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The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril Hardcover – February 9, 2016
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“Loved it! Written with passion and insight, and laden with facts, the book provides a clear explanation of the economic, social, and political issues that lie ahead, and the difficulty in solving them. Essential reading for the investor who wants to be informed and ahead of the curve.”
—Jon Markman, Forbes columnist and president and publisher of Markman Capital Insight
“Growth or, rather, the lack of it is a key issue of our times. The Age of Stagnation provides a penetrating analysis of how a combination of the aftereffects of the Great Recession and deep-seated structural factors now cast a long shadow over the future. Highly accessible and written with wit and style, this provocative and important book deserves to be widely read.”
—Nouriel Roubini, professor, New York University’s Stern School of Business, and chairman, Roubini Global Economics
“The Age of Stagnation is an elegant and informative discussion of the economic and social factors that have led us to the ‘new normal’—a state of low growth, soaring debt, and rising political tensions. Even if you disagree with the author’s dystopian vision of the future of the global economy, this important book challenges the false narrative in the media and in political circles regarding the causes of the Global Financial Crisis of 2008.”
—Christopher Whalen, head of research, Kroll Bond Rating Agency, and author of Inflated: How Money and Debt Built the American Dream
“In The Age of Stagnation, Satyajit Das exposes in masterful clarity the extent to which the global economy careens toward catastrophe while its leaders exude a mix of denial and impotence. The current environment of zero-cost money, concentrated bank power, and anemic productive growth has coalesced not by accident or economic cycle but by willful choice. Developed countries are laden with more than 100 percent debt-to-GDP ratios and inadequate savings levels, while developing countries are being crushed by greater debt, currency wars, internal and external inequality, and unfettered speculative finance. Das warns, with passion and illuminating evidence, that without significant change, the only possible future holds dire consequences for all but an elite few. His tone is as urgent as the problem. All central bankers, politicians, and citizens should heed his words.”
—Nomi Prins, author of All the Presidents’ Bankers
“Satyajit Das was among the first to foresee the 2008 market crash, and he has been one of the sharpest analysts of the current confusions of the European project. Now, in The Age of Stagnation, he focuses on the diminishing prospects of the global economy. His writing is always vivid and clear, but he delivers a hard message that deserves a wide audience.”
—Charles R. Morris, author, The Trillion Dollar Meltdown
About the Author
Satyajit Das is an internationally respected expert in finance, with over 35 years’ experience. In 2014, Bloomberg nominated him as one of the fifty most influential financial thinkers in the world. He has worked for CitiGroup, Merrill Lynch, and the TNT Group and acted as a consultant advising banks, investors, corporations, and central banks throughout the world. He is the author of Extreme Money: The Masters of the Universe and the Cult of Risk and Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives. Featured in Charles Ferguson’s 2010 Oscar Award-winning documentary Inside Job and the 2012 PBS Frontline series Money, Power & Wall Street, Das contributes to the Financial Times and the Wall Street Journal’s Marketwatch among other publications.
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Top customer reviews
"We must stop borrowing!" Good idea. However, borrowing has been part of the baseline for 30+ years. It's way past the "no movies out for a year" sort of solution. Hospitals getting their electricity cut off (Puerto Rico) or pension plans declaring insolvency(everywhere) is a more apt comparison. You know, the sort of things that tear society apart. Which brings me to...
"Hard decisions must be made!" Such as who lives and who dies? I'm so sorry, but I won't accept that glib statement anymore. The more I think about it the more cowardly the statement seems. If you are going to advocate for something spell it out.
"Return to common sense and honest ways!" Yup, I loved this one. But what era fits the bill? Certainly not any time past 1980. the 70's saw post WW2 momentum drag into the ground. World War 3? We all know that would be a final solution in the most unpleasant way imaginable.
It's important to remember that perpetual growth was popularized as way of getting everyone in the world up to a certain living standard. It never made sense but for a while it worked. It hung on because there was nothing better to take its place. Taking a general vow of poverty is not an acceptable answer. All the parasites that took advantage before will come back for seconds and innovation will plunge. What I'm looking for is a plan that keeps the electric grid up, the water system lead free and a reasonable level of heat and eats for the general population while we reinvent ourselves. Something like "Zero Sum Can be Fun!"
