Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Clear and interesting, 21 Nov 2008
This book is one of the better things I have read about the financial crisis. It's a nicely-written and clearly argued case against the efficent markets hypothesis (EMH) and the argument that left to their own financial markets will tend towards equilibrium. In fact a large part of the author's motivation for writing the book seems to be to drive a stake through the heart of the efficent markets hypothesis, which he sees as fundamentally wrong (no argument here!).

As such the book is broadly pro-Keynes, and very pro-Minsky. It takes as a given Minsky's view that markets are inherently unstable and will inevitably swing between boom and bust, and that the busts can be very bad indeed if no action is taken. The suggestion is that Minksy's financial instability hypothesis should replace the EMH as our bedrock understanding of how financial markets work.

Notably this leads him query what central banks are trying to do. He is particularly scathing of Fed, which he suggests tries to combine a belief in the EMH with intervention, when logically they should preclude each other. He argues central banks should refocus their attention on credit expansion and asset price bubbles, rather than consumer price inflation. Notably he therefore believes that bubbles both exist (this might seem obvious, but it's actually an important point) and that central banks can do something about them, though in practice it's credit creation that he thinks should be monitored.

That's the headline argument, but there are lots of nicely structured points building up to it along the way. There's a great section on why even 'fundamental' company analysis on its own can fail to spot the distorting effects of bubbles.

Anyway, definely worth a read, and given that it's both very clearly-written and one of these double-spaced books you can get through it in no time.

COOPER HAS WRITTEN A READABLE MASTERPIECE, 07 Oct 2008
I completely agree with the positive recommendations of The Economist Magazine and the reviewer. George Cooper combines a strong technical and practical investment background to produce a modern study of the best management of our complex economy. I feel Cooper opens this subject up to every thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understandings of the material and deep sympathy for the reader motivate his use of these everyday examples to eliminate the need for mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I would like to recommend Cooper's clear, cogent presentation to every investor and student who is curious about how to improve our economy.


A perceptive book, 05 Oct 2008
This book asserts that whilst efficient market theory does fit trade in goods and services generally, the evidence does not support its fitting assets such as land, and shares. It argues that as a result of what the author sees as a state of denial by most economists, economic policy targets inflation or aims to maintain continuous economic growth. The author suggests, with arguments that are said to be based on the thoughts of Keynes and Minsky and seem compelling to a non-economist, that central banks should rather target asset/land price inflation.

The author is a control engineer and a financial analyst, and his arguments resonate with this reviewer who is also an engineer by origin. What would be interesting is to have reasoned comments from an open minded professonal economist.

That said the book is a good read and for the curious a very different analysis of the financial turmoil of 2008.

Excellent insight into the conditions that created the current financial crisis, 30 Sep 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.

For nearly 200 years, the famed Rothschild banking family has weathered political revolutions, world wars and international financial crises. The House of Rothschild chronicles the family's rise and fall, and now its rise again, and describes the reasons for its lasting power. "Part of the secret of long-run success in banking is, of course, not to go bust; the Rothschilds' relative risk aversion is one reason for their financial longevity," writes author Niall Ferguson, who was surprised to discover during his research that the family had a return on capital as low as an average 3.9 percent from 1900-1909.

This book, the second of two volumes, is an authorised history. While members of the family read the manuscript, Ferguson said they did not censor his work. Ferguson details the Rothschilds' creation of the international bond market in the 1800s, through offices that stretched from London to Naples, and their eventual eclipse by American bankers like J. P. Morgan. He also explores the family's relationship to others in the Jewish community, the Rothschilds' climb up the social ranks and their role as adviser to kings and politicians during times of war and peace. The House of Rothschild is primarily an academic work with its footnotes, bibliography and quotations from Rothschild correspondence. The book is perhaps of most interest to fans of European political and economic history. But in the epilogue, where he describes the current resurgence of the House of Rothschild, Ferguson draws lessons about international finance that should interest those in the field today. --Dan Ring, Amazon.com

Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Clear and interesting, 21 Nov 2008
This book is one of the better things I have read about the financial crisis. It's a nicely-written and clearly argued case against the efficent markets hypothesis (EMH) and the argument that left to their own financial markets will tend towards equilibrium. In fact a large part of the author's motivation for writing the book seems to be to drive a stake through the heart of the efficent markets hypothesis, which he sees as fundamentally wrong (no argument here!).

As such the book is broadly pro-Keynes, and very pro-Minsky. It takes as a given Minsky's view that markets are inherently unstable and will inevitably swing between boom and bust, and that the busts can be very bad indeed if no action is taken. The suggestion is that Minksy's financial instability hypothesis should replace the EMH as our bedrock understanding of how financial markets work.

Notably this leads him query what central banks are trying to do. He is particularly scathing of Fed, which he suggests tries to combine a belief in the EMH with intervention, when logically they should preclude each other. He argues central banks should refocus their attention on credit expansion and asset price bubbles, rather than consumer price inflation. Notably he therefore believes that bubbles both exist (this might seem obvious, but it's actually an important point) and that central banks can do something about them, though in practice it's credit creation that he thinks should be monitored.

