The World Is Curved: Hidden Dangers to the Global Economy (Hardcover)

~ (Author)
Key Phrases: global market traders, currency ball, subprime exposure, United States, Federal Reserve, Tony Soprano Rides the Chinese Dragon (more...)

Editorial Reviews

From Publishers Weekly

With this illuminating book, Smick revisits Thomas Friedman's description of the "flat" world produced by globalization, arguing instead that the uncertainty produced by globalized financial markets has created a world that is curved, where events and their consequences are unpredictable. Smick begins with a puzzle: why did the subprime mortgage crisis, an event that directly impacted a relatively small piece of the global market, have such a catastrophic impact on the world market as a whole? From there, the author turns to topics as complex and varied as the potential 21st Century Chinese financial bubble and the policy dilemmas currently facing the Fed. Throughout the book, the author returns to the argument that political trends are increasingly at odds with the forces driving the globalized world economy. Smick brings expertise and lucidity to many difficult subjects, and while his book's appeal will likely be limited to those with some background in the field, it will undoubtedly stir interest and debate amongst investors, policymakers and strategists alike.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From School Library Journal

The 2007–08 subprime financial crisis is the jumping-off point for Smick's (Johnson Smick International) examination of current threats to global prosperity. He explains that although the subprime losses are small in the context of world financial markets, a lack of transparency has diminished investor confidence, dried up financial liquidity, and threatened the very foundations of our world financial system. He says that the growth of global financial markets has made it more difficult for central banks like the U.S. Federal Reserve to intercede effectively in times of crisis. Smick compares the subprime crisis to past events like the UK's forced devaluation of the pound in 1992 and Japan's economic stagnation in the 1990s. He warns of pending dangers like an overheating of the Chinese development juggernaut and the present calls for protectionism by U.S. politicians. He favors a global financial system built on transparency and trust. Smick's role for some 30 years as an economic adviser to central bankers and legislators of all stripes gives him a solid perspective on the global financial system. This summing-up of the subprime debacle and other global financial threats, aimed at general readers, is first rate; highly recommended for all public and academic libraries.—Lawrence Maxted, Gannon Univ. Lib., Erie, PA
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

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Product Details

• Hardcover: 320 pages
• Publisher: Portfolio Hardcover; First Edition edition (September 4, 2008)
• Language: English
• ISBN-10: 1591842182
• ISBN-13: 978-1591842187
• Product Dimensions: 8.7 x 6 x 1.3 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 3.5 out of 5 stars  See all reviews (43 customer reviews)
• Amazon.com Sales Rank: #29,595 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

52 of 58 people found the following review helpful:

5.0 out of 5 stars Continues where "Flat" left off (and rebuts it), September 11, 2008

By	Bill Gossett "Bill Gossett" (Chicago) - See all my reviews

Smick uses a fascinating series of facts and stories to paint a picture of the world-to-be that is frightening, enlightening, awe-inspiring and hopeful (for the person that knows how to exploit the opporunities). I haven't read a book that changed my world view this much since How to Measure Anything: Finding the Value of "Intangibles" in Business by Doug Hubbard (which Smick could probably have used on a couple of points in his book).

Smick takes, I think, a more realistic view of the world than Friedman's The World Is Flat 3.0: A Brief History of the Twenty-first Century. Where Friedman optimistically sees a move toward an equalibrium of an "even playing field" between all of the world's economic participants, Smick sees something less even - and not entirely in the favor of the developed West. Smick sees market uncertainties, the mortgage crisis, and consumer debt as evidence of a trend toward increasing uncertainties. China is the new economic giant, but lends itself to much less predictability than the relatively solid advances of the western world in the last quarter century.

I have to wonder if Smick makes the "narrative fallacy" as explained in Taleb's The Black Swan: The Impact of the Highly Improbable or his earlier Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Still, Smick seems to make a convincing case, even if at times anecdotal.

Smick discusses the possibility of a Chinese financial bubble alongside the details of US monetary policy. Utterly unnerving and engaging, it will should eclipse "Flat" as the "must read" for long-term thinkers.

44 of 52 people found the following review helpful:

5.0 out of 5 stars A Blockbuster of a book that everyone should read, September 24, 2008

By	George D. Klein, author, Dissensions - See all my reviews

This extremely well-written book describes the current financial problems of globalization. It is easy to follow, easy to understand, and eliminates jargon. It's a great example of communication out of the Frank Lutz 'words that work' school.

The problems of globalization, as the book described' are critical as a major period of entrepreneurial prosperity may be coming to an end. The availability of `oceans of money' started with a liberalized program in the USA during the early 1980's and later elsewhere with the rejuvenation of pension funds and other financial instruments. Capitalization/reserve requirements of banks were reduced, capital gains taxes were cut and a variety of new investment vehicles freed up large sources of capital. Smaller businesses were funded as the need to invest capital continued to grow and consequently, new wealth, new jobs and prosperity resulted. Moreover, many countries established sovereign funds that needed to be invested too. Rapid machine computation facilitated an explosion of capital transfer and global investment. Because the USA was perceived as the safest haven with the highest level of global transparency, it benefited from these changes. Moreover, the USA with labor market flexibility, higher education, a benign political environment, innovative strategies and quality of corporate management is considered the prime country in which global funds invest. However, the USA is not an island, but is interconnected and therefore subject to global economic events. But is it fading?

