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Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
 
 
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Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (Hardcover)

~ Kevin Phillips (Author)
Key Phrases: plunge protection team, liquidity factories, financial mercantilism, United States, Wall Street, Federal Reserve (more...)
3.9 out of 5 stars  See all reviews (92 customer reviews)
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Frequently Bought Together

Customers buy this book with The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash by Charles R. Morris

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism + The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
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Editorial Reviews

Review

“A harrowing picture of national danger that no American reader will welcome, but that none should ignore. . . . Frighteningly persuasive.”
—Alan Brinkley, The New York Times

“An indispensable presentation of the case against things as they are.”
—Time

“Sobering . . . positively alarming.”
—Los Angeles Times --This text refers to the Paperback edition.


Product Description

The bestselling author reveals how the U.S. financial sector has hijacked our economy and put America’s global future at risk

In American Theocracy, Kevin Phillips warned us of the perilous interaction of debt, financial recklessness, and the increasing cost of scarce oil. The current housing and mortgage debacle is proof once more of Phillips’s prescience, and only the first harbinger of a national crisis. In Bad Money, Phillips describes the consequences of our misguided economic policies, our mounting debt, our collapsing housing market, our threatened oil, and the end of American domination of world markets. America’s current challenges (and failures) run striking parallels to the decline of previous leading world economic powers—especially the Dutch and British. Global overreach, worn-out politics, excessive debt, and exhausted energy regimes are all chilling signals that the United States is crumbling as the world superpower.

“Bad money” refers to a new phenomenon in wayward megafinance—the emergence of a U.S. economy that is globally dependent and dominated by hubris-driven financial services. Also “bad” are the risk miscalculations and strategic abuses of new multitrillion-dollar products such as asset-backed securities and the lure of buccaneering vehicles like hedge funds. Finally, the U.S. dollar has been turned into bad money as it has weakened and become vulnerable to the world’s other currencies. In all these ways, “bad” finance has failed the American people and pointed U.S. capitalism toward a global crisis. Bad Money is the perfect follow- up to Phillips’s last book, whose dire warnings are now proving frighteningly accurate.
See all Editorial Reviews

Product Details

  • Hardcover: 256 pages
  • Publisher: Viking Adult (April 15, 2008)
  • Language: English
  • ISBN-10: 0670019070
  • ISBN-13: 978-0670019076
  • Product Dimensions: 9.1 x 6.3 x 1 inches
  • Shipping Weight: 15.2 ounces (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (92 customer reviews)
  • Amazon.com Sales Rank: #63,289 in Books (See Bestsellers in Books)

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    #70 in  Books > Nonfiction > Government > Federal Government
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Kevin P. Phillips
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Front Cover | Front Flap | Table of Contents | First Pages | Index | Back Flap | Back Cover | Surprise Me!
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Key Phrases - Statistically Improbable Phrases (SIPs): (learn more)
plunge protection team, liquidity factories, financial mercantilism, leading world economic powers, financial sector debt, sovereign wealth funds, home price index, credit bubble, equivalent rent, peak oil, global oil production, collateralized debt obligations, housing bubble
Key Phrases - Capitalized Phrases (CAPs): (learn more)
United States, Wall Street, Federal Reserve, New York, Saudi Arabia, Middle East, Financial Times, White House, Persian Gulf, Alan Greenspan, World War, Hillary Clinton, Working Group, Goldman Sachs, Dutch Republic, Merrill Lynch, Social Security, United Arab Emirates, Dow Jones Industrial Average, Bureau of Labor Statistics, Latin America, Bill Clinton, Saddam Hussein, Shanghai Cooperation Organization, Treasury Secretary Paulson
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Customer Reviews

92 Reviews
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333 of 337 people found the following review helpful:
5.0 out of 5 stars Financialization and Its Discontents, May 5, 2008
By Izaak VanGaalen (San Francisco, CA USA) - See all my reviews
(TOP 500 REVIEWER)    (REAL NAME)   
For those who have read Kevin Phillips' American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21stCentury, many of the themes in the current work will sound familiar. In this book, as well as American Theocracy, he reminds us that previous empires such a 17th century Spain, 18th century Holland, and the late 19th and early 20th century Britain all succumbed to financialization as their global power reached its peak. He argues the the United States is now in a similar position. In the last 30 years financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%. A reversal of roles that Phillips sees as very unhealthy.