That's the headline argument, but there are lots of nicely structured points building up to it along the way. There's a great section on why even 'fundamental' company analysis on its own can fail to spot the distorting effects of bubbles.

Anyway, definely worth a read, and given that it's both very clearly-written and one of these double-spaced books you can get through it in no time.

COOPER HAS WRITTEN A READABLE MASTERPIECE, 07 Oct 2008
I completely agree with the positive recommendations of The Economist Magazine and the reviewer. George Cooper combines a strong technical and practical investment background to produce a modern study of the best management of our complex economy. I feel Cooper opens this subject up to every thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understandings of the material and deep sympathy for the reader motivate his use of these everyday examples to eliminate the need for mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I would like to recommend Cooper's clear, cogent presentation to every investor and student who is curious about how to improve our economy.


A perceptive book, 05 Oct 2008
This book asserts that whilst efficient market theory does fit trade in goods and services generally, the evidence does not support its fitting assets such as land, and shares. It argues that as a result of what the author sees as a state of denial by most economists, economic policy targets inflation or aims to maintain continuous economic growth. The author suggests, with arguments that are said to be based on the thoughts of Keynes and Minsky and seem compelling to a non-economist, that central banks should rather target asset/land price inflation.

The author is a control engineer and a financial analyst, and his arguments resonate with this reviewer who is also an engineer by origin. What would be interesting is to have reasoned comments from an open minded professonal economist.

That said the book is a good read and for the curious a very different analysis of the financial turmoil of 2008.

Excellent insight into the conditions that created the current financial crisis, 30 Sep 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.

err... bought the wrong book., 03 Sep 2008
err my fault as I bought the wrong book when I wanted the first volume. I expected to look at the personalities behind the House of Rothschild but you rarely get that and instead I found it to be boring trawling through the numerous financial trades they made at the time. Not really interested in the financial history but characters. Wrong expectation I guess.

Best account of Rothschild history, 31 Oct 2007
Niall Ferguson has written the best account thus far of one of the world's preeminent banking families in history.
Most interesting and rewarding was the author's extensive coverage of the money making process as it developed from the beginnings.
A very major achievement.

Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Clear and interesting, 21 Nov 2008
This book is one of the better things I have read about the financial crisis. It's a nicely-written and clearly argued case against the efficent markets hypothesis (EMH) and the argument that left to their own financial markets will tend towards equilibrium. In fact a large part of the author's motivation for writing the book seems to be to drive a stake through the heart of the efficent markets hypothesis, which he sees as fundamentally wrong (no argument here!).

As such the book is broadly pro-Keynes, and very pro-Minsky. It takes as a given Minsky's view that markets are inherently unstable and will inevitably swing between boom and bust, and that the busts can be very bad indeed if no action is taken. The suggestion is that Minksy's financial instability hypothesis should replace the EMH as our bedrock understanding of how financial markets work.

Notably this leads him query what central banks are trying to do. He is particularly scathing of Fed, which he suggests tries to combine a belief in the EMH with intervention, when logically they should preclude each other. He argues central banks should refocus their attention on credit expansion and asset price bubbles, rather than consumer price inflation. Notably he therefore believes that bubbles both exist (this might seem obvious, but it's actually an important point) and that central banks can do something about them, though in practice it's credit creation that he thinks should be monitored.

That's the headline argument, but there are lots of nicely structured points building up to it along the way. There's a great section on why even 'fundamental' company analysis on its own can fail to spot the distorting effects of bubbles.

Anyway, definely worth a read, and given that it's both very clearly-written and one of these double-spaced books you can get through it in no time.

COOPER HAS WRITTEN A READABLE MASTERPIECE, 07 Oct 2008
I completely agree with the positive recommendations of The Economist Magazine and the reviewer. George Cooper combines a strong technical and practical investment background to produce a modern study of the best management of our complex economy. I feel Cooper opens this subject up to every thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understandings of the material and deep sympathy for the reader motivate his use of these everyday examples to eliminate the need for mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I would like to recommend Cooper's clear, cogent presentation to every investor and student who is curious about how to improve our economy.


A perceptive book, 05 Oct 2008
This book asserts that whilst efficient market theory does fit trade in goods and services generally, the evidence does not support its fitting assets such as land, and shares. It argues that as a result of what the author sees as a state of denial by most economists, economic policy targets inflation or aims to maintain continuous economic growth. The author suggests, with arguments that are said to be based on the thoughts of Keynes and Minsky and seem compelling to a non-economist, that central banks should rather target asset/land price inflation.

The author is a control engineer and a financial analyst, and his arguments resonate with this reviewer who is also an engineer by origin. What would be interesting is to have reasoned comments from an open minded professonal economist.

