Another take on the world of finance

Following the book at reference 1, noticed at reference 2, I have now worked my way through reference 3. And while Shaxson was a journalist who wanted to have go at the evils of the financial and legal services industries, Tooze is a historian of modern Europe who started out at Cambridge and is now at Columbia. And a far better writer, even if he does put my memory systems under some strain – despite the glossary at the back, I had to resort to building my own small glossary to try to keep track of all the names and acronyms. Perhaps books like this should have fold out glossaries in the way that better histories used to have fold out maps that you could consult without losing one’s place in the text.

Even so, the years are telling, and I got to the end having trouble remembering much about the beginning, despite taking notes. So this is posted for how it looks now. We shall see if I manage to read the book again, in which case readers will see how it looks then.

Something like 600 pages of text in my hardback edition, organised into 4 parts and 25 chapters, as snapped above.

We do not get a biography of the book itself, a timeline, which would have been interesting to me in itself, but the acknowledgments do tell us that the book started life as undergraduate courses in Yale & Columbia and that it was honed in numerous conferences, discussions, seminars and workshops. We get a passing mention of one Wynne Godley, the subject of a passing mention of my own at reference 4. It also closes with the curious statement that it is all thanks to an unnamed psycho-analyst. A trade which I had thought near extinct, even in New York City, where the author now lives.

The big lesson is how politics, economics and finance are all twined together, even in places like the US, where they pretend that they are not. Helped along by the steady stream of people moving cosily around the upper reaches of corporations, governments and financial institutions.

Then, that while the capitalist project crashed in 2008, the shocks are still rumbling around the world, ten years later. With one of those shocks being the discrediting of the professional politicians, financiers & bankers generally and the rise of the populists; authoritarian, vulgar and otherwise.

Then, that for this ten years, the whole system was, in effect, bankrolled by the US Federal Reserve. The US economy might not be as dominant as it once was, but the US dollar still is. US Treasury bonds remain the safe haven for hot money – including here warm money from China.

We are told that Juncker of the European Commission once said that once the going gets rough, one has to start lying. Shock, horror. Except that this seems to be very true in the world of high finance: when things are getting bad, the job of central authorities is to calm things down, not to get all the skeletons out of the cupboard. We are also told that while Cameron might have had a difficult hand to play, given everything else that was going on, he still made an awful hash of Europe – with getting into a public lather about the appointment of Juncker, objectionable though he may have been, being just one feature of that hash. And anyway, who was the Tory boy from the country of tax havens to look down on Juncker for building his own one in Luxembourg?

Global finance might have been saved, for the moment at least, but a huge amount of damage has been done to the economies of both the US and Europe, not to mention places further afield. The real incomes of most people has been stagnant for decades, while the very rich continue to thrive and to get their tax breaks – which means that the backlash is coming. A page from the Shaxson playbook. Except that the far right managed to somehow capture the story, throw in some immigrants and generally make it all the fault of big government rather than big business. Which has lumbered the US with Trump and the UK with Johnson.

The book closes on a rather pessimistic note. The Republican Party is no longer fit to govern in the US, which Trump appears to be withdrawing from its role as reserve bank of last resort. The Conservative Party is no longer fit to govern in the UK and the Labour Party is scarcely in better shape. The European project remains in a mess and many of the members have political problems of their own. Russia is flailing about, not helped by sanctions and uncertain oil prices. Saudi Arabia plays its own game, whatever that is. China, despite being an authoritarian, nominally communist country has become part of the global finance system, and despite its strengths is now, like the rest of us, vulnerable to storms on that front. Lastly, the trade surpluses run by Germany and China are not a good thing and ought to be unwound. Ditto, public finance deficits. Fundamentals do matter, oddly enough, they are fundamental.

Despite its considerable length, a pleasure to read, despite struggling with all the acronyms, names and technicalities. Hopefully I will read it all again, sometime soon.

PS: with thanks to Amazon for the snap of the contents page.

References

Reference 1: The Finance Curse: How global finance is making us all poorer – Nicholas Shaxson - 2018.

Reference 2: https://psmv4.blogspot.com/2019/01/city-boys-episode-2.html. A post about another book (reference 2) covering some of the same ground.

Reference 3: Crashed: how a decade of financial crises changed the world – Adam Tooze – 2018.

Reference 4: https://adamtooze.com/. The website which goes with the book.

Reference 5: http://psmv2.blogspot.com/2014/05/osbert.html.