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