Now let's return to our continual game of "kick the can".
Collective, the PIIGS (Portugal, Ireland, Italy, Greece, Spain) had about $4 trillion in debt - acerbated by low productivity, high unemployment, and in Greece's case - large deficits, a large government sector, generous welfare systems - especially for public servants, successive poor governments, and rampant corruption.
The postwar expansion collapsed under the weight of high debt levels, excessive financialization, and a build-up of future entitlements that had not been properly provided for. In 2009, the IMF estimated the total losses at about $12 trillion, about 20% of world annual GDP. Households borrowed because real wage levels, especially in the U.S., had not kept pace with living costs. They borrowed more to buy houses, which kept rising in value. Corporations substituted debt for equity, to buy back their own shares. Governments borrowed to build essential infrastructure and to provide additional services (more palatable than increasing taxes).
The world is entering a period of stagnation, the new mediocre. For individuals, this translates into destruction of hopes and dreams. Since the early 1980s, economic activity and growth have been increasingly driven by financialization - replacement of industrial activity with financial trading, and increased levels of borrowing to finance consumption and investment. By 2007, $5 of new debt was needed to create and additional $1 of U.S. economic activity - a 5X increase from the 1950s. Since the 2008 Great Recession, the world shows little sign of shaking its addiction to borrowing - but ever-increasing amounts of debt now act as a brake on growth. These financial problems are compounded by lower population growth and aging populations, slower increases in productivity and innovation, looming shortages of critical resources such as water, food, and energy, and man-made climate change and extreme weather. Rising inequality has also impeded economic activity.
The initial official response to the Great Recession was to believe that increased government spending, money supply, and inflation, along with lower interest rates would create growth and reduce the level of debt. While financial markets are at or above per-crisis prices in countries that have 'recovered,' conditions in the real economy have not returned to normal. New 'must-have' electronic gadgets cannot obscure the fact that living standards for most are stagnant, job insecurity has risen, and wages are static or falling.
American families in the middle 20% of the income scale now earn less and have a lower net worth than before the Great Recession. The experience of Germany, U.K., Australia, and New Zealand is similar. The Greek economy has shrunk by 25% and youth unemployment is over 50%. Banks considered dangerously large after the events of 2008, have increased in size and market power since then - the six largest U.S. banks now control nearly 70% of all assets in the U.S. financial system. Politicians refuse to accept that popular demand for public services is irreconcilable with lower taxes; further they have succumbed to populist demands for faux certainty and placebo policies. The priority is to maintain the appearance of normality, to engender confidence.
Since Lehman Brothers departed, there have been more than 600 rate cuts world-wide, and central banks injected over $12 trillion under TQ programs into money markets. These policies, according to policy makers, have been crucial to the 'recovery.' Up to December 2016, the Fed had not had a rate increase for 112 months - the prior longest period being 49 months between May 2000 and June 2004. Pension funds are in trouble with rising levels of unfunded liabilities. Debt levels are rising from unsustainable to even more unsustainable and created bubbles in shares, property, and other investments. We have had the biggest monetary stimulus the world as ever seen and still not solved the problem of weak demand after seven years.
Only 15 - 20% of borrowed money since the late 1980s went into productive investment, while the remainder financed takeovers of existing companies or real estate, or personal lending to finance 'life-cycle' consumption smoothing. Low or negative interest rates do nothing to encourage borrowers to repay debt.
Das contends that living standards will decline in real terms, working lives will lengthen and retirement will revert to being a luxury for many, citizens will have to save more and consume less, and financial institutions need to return to their role of supporting economic activity, rather than facilitating/engaging in speculation.
Das sees the Great Recession and its causes as a 'crisis that went to waste' - policymakers have dismissed the real risks of further trouble.
I strongly recommend this book and this author.
If you thought you understood the financial markets, this man will awaken you.