelling case for the new tools we'll be using to manage the post-meltdown global economy, and even advises on investor portfolios to protect us from the likeliest scenarios that occur when a supercycle enters its terminal phase.

A cogent and impossible-to-ignore mixture of economics, finance, policy, risk management, and investment advice from a global perspective, Supercycles is certain to inform and inspire debate among investors, academics, and casual readers alike.

Reviews:

"Motianey is an engaging writer and Supercycles should be considered a must read for economic junkies. His ideas are fresh and innovative and he attempts to avoid the dogma that frequently leads those in the profession astray. I highly recommend it for those who want to gain greater perspective on the Credit Crisis and where we might be heading in its aftermath. --SeekingAlpha.com

"Highly readable. The pitch-perfect blend of the best economic thinking informed by the lessons from the past and the investment savvy of a veteran investment advisor at the top of his game." -- Thomas J. Trebat, Executive Director, Institute of Latin American Studies & Center for Brazilian Studies, Columbia University

"A provocative way of looking at the global economy. This book will make you stop and think." -- Peter Scaturro, Private Bank Executive

"This lively volume not only examines the big picture, but also provides practical advice for investors who are trying to prosper in this complex and challenging economic environment." -- Harvey S. Rosen, John L. Weinberg Professor of Economics and Business Policy, Princeton University

"Arun Motianey sheds light on some of the more ludicrous propositions of modern equilibrium economics. He describes how investment bankers and economists got it all wrong—and the world is experiencing the disastrous consequences." -- Dr. Terry O’Shaughnessy, Fellow in Economics, St. Anne’s College, Oxford University

"Not all readers will agree with Motianey's savage criticism of the finance-driven modern economy, but few can read SuperCycles without having at least some of their preconceived notions challenged. A must-read for policymakers and investors." -- Dr. Kevin Hebner, Global Investment Strategist, Third Wave Global Investors

“Required reading for those who do not want to get lulled into the conventional thinking” -- David Martin, Chief Risk Officer, AllianceBernstein

Editorial Reviews

About the Author

Arun Motianey worked for Citigroup from 1987- 2008. His positions included managing director and head of macro research and strategy in the company’s Global Wealth Management division.

Product Details

• Hardcover: 304 pages
• Publisher: McGraw-Hill; 1 edition (January 14, 2010)
• Language: English
• ISBN-10: 0071637370
• ISBN-13: 978-0071637374
• Product Dimensions: 9 x 6.1 x 1.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (11 customer reviews)
• Amazon Best Sellers Rank: #449,180 in Books (See Top 100 in Books)

More About the Author

Arun Motianey is a mathematician and economist, educated at Cambridge University, who found that the two subjects make for a toxic combination. This book, SuperCycles, is the result of that recognition. But it was a recognition, not a revelation and so the argument needed to be made in the book that the idea of "equilibrium", so central to economic thinking needs to be dropped and replaced with something else.

His 20-year international career at Citi (earlier Citigroup) has helped. Fortuitously, but also fortunately, he was close at hand when most of the big crises hit the global economy -- from the Latin debt crisis in the 1980s to the Asian currency crisis of the 1990s to the shocks that have pounded the US economy over the last decade. Drawing a connection between these different crises, Motianey has presented something like a new organizing principle for understanding the global economy. He has no doubt there will be a few readers who will feel uncomfortable by his root-and-branch reformulation of how markets and economies work and they will attempt to dismiss this work as "speculative". The open-minded reader should, however, learn much from these ideas.

The investment implications of these ideas are pivotal to his larger intellectual interests. Much of the latter part of his career was spent in the investment management side of Citi and he thinks there is a framework where great investment opportunities can be exploited.

Motianey is now a full-time author and is setting up an independent economic consultancy. He will continue to be based in the Greater New York area.

Customer Reviews

Most Helpful Customer Reviews

21 of 23 people found the following review helpful:

5.0 out of 5 stars Finally, some new ideas!, January 29, 2010

By 

Hildreth Noronha (Cheltenham, MD) - See all my reviews
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This review is from: SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy (Hardcover)