This huge growth of the financial sector was not without adverse consequences: in the last 20 years public and private debt has quadrupeled to $43 trillion. How this came about has been expertly explained in another book called The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash by Charles Morris. There was easy money as the Federal Reserve was lending money at less than the rate of inflation. Money was risk-free for the lender since they collected fees up front and sold the securitized loans to investors. When this process was repeated millions of times, one ends up with hard-to-value securitized debt throughout the global economy. Then when housing prices start to decline and homeowners start to default on their mortgages on a grand scale, you have a global crisis of American capitalism. (Bear Stearns alone was estimated to be holding $46 billion worth of bad money.)

As in American Theocracy, Phillips writes that the oil industry is another component of the current crisis. In the US oil production peaked in the 1970s, on a global level it is peaking right about now. And with the ravenous appetite for oil from newly industrialized countries such as China and India, prices will continue to go up. The US still gets "cheap" oil relative to Europe since oil is priced in dollars, but that advantage may soon disappear. The weakening dollar is forcing OPEC countries to move to Euros and other currencies. And some oil producing countries such as Iran and Venezuela are moving to other currencies for reasons other than economic.

The author began his career as a Republican strategist, but he has long since disavowed them. Having a monetary policy of free money, a fiscal policy of tax cuts and increased spending, and an ideology of unregulated market fundamentalism, the Republicans have lost most of their credibiltiy. This does not mean Phillips has gone over to the Democratic side. He believes that Bill Clinton was instrumental in the financialization of the economy, and that currently Hillary and Obama are beholden to investment bankers and hedge fund managers. What used to be the vital center in Washington is now the "venal center."

The conclusion of this volume is very gloomy. Phillips believes that we are at a pivotal moment in American history when the economy has been hollowed out, we are saddled with trillions of dollars of debt, and our political leaders are dishonest, incompetent, and negligent. Given that all that may currently be the case, it may be instructive to further meditate on the empires of the past. Spain, Holland, and Britain all managed to survive and even thrive, hopefully the US will do the same.
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86 of 90 people found the following review helpful:
5.0 out of 5 stars Grandpa Tells the Awful Truth, April 19, 2008
By leftyrite (Providence, R.I.) - See all my reviews
Kevin Phillips dedicates his latest insightful work of political and economic history to his grandson. It's a fitting tribute since, by the author's reckoning, the aforementioned young man might be well into his forties, and the U.S. deeply into its post-imperial senescence, by the time the mischief explained in the pages of Bad Money is fully digested by the earth's economic system.

Instead of reflecting upon and compensating for the turn to an unprecedented expansion of finance capitalism that today supersedes manufacturing in this nation by at least six percent of GDP, Wall Street, our empire's "coliseum," chose instead to gamble upon the promulgation of an unregulated class of investments known as derivatives, the size and scope of which, particularly in terms of their capacity to hedge against risk, could only be guessed at. So much for the efficacy of market deregulation.

In a similar context, it was sadly hilarious to hear former Treasury Secretary Robert Rubin state recently that no one could have guessed the present debacle. Or, to recall that Hillary Clinton had proposed a blue ribbon committee, presumably to be chaired or co-chaired by Allan Greenspan, to address the situation.

Warren Buffett has been on record for denouncing derivatives as "weapons of financial mass destruction" since at least 2003. Even so, to paraphrase Pete Seeger, "the big fool(s)" at Citibank and Bear Stearns, "said to push on." Privatize the profits and socialize the losses.

At present, these so-called derivative financial "instruments" are embedded deeply in every sphere of global economic activity, from domestic pension funds to the portfolios of credulous investors throughout the world who believed in the transparency of the U.S. market system. Their ramifications add up to a disaster, aided and abetted at every modern-day turn by America's government, under both Democratic and Republican leadership.

Through his incisive and perceptive use of charts and tables,and,in his exceptionally clear narrative, Phillips makes the case that our government lies to itself as well as us. Now, we are fifty trillion dollars in debt. Go figure. Better yet, read and be ironically comforted by the truths contained in this quietly patriotic book.
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123 of 133 people found the following review helpful:
5.0 out of 5 stars Insightful, but Incomplete and Rapidly Becoming Dated!, April 22, 2008
"Bad Money" is about the insecurity of America's future given a debt-gorged financial sector, and vulnerability caused by expensive dependence on imported oil. The term refers not just to the depreciated dollar but also dangerous attitudes and flawed financial products.

Phillips points out that over the last 30 years, financial services have nearly doubled to a record 20% of GDP (and an even greater share of corporate profits - 54% in '04), while manufacturing's share has halved to 13% (10% of profits), greatly imperiling the economy. En route, Washington has provided government bailouts and/or liquidity when financial institutions or methodologies got themselves into trouble (eg. S&L crisis; Citibank forced into technical failure, but allowed to stay open; bailing out junk bond investors by lowering federal funds rate; etc.), encouraging bigger problems down the road.