That said the book is a good read and for the curious a very different analysis of the financial turmoil of 2008.

Excellent insight into the conditions that created the current financial crisis, 30 Sep 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.

err... bought the wrong book., 03 Sep 2008
err my fault as I bought the wrong book when I wanted the first volume. I expected to look at the personalities behind the House of Rothschild but you rarely get that and instead I found it to be boring trawling through the numerous financial trades they made at the time. Not really interested in the financial history but characters. Wrong expectation I guess.

Best account of Rothschild history, 31 Oct 2007
Niall Ferguson has written the best account thus far of one of the world's preeminent banking families in history.
Most interesting and rewarding was the author's extensive coverage of the money making process as it developed from the beginnings.
A very major achievement.

Very useful account of the crisis, 13 Nov 2008
Alex Brummer, the Daily Mail's City Editor, has produced a valuable account of the origins of the crisis. He shows how finance capitalists played pass the parcel with bundles of bad debts - a form of mutually assured destruction.

The financial firms' overriding drive for personal gain meant that they advised those least able to pay to take out mortgages at the highest interest rates. As Brummer notes, "The more that was borrowed, the less equity or hard-earned cash was needed for a deal, so the greater the returns."

The banks then sold on debts that they knew to be rotten or overvalued. There is no chance that the value of these debts will rise, so banks will have to increase the level of write downs. They are guilty of fraud on a grand scale.

Northern Rock's `Together' mortgage allowed customers to borrow 125% of their home's value plus up to six times their annual income. The Rock borrowed three-quarters of its money from other banks. Its directors paid themselves £30 million in 2002-07.

In July 2007, the Financial Services Authority approved the Rock's paying a special dividend of £59 million to shareholders, just when the company was imploding. The FSA, the Bank of England and the government all failed in their duties of supervision.

On 17 February the government nationalised the Rock, privatising the gains and nationalising its losses. Goldman Sachs lawyers and PR people got £41 million in fees. The Rock's new CEO will get £950K a year. He and his new financial officer are `non-doms', tax evaders, while 2,000 workers get the sack.

The Office of National Statistics estimates that the Rock debacle has cost taxpayers £100 billion. Another £30 billion of the Rock's loans fall due in 2009, with a very heavy repayment schedule over the coming year, so there will be many more repossessions - and already, under government control, the Rock is repossessing homes twice as fast as other banks.

Globalisation means that a banking crisis cannot be contained in any one market. But the more a country relies on finance, the worse it suffers. As Brummer writes, "The rundown in Britain's manufacturing base in favour of an economy building on the nation's skills in financial services, made it peculiarly sensitive to global financial events such as the credit crunch." The parasite finance will destroy the real economy of jobs and production, if we let it.



Excoriating but readable, 01 Oct 2008
An often excoriating take on the current plight of the financial services industry, which takes the Northern Rock fiasco as a starting point for an examination of the wider picture.

There is definitely a right-wing slant to what is said, but this book is valuable for its readability and in particular its refusal to lose itself in financial jargon; instead, it makes complicated matters clear to the layman.

Missing Pages, 30 Aug 2008
Beware!

I bought this book at a local book store. When I got it home I found the first 20 pages were missing! I took it back and it was exchanged with no problems and we found a second copy with the same problem.

A Layman`s guide to the credit crunch, 16 Jul 2008
If ever anyone wanted to know what the `credit crunch` was all about then look no further than this offering from `The Daily Mail`s`chief economic journalist- alex brummer.
The book explains how, why and who were the main protagonists in this unfolding financial drama.
From the background of Northern Rock`s woes to the exploits of jerome kerviel at societe general, all points are candidly covered in brummer`s typical style of writing.
There is even a glossary of financial jargon, which detail the often mysterious terms used by the professionls, expained in every-day english.
Well worth the money!



Rock Cruncher, 16 Jul 2008
Feeling the pinch of the credit crunch? So were Northern Rock, and foolishly, they chose to deal with it by hoarding funds, with disastrous repercussions. Alex Brummer's thorough and engagingly written account blows the whistle on the scandal of the troubled British bank.

This is the book Northern Rock didn't want you to read and Brummer's tight, journalistic style makes this an expose you can't afford to miss.

It began with a simple $27 loan. After witnessing the cycle of poverty that kept many poor women enslaved to high-interest loan sharks in Bangladesh, Dr. Muhammad Yunus lent money to 42 women so they could purchase bamboo to make and sell stools. In a short time, the women were able to repay the loans while continuing to support themselves and their families. With that initial eye-opening success, the seeds of the Grameen Bank, and the concept of microcredit, were planted.

After earning a Ph.D. in economics at Vanderbilt University, Dr. Yunus returned to Bangladesh to settle into a life as a professor. But a famine in 1974 ravaged the country, leading Dr. Yunus to alter his thinking and his life profoundly: "What good were all my complex theories when people were dying of starvation on the sidewalks and porches across from my lecture hall?.... Nothing in the economic theories I taught reflected the life around me." Armed with little more than a lofty dream to end the suffering around him, he started an experimental microcredit enterprise in 1977; by 1983 the Grameen Bank was officially formed.

