Past Due
the insightful book
The End of Easy Money and the Renewal of the American Economy
The delightful motif that enlivens Peter S. Goodman’s otherwise sobering new book on economic delusion suggests that we’ve been living in Neverland. The fairy dust of easy money - heedless borrowing by homeowners and investment bankers alike - has lost its magic, and now we have returned to harsh reality. If Greenspan is Peter, then his band of Lost Boys who live with him in Neverland would include the current Fed chairman, Ben Bernanke, and the chief White House economic adviser, Lawrence Summers. Unless our Lost Boys imitate their literary counterparts and return to the gravity-bound world, we could face further rounds of economic disaster.
Summers opposed the regulation of credit derivatives during his years in the Clinton administration, helping to open the door to the reckless trading and lending that brought Wall Street to its knees. Bernanke and Summers remain in positions of tremendous influence, and they have failed, so far, to articulate specifically just how wrong Greenspan was, and how they intend to reshape the worlds of banking and financial regulation.
The Obama administration’s initiative to stiffen the spine of the Securities and Exchange Commission and curb derivatives speculation is apparently losing momentum. Goodman’s book reminds us that this situation contains the seeds of future fiascoes. Drawing on his experience covering the technology industry as well as broader economic trends, Goodman performs a tremendous service by showing how the context of market manias changes but the essential content remains the same.
The tech boom of the late 1990s gained dangerous momentum when financial seers reassured investors that traditional rules - companies ought to make profits derived from real demand for their goods and services - no longer applied. Crash! Wall Street, for its part, defiantly insists that derivatives trading should remain beyond the reach of the financial police. We desperately need the Lost Boys to wake up and deal with the truth. You could have the book, here.
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