The downside was securitization, a process of spreading out investment into multiple income streams to reduce risks. Securitization also involves arcane practices that are difficult for most policy makers, bankers and financial institutions to fully understand. In the process are no longer tied to the risk of the borrower, making capital easier to lend. Even riskier is the overlay of lack of transparency in many countries, including China. Eventually, underpriced and hidden risk will lead to major market corrections, as we have seen recently. Moreover, global forces and lower international trade barriers have diminished the role of government to influence their own economies.

We now see increasing political risk in the USA that may kill the goose that laid the golden egg. The rising tendency of anti-global trade pacts, envy, class warfare, and populism, are placing the US at economic risk. American politicians, according to Smick, have only one option and that is to make the American economy the most attractive destination for global investment on a LONG-TERM basis.

The wild card in all of this is China and I cannot detail the intricacies in Smick's chapter. China's approach includes widespread investment for strategic advantage, and a lack of transparency. Also it is involved in widespread commodity stockpiling. There, foreign investment is controlled. Chinese banking does not understand credit risks and are viewed instead as social and political instruments. In short, their economic system is extremely unstable and a bursting of its bubble will have worldwide cascading consequences

The chapter on Japan's economic activities is well worth reading, as is the chapter on the sterling crisis of 1992.

But perhaps the biggest change during the past 25 years is the diminishing role of central banks. As private entrepreneurs and government sovereign funds accumulate large amounts of cash, the role of central banks has diminished. With diminished governmental roles, people's vulnerabilities are increasing and one of the consequences is political pandering in the form of abetting class warfare,. We see it today. That is the underlying cause of the current backing-off by congressional democrats from free trade. It is a disaster in the making
The closing chapter on "Surviving and prospering in this age of volatility" would require a long review in itself. It is not only worth reading, but needs to be reread to fully comprehend the economic mess we are in today and possible solutions out of that mess.

Other reviewers have suggested both major presidential candidates should read this book. I can only concur. In fact, everyone needs to read this book to navigate the choppy waters ahead.

12 of 12 people found the following review helpful:

3.0 out of 5 stars Some Good Insights; Not Totally Satisfying, February 26, 2009

By	D. Weisberg "kayak angler" (San Jose, CA USA) - See all my reviews (REAL NAME)

I began reading The World is Curved with great hope and anticipation. The book has some good insights, but in the end I felt disappointed. Smick's basic points include:

- Global capital today flows from one investment to another in the blink of an eye, regardless of borders or culture. As a result, central banks have less control over their economies.

- Global capital exceeds the number of good investment opportunities, creating the potential for bubbles (i.e. too much debt has expanded the worlds money supply beyond what's financially healthy).

- The securitization of debt is a primary villain, because the bank that originates the mortgage suffers no consequence if the loan goes bad. (But I worked at Countrywide in the mid-1990s - they were securitizing mortgages back then and there were no problems at that time).

Smick says that the bond rating agencies and the government regulators were simply not up to the task of anticipating the problems. In reality, some Republicans belatedly questioned the lending practices that were occurring pre-meltdown, but the Democrats in power at the time denied there were problems! These same Democrats are still in power today.

Smick expresses concern that the current political trend is toward over-regulation, protectionism and class warfare, all of which will cause the global pie to shrink. And we don't want "financial executives working desperately to avoid civil suits and criminal prosecution."

In my opinion, a good share of the blame must go to Alan Greenspan who kept interest rates too low for too long. Smick does a good job of trying to protect Greenspan from criticism. I agree that Greenspan did a good job for most of his career, and multiple factors contributed to the today's meltdown, but I can't ignore his obvious role in creating this fiasco. But then again, I don't have a book with Alan Greenspan's glowing endorsement on the cover either!

Smick says the solution is to have smarter politicians, like Democrat Charles Schumer. Smick's opinion is based, in part, on Schumer inadvertently insulting a Japanese audience. If this is brilliance, then no wonder the world is in trouble.

Unlike Smick, I WANT the upcoming crop of financial execs to fear "civil suits and criminal prosecution." If the system is too complex for regulators and politicians, then the only thing that will bring prudence to the financial elite is the threat of punishment for screwing up.

Sadly, the financial policies of Bush and Obama are geared toward maintaining the status quo by further borrowing, and by giving money to the very people who got us into this mess. In the end, we'll have more bubbles and greater financial problems. I agree with Smick that too much regulation will kill the golden goose and we need to encourage entrepreneurs, but I walked away feeling that Smick, who is well connected to the world of high finance and politics, is part of the problem, rather than part of the solution.