The idea behind the Grameen Bank is ingeniously simple: extend credit to poor people and they will help themselves. This concept strikes at the root of poverty by specifically targeting the poorest of the poor, providing small loans (usually less than $300) to those unable to obtain credit from traditional banks. At Grameen, loans are administered to groups of five people, with only two receiving their money up front. As soon as these two make a few regular payments, loans are gradually extended to the rest of the group. In this way, the program builds a sense of community as well as individual self-reliance. Most of the Grameen Bank's loans are to women, and since its inception, there has been an astonishing loan repayment rate of over 98 percent.

Banker to the Poor is an inspiring memoir of the birth of microcredit, written in a conversational tone that makes it both moving and enjoyable to read. The Grameen Bank is now a $2.5 billion banking enterprise in Bangladesh, while the microcredit model has spread to over 50 countries worldwide, from the U.S. to Papua New Guinea, Norway to Nepal. Ever optimistic, Yunus travels the globe spreading the belief that poverty can be eliminated: "...the poor, once economically empowered, are the most determined fighters in the battle to solve the population problem; end illiteracy; and live healthier, better lives. When policy makers finally realize that the poor are their partners, rather than bystanders or enemies, we will progress much faster that we do today." Dr. Yunus's efforts prove that hope is a global currency. --Shawn Carkonen

Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Clear and interesting, 21 Nov 2008
This book is one of the better things I have read about the financial crisis. It's a nicely-written and clearly argued case against the efficent markets hypothesis (EMH) and the argument that left to their own financial markets will tend towards equilibrium. In fact a large part of the author's motivation for writing the book seems to be to drive a stake through the heart of the efficent markets hypothesis, which he sees as fundamentally wrong (no argument here!).

As such the book is broadly pro-Keynes, and very pro-Minsky. It takes as a given Minsky's view that markets are inherently unstable and will inevitably swing between boom and bust, and that the busts can be very bad indeed if no action is taken. The suggestion is that Minksy's financial instability hypothesis should replace the EMH as our bedrock understanding of how financial markets work.

Notably this leads him query what central banks are trying to do. He is particularly scathing of Fed, which he suggests tries to combine a belief in the EMH with intervention, when logically they should preclude each other. He argues central banks should refocus their attention on credit expansion and asset price bubbles, rather than consumer price inflation. Notably he therefore believes that bubbles both exist (this might seem obvious, but it's actually an important point) and that central banks can do something about them, though in practice it's credit creation that he thinks should be monitored.

That's the headline argument, but there are lots of nicely structured points building up to it along the way. There's a great section on why even 'fundamental' company analysis on its own can fail to spot the distorting effects of bubbles.

Anyway, definely worth a read, and given that it's both very clearly-written and one of these double-spaced books you can get through it in no time.

COOPER HAS WRITTEN A READABLE MASTERPIECE, 07 Oct 2008
I completely agree with the positive recommendations of The Economist Magazine and the reviewer. George Cooper combines a strong technical and practical investment background to produce a modern study of the best management of our complex economy. I feel Cooper opens this subject up to every thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understandings of the material and deep sympathy for the reader motivate his use of these everyday examples to eliminate the need for mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I would like to recommend Cooper's clear, cogent presentation to every investor and student who is curious about how to improve our economy.


A perceptive book, 05 Oct 2008
This book asserts that whilst efficient market theory does fit trade in goods and services generally, the evidence does not support its fitting assets such as land, and shares. It argues that as a result of what the author sees as a state of denial by most economists, economic policy targets inflation or aims to maintain continuous economic growth. The author suggests, with arguments that are said to be based on the thoughts of Keynes and Minsky and seem compelling to a non-economist, that central banks should rather target asset/land price inflation.

The author is a control engineer and a financial analyst, and his arguments resonate with this reviewer who is also an engineer by origin. What would be interesting is to have reasoned comments from an open minded professonal economist.

That said the book is a good read and for the curious a very different analysis of the financial turmoil of 2008.

Excellent insight into the conditions that created the current financial crisis, 30 Sep 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.

err... bought the wrong book., 03 Sep 2008
err my fault as I bought the wrong book when I wanted the first volume. I expected to look at the personalities behind the House of Rothschild but you rarely get that and instead I found it to be boring trawling through the numerous financial trades they made at the time. Not really interested in the financial history but characters. Wrong expectation I guess.

Best account of Rothschild history, 31 Oct 2007
Niall Ferguson has written the best account thus far of one of the world's preeminent banking families in history.
Most interesting and rewarding was the author's extensive coverage of the money making process as it developed from the beginnings.
A very major achievement.

Very useful account of the crisis, 13 Nov 2008
Alex Brummer, the Daily Mail's City Editor, has produced a valuable account of the origins of the crisis. He shows how finance capitalists played pass the parcel with bundles of bad debts - a form of mutually assured destruction.

