Customer Reviews

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

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

 

 

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.

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.

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.

Supercycles is a refreshing view of modern economics that draws richly from the author's knowledge of history and experience. Motianey questions the "science" of economics because it generally lacks verification. There are so many variables in most economic models that it is impossible to identify causality with any accuracy. As a result almost any conclusion can be explained using very different theories. Supercycles describes longer trends that suggest that violent moves in the global economy are seeded in longer term fundamental problems rather than a dotcom bubble or a subprime bubble. The bubbles are symptoms of the problem rather than the cause.

I think the book is written in a very readable format that is refreshing in its style and analysis. The book challenges the reader without the boring verbiage of typical economics texts or the fluff I would associate with the pop-economic books that have recently been written. It is thoughtful and well written. It is a unique analysis that explains much of the recent financial turbulence and unfortunately much of the turbulence that is expected to come.

I struggle with real mathematical applications to economic history but this was accessible. Basically, he argues that economic history has been a series of price shocks and explains how they trickle into eachother. The message I was looking for was what that means for investors and he seems to be implying that this could be one awkard patch we are entering now. The book kept me thinking.

I'm halfway through this excellent book. If you've been trying to make sense of global macro phenomena, look no further.

This one book has made about ten books on my bookshelf irrelevant.

It's nice to see authors like Arun out there, especially in the field of finance, where it is hard to distinguish writers and identify their depth.

As for the poster giving him 1 star, they obviously hadn't read the book.

5 Stars

Mr. Motianey's book is intellectually rigorous and easy to read for anyone that has been following the present global crisis.

He introduces the idea of a SuperCycle by which we should look at the world or national economies as a series of production chains or supply chains (pipelines). The SuperCycle moves through the pipeline as misalignments in relative prices occur -- with a series of implications detailed in the book.

Mr. Motianey's perspective deserves attention from policy makers and political leaders in general. The consequences of his analysis are far reaching for all. He concludes with must-read investment portfolio implications using his ample professional experience helping high net worth clients during his tenure at Citigroup.

The bottom line is a clear thumbs up for a great book!

My mother always said say something nice so here goes - the author has a very impressive vocabulary and the cover art is really nice. A better title might really be SuperVocabulary. This book should be a MUST read for government economists as it uses pages and pages of ink and I am not sure anything has yet been said. Truth be told I am not completely finished and I swear I will try and get through it but I am not sure I can. I keep reading and reading and reading for a crumb of something indicating that a supercycle exists and more importantly that I can identify it and use the existence of it in some meaningful way but sadly that is just not the case. Here is a summary of the first 50 pages, a SuperCycle may exist and if it does it points to the fact that going forward we will either have inflation, deflation or something in-between. That's it. This should have been a short article, not a book. Now the book goes to SuperRecycle. Save your $$$$.

I thought this book would be helpful background reading for some academic work I'm doing but unfortunately it's written so badly I was unable to get past page 2. The subject matter could well be interesting but I wasn't prepared to find out. Gave me a headache just trying to read it - worse than A Brief History of Time, and I'm used to reading dry textbooks.

In SuperCycles, Arun Motianey shows a vast understanding of the roots and complexities of our current financial crisis, and places where we are today within a historical context that extends well past recent memory. With this book, one can fully comprehend where we stand now from the perspective of the long term economic cycle, and begin to grasp the enormous economic and investment implications that lie ahead of us.