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Alchemists of Loss: How modern finance and government intervention crashed the financial system Hardcover – May 3, 2010

4.0 out of 5 stars 7 customer reviews

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Editorial Reviews

Review

written with elegance and wit: it sweeps the reader along a tremendously stimulating read, and strong fuel for the reform debate. (Financial World, July/August 2010). ...[an] entertaining new book... (Financial Times, August 2010). a fascinating, troubling read. (City AM, December 2010). '...Long term horizons, coupled with clear analysis in the book , provide a clear understanding and historical perspective into financial crises (Central Banking, November, 2011)

From the Inside Flap

“Many books have purported to examine the causes of the financial crash of 2008, but they really just provide commentary on the mistakes that were made. Authors have often concluded that we just need to make sure that governments stop markets making the same mistakes again – an approach that is doomed to failure. This book gets to the root causes of the crash [and]more government is not the solution.”

Philip Booth, Professor of Insurance and Risk Management, Cass Business School and Institute of Economic Affairs

“This book is must reading for anyone who wants to understand the true origins of the financial crisis and the reforms needed to create financial harmony.”

James A. Dorn, Cato Institute, Washington DC; editor of The Future of Money in the Information Age

“Unlike many financial prospectuses that preceded the Panic of 2008 and most of the discourse that has followed, Alchemists of Lossis not filled with contradictory statements, double-talk and non sequiturs. Dowd and Hutchinson present a clear, comprehensive and compelling diagnosis in which all of the culprits are hung out to dry. The authors then lay out a detailed blueprint for replacing what they finger as crony capitalism with Free-Market Capitalism.”

Steve H. Hanke, Johns Hopkins University, Baltimore, USA

“What if the 2007–2008 financial crisis was but the last by-product of the ‘Keynesian episode’? Alchemists of Lossdraws lessons from the economic crises of the past, to envisage a way out of the current financial mess. This book is a must read for anyone who cares for the future of the world economy.”

Alberto Mingardi, Director General,
Istituto Bruno Leoni, Milan

“Bracing, sharp, bleakly amusing and profoundly depressing, Alchemists of Lossis a fascinating, smart, often contrarian analysis of how the financial system got into the mess into which it now finds itself – and why none of us are likely to emerge in one piece.”

Andrew Stuttaford, Contributing editor, National Review Online

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Product Details

  • Hardcover: 432 pages
  • Publisher: Wiley; 1 edition (May 3, 2010)
  • Language: English
  • ISBN-10: 0470689153
  • ISBN-13: 978-0470689158
  • Product Dimensions: 6.3 x 1.4 x 9.4 inches
  • Shipping Weight: 1.6 pounds
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (7 customer reviews)
  • Amazon Best Sellers Rank: #417,745 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover
I wanted to like this book. And I did in many ways. But not enough to give it a higher rating. I appreciated the detailed discussion of "Modern Finance". I appreciated the discussions of the various transgressions of financial institutions without blaming "the free market". The discussion of managerial capitalism was fascinating. Nuggets such as the impact of the estate tax on corporate structure were also illuminating. There is also an interesting and fresh discussion on how Greenspan's policies evolving over his term.

I did find some chapters were so dense with mathematical analysis that I mostly skimmed them. (To the authors' credit, they acknowledge such at the beginning of chapter 15 by suggesting that it could be optional for some readers.)

The broad recommendations of stricter monetary controls, reduction in the scope of deposit insurance, and restrictions on future bailouts of financial institutions seemed quite sound. The overall tone that our financial systems would be better served with less government actions and less regulation was also compelling to me (acknowledging my own confirmation bias.)

I did find chapter 16 to be a little muddy. The authors suggest various reforms of corporate governance while seemingly ignoring how these reforms might be implemented without additional government interventions. To my eyes, the authors fell into the trap that all we need is better regulations of financial institutions and corporations without acknowledging the incentives that governments and legislatures have when crafting such regulations.

For US readers, keep in mind that the book is mostly written from a UK perspective. Not completely, for sure, but enough that I was forced to pause regularly to make sure I understood what was being presented.
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Format: Hardcover
Well, I think this one might just be one of the best books recreating the tragic events that led to the disaster of 2007-2008. Their analysis about "modern finance", involving portfolio theory, VAR theory, and all new derivative markets and managerial shift in finances is short from spectacular.

I loved it, but I must agree is not too easy to digest, even though the authors show they are doing their best.

I recommend it to anyone with (at least) basic knowledge in finances and who's interested in finding out what really went wrong in the latest crisis.
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Format: Hardcover Verified Purchase
The comparison with the amateur economists who nearly brought the entire US into bankruptcy is quite appropriate. The author describes what went wrong and why it went wrong. He also tells how to prevent it from happening again, although this is probably going to be called "politically impossible."
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Format: Hardcover
The authors provide a comprehensive catalogue of the failures of government involvement in capital markets over the last century but their proposed cures are largely impractical and misguided.

The authors argue for returning to the good old days when investment banking was a gentlemen's of partnerships who ran their firms without worrying about stockholders or government regulators. They also want to do away with deposit insurance and return to the gold standard.

Several of their ideas make more sense and would be easier to implement. Transparency in financial accounting, elimination preferential tax treatment for capital gains, and a tax on financial transactions would be steps in the right direction.
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