The financial firms' overriding drive for personal gain meant that they advised those least able to pay to take out mortgages at the highest interest rates. As Brummer notes, "The more that was borrowed, the less equity or hard-earned cash was needed for a deal, so the greater the returns."

The banks then sold on debts that they knew to be rotten or overvalued. There is no chance that the value of these debts will rise, so banks will have to increase the level of write downs. They are guilty of fraud on a grand scale.

Northern Rock's `Together' mortgage allowed customers to borrow 125% of their home's value plus up to six times their annual income. The Rock borrowed three-quarters of its money from other banks. Its directors paid themselves £30 million in 2002-07.

In July 2007, the Financial Services Authority approved the Rock's paying a special dividend of £59 million to shareholders, just when the company was imploding. The FSA, the Bank of England and the government all failed in their duties of supervision.

On 17 February the government nationalised the Rock, privatising the gains and nationalising its losses. Goldman Sachs lawyers and PR people got £41 million in fees. The Rock's new CEO will get £950K a year. He and his new financial officer are `non-doms', tax evaders, while 2,000 workers get the sack.

The Office of National Statistics estimates that the Rock debacle has cost taxpayers £100 billion. Another £30 billion of the Rock's loans fall due in 2009, with a very heavy repayment schedule over the coming year, so there will be many more repossessions - and already, under government control, the Rock is repossessing homes twice as fast as other banks.

Globalisation means that a banking crisis cannot be contained in any one market. But the more a country relies on finance, the worse it suffers. As Brummer writes, "The rundown in Britain's manufacturing base in favour of an economy building on the nation's skills in financial services, made it peculiarly sensitive to global financial events such as the credit crunch." The parasite finance will destroy the real economy of jobs and production, if we let it.



Excoriating but readable, 01 Oct 2008
An often excoriating take on the current plight of the financial services industry, which takes the Northern Rock fiasco as a starting point for an examination of the wider picture.

There is definitely a right-wing slant to what is said, but this book is valuable for its readability and in particular its refusal to lose itself in financial jargon; instead, it makes complicated matters clear to the layman.

Missing Pages, 30 Aug 2008
Beware!

I bought this book at a local book store. When I got it home I found the first 20 pages were missing! I took it back and it was exchanged with no problems and we found a second copy with the same problem.

A Layman`s guide to the credit crunch, 16 Jul 2008
If ever anyone wanted to know what the `credit crunch` was all about then look no further than this offering from `The Daily Mail`s`chief economic journalist- alex brummer.
The book explains how, why and who were the main protagonists in this unfolding financial drama.
From the background of Northern Rock`s woes to the exploits of jerome kerviel at societe general, all points are candidly covered in brummer`s typical style of writing.
There is even a glossary of financial jargon, which detail the often mysterious terms used by the professionls, expained in every-day english.
Well worth the money!



Rock Cruncher, 16 Jul 2008
Feeling the pinch of the credit crunch? So were Northern Rock, and foolishly, they chose to deal with it by hoarding funds, with disastrous repercussions. Alex Brummer's thorough and engagingly written account blows the whistle on the scandal of the troubled British bank.

This is the book Northern Rock didn't want you to read and Brummer's tight, journalistic style makes this an expose you can't afford to miss.


Yunus The Man - Yunus The Myth Buster, 10 Nov 2008

This is a fascinating book about a fascinating man. Read though if you want to understand about what made this man great not whether micro loans really are the best way to assist the poor in mainly third world countries. We all know that it is usually what's not in an autobiography that is really worth knowing not what has been included. This book contains no mention of the critics of micro loans or any of its disadvantages. It gives the reader the view that micro loans are the answer to eradicating world poverty. It may be an important part of the answer but it clearly doesn't stand alone in the fight today to make sure everyone enjoys at least a reasonable standard of living.
Yunus exposed the banking myth that only loans to the rich backed by collateral are both secure and likely to return a profit. Starting with just £17 he began lending money to the poor in Bangladesh with a repayment rate of around 99%. Acknowledged now as a major contribution to the fight against poverty Yunus's thesis is that hand outs to the poor patronise, disincentivise and are as much about allowing donors to feel they are doing their little bit to help fight poverty as they are about addressing the core problem of what keeps people poor. Micro loans, he advocates, spark initiative and encourage the very type of enterprise that will lift people out of poverty for good.
Yunus is speaking in December this year at a Leadership conference in London. Anyone interested in leadership will take a lot from this book. He's clearly :
- A Rule breaker - like many great leaders he wasn't scared to break rules. He tells the story of how he and his brother when young decided to educate themselves by getting their hands on as much reading material as possible. When Yunus saw the names of prize winners published in a magazine he wrote in pretending to be one of them. He explained he had just moved house and asked that the prize of a year's free subscription be re-directed to the address given. It worked. Yunus also admits to having taken money from his father."The embezzlement never amounted to much, but it was enough to build up a fund to meet my modest requirements" he writes.
- Highly Motivated - initially it seems by anger. On seeing the poverty on his doorstep in Bangladesh which, the grand economic theories he was teaching at universities appeared unable to fix, his rage steadily began to build.
- Rebellious - Yunus describes how he agreed on paper to stand as a guarantor to loans issued by a bank only to tell the manager once completed that he had no intention of standing over any defaults "He looked at me as if I were crazy, but I wanted that, I wanted to cause some panic in this crazy unjust system. I wanted to be the stick in the wheels that stopped the infernal machine"
- Doggedly Persistent - Yunus's determination is remarkable and a lesson to all. His constant challenging of what he believed to be wrong combined with his own self belief in where he had to go is very compelling.