The positive impact of borrowing has declined about 60-70% from the 1970s-80s when such monies would mostly be used for factory and highway construction, compared to today's increasingly likely use for increasing leverage for LBOs, M&A, and hedge funds. Meanwhile, the negative likelihood of families experiencing a 50% drop in income has increased dramatically from 1970 - resulting in a greater probability of default.

Cognizance of our problems has been somewhat covered up with revisions to the CPI (understating costs of home ownership) and unemployment measures (not counting those who gave up and quit looking). Thus, the 2-4%/year CPI increase 2005-2007 would have been 5-7%/year, and unemployment would have been 8%.

Early millennium results include the housing sector (including its "ATM effect") providing 40% of the nation's growth in GDP and employment (an unsustainable rate achieved through financial gamesmanship that set the stage for the current financial and construction crash), while imported petroleum outlays rose from $100 billion in '02 to $302 in '06.

Observing from a distance, OPEC has reduced its foreign-currency reserves held in dollars from 75% to 62.5%, and Iraq and Venezuela began selling oil in euros and yen (admittedly for political purposes, at least at first). Meanwhile, the U.S. has antagonized major oil producers (Iran, Russia, Venezuela), and effectively dismantled Iraq - raising the risk of nations being unwilling or unable to supply the U.S. as supplies grow tighter.

Declining oil supplies, rising demand, global warming, our recession, and global loss of confidence in American financial markets are all converging and demand strong political leadership. Phillips, however, is not optimistic that this will emerge based on strong financial sector support for the Democratic Party and political failures in other nations needing dramatic change.

Phillips makes numerous comparisons between the U.S. today and the Great Depression (Eg. Total indebtedness was three times the size of GDP in 2007, higher than the prior record set in the years of the Great Depression), as well as the declines of Rome, Holland, Spain, and Great Britain. Regardless, no predictions are made about how long or deep our current downturn will be (though his writing hints the more severe possibilities), and he gives little or no attention to the steady amassing of dollars in Asia and associated growing unemployment of Americans. Finally, readers must also keep in mind that throughout the book he refers to $70 oil - obviously outdated vs. today's nearly $120.

Interesting Side Issue: Phillips states that food represents about 14% of the U.S. CPI, vs. 33% and 46% for China and India, respectively. Doesn't auger well for biofuels continuing to take 28% of the U.S. corn crop.
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Most Recent Customer Reviews

3.0 out of 5 stars On target
Kevin Phillips has made some brilliant predictions in his long career and and like all prognosticators,some bad ones. Read more
Published 2 months ago by Douglas J. Wolf

5.0 out of 5 stars Informative
It was very informative. The author was non partisan and objective, not placing blame on just one group or party.
Published 2 months ago by Francis E. Carr

3.0 out of 5 stars Interesting But .....
I have now read the author , Kevin Phillips' books : Wealth and Democracy, American Dynasty :
The Bush Family, Bad Money, and finally, The Politics of Rich and Poor... Read more
Published 2 months ago by libertarian reader

4.0 out of 5 stars Gresham's law- "Bad money drives out good"
An excellent read to understand the transition of the US econony and migration to financial services. Read more
Published 2 months ago by Anthony F. Paul

5.0 out of 5 stars Brilliant study of capitalism's economic, political and moral failure
In this brilliant book, Kevin Phillips, a long-time student of the USA, exposes Wall Street's greed, criminality and stupidity. Read more
Published 2 months ago by William Podmore

2.0 out of 5 stars Not for the average layperson!
I picked up this book with the hopes of learning a little more about the roots of today's economic crisis. Read more
Published 2 months ago by Sam Willis

3.0 out of 5 stars Not for the financial neophyte
I bought this book as a concerned American wanting to understand what has brought us into this financial & economic quagmire. Read more
Published 3 months ago by Charles Nemenzo

5.0 out of 5 stars Spot On. Phillips was right.
On a lark I picked this book up in the Las Vegas airport last summer and during the flight I couldn't believe what I was reading. Read more
Published 4 months ago by J. COTTRELL

5.0 out of 5 stars Better than most big-picture books out there.
This quote from page 195 pretty much sums up what you will find in this book; "In the United States, political correctness, religious fundamentalism, and other inhibitions... Read more
Published 5 months ago by Warren R. Grayson

5.0 out of 5 stars The decline of the US Empire
The author shows that the actual debt bubble can only be compared to the huge debt bubble of 1933, just before FDR devalued the US dollar with 40 %. Read more
Published 5 months ago by Guy Denutte

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