Top critical review
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Awesome market calls, great prose, suspect argumentation
on August 5, 2013
Two confessions first:
1. I've owned the old book since 2006, I looked at it briefly and there was no way I was paying good money to get an extra 50 pages, so the review is actually based on The Empire of Debt. Regardless, I'm rather confident my insights are relevant, for reasons that will hopefully become apparent.
2. I totally loved reading it. I could not put it down. I even went back to re-read some passages, often going on to re-read entire pages or chapters.
Now, for the review proper.
The executive summary is that the authors made a truly amazing set of market calls when this was published in 2005: Sell stocks, sell housing, buy gold. Indeed, "buy gold" are the last two words of the book. At the same time, they based these market calls on a series of hunches and prejudices that it is very difficult for a sensible, educated man to agree with. And the thesis of the book, that the US is an empire in reverse, is preposterous.
But it is so unbelievably funny to read, you kind of wish they were right.
I come from a country that was twice saved by America. Once from the Nazis and soon after that from communism. My parents are to this day unbelievably grateful for this. They paid for me to go study in America, in the process returning a small part of the favor by sending hundreds of thousands of dollars to fund solid American jobs of the kind the authors like, albeit at an institution they probably despise. I can't square this with the authors' vitriol against American intervention in Europe. As a human being, Wilson may have been as bad as they make him sound, possibly FDR too. But the debt these presidents issued to fund these wars is probably a footnote compared to the benefits, pecuniary and otherwise. Would not know where to start with the math, but that's my hunch and I don't feel any more obliged to defend it than the authors do theirs.
Also, from my time spent in America the impression I gathered was of a people that is prepared to make material concessions if there is a principle at stake. Sometimes it can by misguided or beside the point (I don't much care for guns myself, and where I was brought up history says they had no compunctions about tossing malformed babies off a cliff, let alone worry about unborn foetuses) but it's just how it is. So I remain to be convinced George W Bush was an imperialist. Especially as we all know he's an imbecile with strong principles. That'll do it every time.
Equally, the authors treat all debt as one thing. While it can't be denied that there's a level of debt that's too high, it can no more be denied that a bit of debt does grease the wheels of an economy. The authors get unbelievably annoyed and aggrieved about an issue that may have been evident to them because of their market experience or because of their personal prejudices, but who is to know? Also, they do not mention anywhere that the big bucks were in the fees charged for all the lending, not so much in the house appreciation itself. It could be (we'll never find out) that if all the lending had been priced right the party could have carried on for a long time. And maybe not, of course. But people who have studied what happened with the Lloyd's insurance market some twenty years ago have come precisely to that conclusion. It wasn't hurricane Andrew that killed the Lloyds "names," it was the layers upon layers of fees. So it could one day transpire that the US economy can indeed support amounts of debt the authors find disastrous, if we bother to keep record of who lent what to whom, if we give prime loans to people who can afford them rather than trick them into subprime, if we suppress valuation fraud, if we don't take a slice of juice after every repackaging and so on. Maybe one day it will.
Anyway, little point in trying to refute every idea in the book, especially since I'm saying I loved reading it.
So, for example, there's a six page section where they tear into Thomas Friedman who writes for the NYT. God, do I wish I'd written that myself. And how unbelievably brave to publish this book in 2005. And what fantastic prose.
So where I'm left with this book is that first and foremost it entertained me, but it also exposed me to a series of arguments on which I could develop my own, less strident, views and counterviews. Pretty much what I'd expect from a good book.
But it's so one-sided and absolutist and, frankly, insular in the arguments it makes, that you can hardly say it's great book.