It becomes clear early on in this book that greatness was almost inevitable for Yunus. His sense of self belief and destiny is almost Churchillian in tone. Like Churchill, success came only after tremendously hard work, dogged determination and huge personal sacrifice.


Inspiring, but reality is not that simple, 12 Jul 2007
This is the book that made me want to know more about microfinance, I found it very inspiring and Dr Yunus became my personal hero.
I then learned more about microfinance, talked to senior microfinance experts, and even though microfinance is indeed a powerfull tool to fight poverty, it is not the panacea it sometimes claims to be.

Microfinance can have a negative impact on social fabric, increasing tensions inside communities, it can also be used by governments of developping countries as a way to privatise social welfare, typically after massive lay-offs from the private sector(why spend public money on unemployment benefits, minimum wage, let's bring microfinance instead to help the poor..).
I don't mean to sound cynical or disillusioned, my point is just that overselling microfinance and creating unrealistic expectations doesn't help microfinance, better know from the beginning that it's good but far from the perfect and ultimate solution to end world poverty.

And btw, Dr Yunus didn't invent microfinance, it existed 100 years ago already.

Illuminating saga of Nobel-winning microcredit hero, 21 Feb 2007
In 1974, while Muhammad Yunus was teaching economics in Bangladesh, the country was ravaged by famine. Increasingly uncomfortable teaching abstract theories while starving people shuffled by outside his classroom, Yunus realized his economic education was incomplete. To complete it, he went to local villages to "learn from the poor" about what they actually needed rather than what a textbook said they should have. The answer was credit, so Yunus founded a bank to provide it - Grameen Bank. The name means the "bank of the village." Today, Yunus is a Nobel Peace Price winner and Grameen Bank has extended credit to more than 2.6 million people. This down-to-earth, unsentimental autobiography recounts what inspired him, the obstacles he overcame and the ultimate success of this project, his life's work. We highly recommend it to anyone who wants to know how one person's efforts can have a huge impact.


more stars, please - around 20?, 07 Oct 2003
What can you say about a man who has changed the world for over 2 million people? Not single-handedly, because his bank had 12,000 employees when he wrote this book, and there are other banks now, that follow the same model - but he was the one who started it all.

If you've ever noticed that your bank only wants to give you money if you don't need it - here's how the other kind of bank would look.

He's an egalitarian Muslim, and he does his best thinking with the T.V. on. I've been waiting a long time for a super-hero with respect for the idiot box.

This is a really hopeful book. It doesn't have all the answers, but it has a bunch of fascinating questions to take down the pub with you. Read it, lend it, review it - stick a bookcrossing label in it and give it to your bank manager. Swap it for a Big Issue, mail it to your MP. What are you waiting for?

More stars, please - around 20?, 28 Sep 2003
What can you say about a man who has changed the world for over 2 million people? Not single-handedly, because his bank had 12,000 employees when he wrote this book, and there are other banks now, that follow the same model - but he was the one who started it all.

If you've ever noticed that your bank only wants to give you money if you don't need it - here's how the other kind of bank would look.

He's an egalitarian Muslim, and he does his best thinking with the T.V. on. I've been waiting a long time for a super-hero with respect for the idiot box.

This is a really hopeful book. It doesn't have all the answers, but it has a bunch of fascinating questions to take down the pub with you. Read it, lend it, review it - stick a bookcrossing label in it and give it to your bank manager. Swap it for a Big Issue, mail it to your MP. What are you waiting for?