Most of us been affected in some way by this recent economic crisis, and there could not be many who have not spent some time thinking about how this whole damn mess came about. And just when we thought it was over, and the pundits on CNBC were talking about a V-shaped recovery, we hear the economy is slipping down the slope again! So this book "SuperCycles" (which I first heard about when I read and enjoyed the author's long article on the Roubini Global Economics website) got me really interested because his solutions seemed to be a radical departure from what we hear about every day.
First, an important disclosure. I've had the book for just a few days and I've skimmed it quickly and then gone back to read the sections that caught my attention. The best way to read this sort of the book is to read it carefully because it is heavy with concepts - and these concepts build on the ones that came earlier. Since not many of us have the time to devote a whole week to a single book, I would suggest that the reader focus on the Introduction, Chapters 1, 2 3, 6, 7 and 8. Some of the chapters in the middle of the book that deal with the Gold Standard would appeal only to history buffs. The last chapter is on investment ideas for the three scenarios (deflation and two types of inflation) and would be of maximum interest to the general reader but to be quite honest you won't get that much out of it if you haven't understood how the Supercycle works and why the author believes that policymakers are going to be faced with nothing but really terrible choices. The two Appendixes, both quite long, can be omitted by most.
Is Motianey's thesis convincing? He launches a pulverizing attack on the economics profession, and Chapters 1 and 2 are worth reading (and worth the price of the book in my opinion) for the viciousness with which he attacks them. I am not an economist by profession, but I have some knowledge of the subject and have followed the debate in the media quite carefully. But even I was stunned by the author's accusation of the economics profession's ostrich-like behavior. Motianey adopts a high-risk strategy here and that is what makes this section of the book interesting and different from other books on this subject like Justin Fox's "The Myth of the Rational". He does not just claim that the mainstream theories have got it all wrong because they have failed to predict crises. He levels a more serious charge against the orthodoxy, by saying that their theories are unfalsifiable and economists have insulated themselves by coming up with theories that can never be proved wrong.
How can that be? Motianey says that macroeconomists will not let go of their theories because it is only when real economies mimic the descriptions of economies in their models (which is, basically, never) will they submit to the test of verification. It is not as silly or as trivial as it sounds! Because of the power of the economics profession in shaping the opinions of policymakers, economists play a destructive role by making the world adapt to their ridiculous models. (The extremes of financial market deregulation of the last twenty years being a case in point!) He is essentially calling the macroeconomists in the US Federal Reserve and in the top universities of the world frauds. Along the way he threads the reader through the different schools of macroeconomic thought (the Real Business Cycle and the New Keynesian being the main ones) but in his opinion, each one is as bad as the next. It isn't just economists who will object to his strong and highly provocative descriptions of mainstream economic thinking.
Having dispensed with the idea of a business cycle he introduces the idea of a Supercycle. This is the real meat of the book. It is not as difficult as it might first look. If you know what a supply chain is, you will get the idea of a pipeline that runs from commodities to goods and services. The author is basically arguing that a Supercycle is a series of booms, followed by busts, that begins with commodities and ends with services. Since the US is a massive service-driven economy, the boom and bust that we are going through now will prove especially painful. Most disturbing is his conclusion that no matter what measures are taken by the US government, the collapse of household balance sheets is unavoidable. Only sudden and unexpected inflation can alleviate the problem. I don't think Motianey means Argentina-style hyperinflation but he isn't talking about a garden-variety inflation either, though he never really makes that clear. This is the weakest part of the book. He moves quickly through his scenarios and then gets into the investment implications of the scenarios. Personally, I think he should have focused on just the economic ideas and left the investment ideas for another book, but that is just my opinion, and I am sure many others will disagree.
In conclusion, I think this book helped get me out of the echo chamber of "fiscal deficits are a really bad thing" and "Chinese savings were the real cause of the crisis" that I seem to find myself in every time I turn on the TV and listen to the pundits recycling their platitudes. Motianey offers a complex and multi-layered picture of the world economy that is going to get even more challenging in the coming years. I'm not sure he has all the right answers, but my gut tells me he is on to something here and has some of them for sure.

10 of 12 people found the following review helpful:

4.0 out of 5 stars A Fresh and Bold Perspective, January 30, 2010

By 

Peter Jensen (New Canaan, CT, US) - See all my reviews
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This review is from: SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy (Hardcover)

The author warns us early on that we will be reading a major against-the-consensus view of why the global economy ran into trouble, and why we will struggle hard to get out of it. In the Introduction, he tells us that when the time came to write this book, everything he learned at Citigroup (where he held a senior research and strategy position), had to be thrown out the window because "they rationalize the industry's own feral behavior in herding investor capital into and out of these markets." This resonated well with me - as a retired Foreign Service Officer, I have seen the power of vested interests (and the damage it can do) all around the world. This mother of all financial busts began back here in the good old USA. Like many, I remain puzzled as to why only a handful of incompetent banks bear the blame.

Those hankering for a screed that would dump on the financial sector or the Washington political class will be disappointed. This is a serious work of analysis, written with a great amount of literary flourish. Although the reader can sense the author's outrage at various stages in the book his targets are not specific individuals, companies or countries. Motianey's conclusion is that the financial meltdown was an intellectual failure of the highest order - and until that is recognized and corrected we will remain thrashing around in the morass.

Happily, he does offer us a ray of hope at the end. Using the framework of the Supercycle, he points the way out, but on the basis of accepting much higher inflation than the central banks would wish. He worries that the need to encourage inflation will clash with the central bankers' need to stay true to everything they have been taught is right. Major ideological battles lie ahead for all central banks, including the Fed. This is why I suspect that the author spends so much time in the book demolishing the intellectual arguments that support current policy recommendations from both the left and the right (in the book he calls it "removing the scaffolding".) In this intense and controversial book, Arun Motianey persuasively makes his case that without an intellectual sea change, we are not going to get very far.

2 of 2 people found the following review helpful:

5.0 out of 5 stars A new, compelling take on supply, demand, economic equilibrium and long-range cycles., April 28, 2011

By 

Rolf Dobelli "getAbstract" (Switzerland) - See all my reviews
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This review is from: SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy (Hardcover)

In classic economic theory, market forces move the global economy toward a balance in the creation and consumption of products and services. In reality, markets rarely settle into a steady equilibrium that neatly matches supply and demand. Arun Motianey sets out a new paradigm to explain this mismatch - and much more. He says serial disequilibrium drives "SuperCycles," decades-long sequences of economic expansions, recessions and recoveries marked by a common pattern of changes in the prices of inputs and outputs. The "Classical SuperCycle," which ended with the Great Depression, lasted almost 60 years. The "Modern SuperCycle," which began in 1979, may die younger, largely because increased borrowing and other "financialization" forces are accelerating its advance. Instead of letting this unfold, regulators should set policies that sustain the Modern SuperCycle. Motianey criticizes classical macroeconomics' poor predictive power and proposes that the SuperCycle may provide a defined structure that could make it easier to foresee the economic future. getAbstract recommends this lucid, if sometimes contrarian, book to readers intrigued by fiscal history and by new ways to understand long-term economic trends.