When Nick Leeson was arrested in 1995 for bringing Barings Bank to its proverbial knees, it initially seemed as if he had single handedly crushed this most well-established and well-respected financial institution, and indeed it was he alone who found himself in a Singapore jail serving time for deceiving the auditors of Barings in a way "likely to cause harm to their reputation" and to cheating SIMEX (Singapore International Money Exchange). In Rogue Trader Leeson tells his own story with more than a hint of the bitterness--and, at times, suspended belief--of an ordinary Joe from Watford made scapegoat by a cast of characters who may not have been guilty by design, but certainly appear to be guilty of simply not adhering to the basic procedures which would have picked up any discrepancies long before any real damage was done. Hard to feel sorry for such wheeler- dealers, perhaps, and certainly hard to feel sorry for Leeson, but he manages to successfully tell an incredible story which moves at breakneck speed from his appointment as General Manager for Barings in Singapore to his fast and furious downfall, which began as a simple cover-up of a mistake by an inexperienced member of staff and ended in multi-million pound fraud, with earth-shattering repercussions across the financial markets of the world. Anyone who ever wondered how one man could do so much damage will find the explanation between the pages of Rogue Trader, but more than that they will also find a hugely compelling, tense and decidedly hair- raising story that defies imagination to the point where, if it had been written as fiction no one would ever believe it. --Susan Harrison

Financial Democracy, 08 Nov 2008
For Prof. R.J. Shiller, the root of the subprime mortgage crisis in the US is a myth, the belief that real estate prices must strongly trend upward for demographic reasons.
He proves that the price of real estate, to the contrary, is trending lower. What went up are the quality and the dimension of the average individual houses. But what about `land'? Didn't Mark Twain recommend strongly: `Go for land. They've stopped producing it.'? R.J. Shiller remarks cleverly that only 2,6 % of US land is used for urbanization.
Another factor of the bubble was psychological: the human herd instinct. There was a social contagion of boom thinking.
A third, more specific, factor was the deliberate governmental policy to promote home-ownership as much as possible. This should be good for the Party.

When the real estate bubble burst, it disrupted immediately the credit markets. Aggressive mortgage lenders never worried about repayment risks. They repackaged the mortgages, got top ratings from the rating agencies and sold their packages to third parties all over the world.
But even more importantly, the crisis damaged the `social fabric', the way of life of millions of families and also human relationships (through aggressive creditors). It created an atmosphere of distrust, of hoarding, with runs on banks; in one word, it gave rise to a psychological environment that could lead to a severe and long depression, which would hurt every citizen. Therefore, the subprime crisis must be solved.

Prof. R.J. Shiller makes a distinction between the short term and the long term solution.
In the short term, there should be a massive bail-out in order to prevent an escalation of the crisis and of the economic downturn.
In the long term, the US government should create a basic social contract and protect every citizen against major misfortune. It should impose financial democracy through standardized full disclosure documents so that everybody should get better information about all the risks involved. Without affecting individual privacy, indicators should be created about the real value of real estate. Those should lead to a more efficient pricing of houses and to a stabilization of the market. Prof. R.J. Shiller did not only recommend these policies, but created an indicator himself.

With an open and clear-sighted mind, Prof. Shiller wrote a small, but essential, book about a dramatic worldwide crisis, without losing the `human touch'. It is an essential read for all those interested in the future of mankind.


Thoughtful, straightforward diagnosis and prescription, 18 Sep 2008
Robert Shiller, the prescient author of the book Irrational Exuberance, offers an insightful examination of the causes of the subprime mortgage crisis, and suggests a list of potential measures for the future. He lays the blame for the subprime crisis on the same oblivious fiscal attitudes that led to the technology bubble of the 1990s and the real estate bubble of the 2000s. Both bubbles involved excessive lending and resulted in severe losses for capital providers. His prescription for dealing with the crisis involves a range of policy measures. In the short term, he calls for bailouts for low-income borrowers who got drawn into subprime scams that they did not understand. For the long term, he proposes a new framework for financial institutions, more transparent information, simpler contracts, improved risk-management markets, equity insurance and home loans linked to income, among other measures. Both his diagnosis and his prescription will be controversial, no doubt, but getAbstract thinks his book is a necessary text for anyone who wants to understand what's happened, and how to survive it and learn from it.

Short and radical, 30 Aug 2008
Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This short book (the previous reviewer is right to say it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some challenging ideas for how we might stop this kind of crisis arising again.

an essential handbook for bubble spotters, 05 Aug 2008
Shiller's is a concise attempt to elaborate in just seven chapters the genesis of the housing bubble (a psychological carry-over from the dotcom bubble), explode its myths ("prices always go up"), explore its scale and the dangers of its deepening impact (it's bad), assert the need to maintain confidence in our economic and financial institutions by aggressive action (comparing the US and European responses to the Great Depression), and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.

Shiller says his inspiration was John Maynard Keynes 'The Economic Consequences of the Peace', which I take to mean that getting the subprime solution wrong could have devastating consequences.

At less than 200 pages of wide-margined type, lightly annotated and with no bibliography, there is something of the emergency pamphlet about this book. And Shiller is advocating a much speedier and more deep-rooted response to the crisis, which, as of a few weeks ago, he felt was still not being taken seriously enough.

There are many recommendations, but if the scale of the problem is as suggested, I'd argue that it's a book that everyone who lives in a house (and who is of reading age) should own; just don't buy ten and try to rent them out.

The Knackered Hack

Clear and interesting, 21 Nov 2008
This book is one of the better things I have read about the financial crisis. It's a nicely-written and clearly argued case against the efficent markets hypothesis (EMH) and the argument that left to their own financial markets will tend towards equilibrium. In fact a large part of the author's motivation for writing the book seems to be to drive a stake through the heart of the efficent markets hypothesis, which he sees as fundamentally wrong (no argument here!).

As such the book is broadly pro-Keynes, and very pro-Minsky. It takes as a given Minsky's view that markets are inherently unstable and will inevitably swing between boom and bust, and that the busts can be very bad indeed if no action is taken. The suggestion is that Minksy's financial instability hypothesis should replace the EMH as our bedrock understanding of how financial markets work.

Notably this leads him query what central banks are trying to do. He is particularly scathing of Fed, which he suggests tries to combine a belief in the EMH with intervention, when logically they should preclude each other. He argues central banks should refocus their attention on credit expansion and asset price bubbles, rather than consumer price inflation. Notably he therefore believes that bubbles both exist (this might seem obvious, but it's actually an important point) and that central banks can do something about them, though in practice it's credit creation that he thinks should be monitored.

That's the headline argument, but there are lots of nicely structured points building up to it along the way. There's a great section on why even 'fundamental' company analysis on its own can fail to spot the distorting effects of bubbles.

Anyway, definely worth a read, and given that it's both very clearly-written and one of these double-spaced books you can get through it in no time.

COOPER HAS WRITTEN A READABLE MASTERPIECE, 07 Oct 2008
I completely agree with the positive recommendations of The Economist Magazine and the reviewer. George Cooper combines a strong technical and practical investment background to produce a modern study of the best management of our complex economy. I feel Cooper opens this subject up to every thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understandings of the material and deep sympathy for the reader motivate his use of these everyday examples to eliminate the need for mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I would like to recommend Cooper's clear, cogent presentation to every investor and student who is curious about how to improve our economy.


A perceptive book, 05 Oct 2008
This book asserts that whilst efficient market theory does fit trade in goods and services generally, the evidence does not support its fitting assets such as land, and shares. It argues that as a result of what the author sees as a state of denial by most economists, economic policy targets inflation or aims to maintain continuous economic growth. The author suggests, with arguments that are said to be based on the thoughts of Keynes and Minsky and seem compelling to a non-economist, that central banks should rather target asset/land price inflation.

The author is a control engineer and a financial analyst, and his arguments resonate with this reviewer who is also an engineer by origin. What would be interesting is to have reasoned comments from an open minded professonal economist.

That said the book is a good read and for the curious a very different analysis of the financial turmoil of 2008.

Excellent insight into the conditions that created the current financial crisis, 30 Sep 2008
172 page analysis of the origin of the current financial crisis. Author argues that the widely accepted Efficient Markets theory has dominated economic thinking of the management of the economy/financial markets. Alas, the facts do not support this theory. Crisis appear far more frequently that theory suggests. In fact, he argues that financial systems are prone to the formation of boom-bust cycles. As an example, rising property prices give lenders a false sense of security in increasing lending money, which in turn increases property prices, which in turn "justifies" lending the money and so on. He discusses the role of central banks and their failure to address the problems of excessive credit creation. Current solutions to the crisis include allowing markets to sort out the problem themselves (the Great Depression route);encourage yet another huge debt-fuelled spending spree; or let inflation rip thereby debasing the outstanding stock of debt. The author argues for a more regular "hand on the tiller" approach, preventing excesses from appearing in the economy. Highly recommended.

err... bought the wrong book., 03 Sep 2008
err my fault as I bought the wrong book when I wanted the first volume. I expected to look at the personalities behind the House of Rothschild but you rarely get that and instead I found it to be boring trawling through the numerous financial trades they made at the time. Not really interested in the financial history but characters. Wrong expectation I guess.

Best account of Rothschild history, 31 Oct 2007
Niall Ferguson has written the best account thus far of one of the world's preeminent banking families in history.
Most interesting and rewarding was the author's extensive coverage of the money making process as it developed from the beginnings.
A very major achievement.

Very useful account of the crisis, 13 Nov 2008
Alex Brummer, the Daily Mail's City Editor, has produced a valuable account of the origins of the crisis. He shows how finance capitalists played pass the parcel with bundles of bad debts - a form of mutually assured destruction.

The financial firms' overriding drive for personal gain meant that they advised those least able to pay to take out mortgages at the highest interest rates. As Brummer notes, "The more that was borrowed, the less equity or hard-earned cash was needed for a deal, so the greater the returns."

The banks then sold on debts that they knew to be rotten or overvalued. There is no chance that the value of these debts will rise, so banks will have to increase the level of write downs. They are guilty of fraud on a grand scale.

Northern Rock's `Together' mortgage allowed customers to borrow 125% of their home's value plus up to six times their annual income. The Rock borrowed three-quarters of its money from other banks. Its directors paid themselves £30 million in 2002-07.

In July 2007, the Financial Services Authority approved the Rock's paying