Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism Reviews

• Financialization and Its Discontents

  
  By A3H86VWLHHG96C on 2008-05-06
  For those who have read Kevin Phillips' American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21stCentury, many of the themes in the current work will sound familiar. In this book, as well as American Theocracy, he reminds us that previous empires such a 17th century Spain, 18th century Holland, and the late 19th and early 20th century Britain all succumbed to financialization as their global power reached its peak. He argues the the United States is now in a similar position. In the last 30 years financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%. A reversal of roles that Phillips sees as very unhealthy.
  
  This huge growth of the financial sector was not without adverse consequences: in the last 20 years public and private debt has quadrupeled to $43 trillion. How this came about has been expertly explained in another book called The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash by Charles Morris. There was easy money as the Federal Reserve was lending money at less than the rate of inflation. Money was risk-free for the lender since they collected fees up front and sold the securitized loans to investors. When this process was repeated millions of times, one ends up with hard-to-value securitized debt throughout the global economy. Then when housing prices start to decline and homeowners start to default on their mortgages on a grand scale, you have a global crisis of American capitalism. (Bear Stearns alone was estimated to be holding $46 billion worth of bad money.)
  
  As in American Theocracy, Phillips writes that the oil industry is another component of the current crisis. In the US oil production peaked in the 1970s, on a global level it is peaking right about now. And with the ravenous appetite for oil from newly industrialized countries such as China and India, prices will continue to go up. The US still gets "cheap" oil relative to Europe since oil is priced in dollars, but that advantage may soon disappear. The weakening dollar is forcing OPEC countries to move to Euros and other currencies. And some oil producing countries such as Iran and Venezuela are moving to other currencies for reasons other than economic.
  
  The author began his career as a Republican strategist, but he has long since disavowed them. Having a monetary policy of free money, a fiscal policy of tax cuts and increased spending, and an ideology of unregulated market fundamentalism, the Republicans have lost most of their credibiltiy. This does not mean Phillips has gone over to the Democratic side. He believes that Bill Clinton was instrumental in the financialization of the economy, and that currently Hillary and Obama are beholden to investment bankers and hedge fund managers. What used to be the vital center in Washington is now the "venal center."
  
  The conclusion of this volume is very gloomy. Phillips believes that we are at a pivotal moment in American history when the economy has been hollowed out, we are saddled with trillions of dollars of debt, and our political leaders are dishonest, incompetent, and negligent. Given that all that may currently be the case, it may be instructive to further meditate on the empires of the past. Spain, Holland, and Britain all managed to survive and even thrive, hopefully the US will do the same.
  
  

• Insightful, but Incomplete and Rapidly Becoming Dated!

  
  By A22RY8N8CNDF3A on 2008-04-22
  "Bad Money" is about the insecurity of America's future given a debt-gorged financial sector, and vulnerability caused by expensive dependence on imported oil. The term refers not just to the depreciated dollar but also dangerous attitudes and flawed financial products.
  
  Phillips points out that over the last 30 years, financial services have nearly doubled to a record 20% of GDP (and an even greater share of corporate profits - 54% in '04), while manufacturing's share has halved to 13% (10% of profits), greatly imperiling the economy. En route, Washington has provided government bailouts and/or liquidity when financial institutions or methodologies got themselves into trouble (eg. S&L crisis; Citibank forced into technical failure, but allowed to stay open; bailing out junk bond investors by lowering federal funds rate; etc.), encouraging bigger problems down the road.
  
  The positive impact of borrowing has declined about 60-70% from the 1970s-80s when such monies would mostly be used for factory and highway construction, compared to today's increasingly likely use for increasing leverage for LBOs, M&A, and hedge funds. Meanwhile, the negative likelihood of families experiencing a 50% drop in income has increased dramatically from 1970 - resulting in a greater probability of default.
  
  Cognizance of our problems has been somewhat covered up with revisions to the CPI (understating costs of home ownership) and unemployment measures (not counting those who gave up and quit looking). Thus, the 2-4%/year CPI increase 2005-2007 would have been 5-7%/year, and unemployment would have been 8%.
  
  Early millennium results include the housing sector (including its "ATM effect") providing 40% of the nation's growth in GDP and employment (an unsustainable rate achieved through financial gamesmanship that set the stage for the current financial and construction crash), while imported petroleum outlays rose from $100 billion in '02 to $302 in '06.
  
  Observing from a distance, OPEC has reduced its foreign-currency reserves held in dollars from 75% to 62.5%, and Iraq and Venezuela began selling oil in euros and yen (admittedly for political purposes, at least at first). Meanwhile, the U.S. has antagonized major oil producers (Iran, Russia, Venezuela), and effectively dismantled Iraq - raising the risk of nations being unwilling or unable to supply the U.S. as supplies grow tighter.
  
  Declining oil supplies, rising demand, global warming, our recession, and global loss of confidence in American financial markets are all converging and demand strong political leadership. Phillips, however, is not optimistic that this will emerge based on strong financial sector support for the Democratic Party and political failures in other nations needing dramatic change.
  
  Phillips makes numerous comparisons between the U.S. today and the Great Depression (Eg. Total indebtedness was three times the size of GDP in 2007, higher than the prior record set in the years of the Great Depression), as well as the declines of Rome, Holland, Spain, and Great Britain. Regardless, no predictions are made about how long or deep our current downturn will be (though his writing hints the more severe possibilities), and he gives little or no attention to the steady amassing of dollars in Asia and associated growing unemployment of Americans. Finally, readers must also keep in mind that throughout the book he refers to $70 oil - obviously outdated vs. today's nearly $120.
  
  Interesting Side Issue: Phillips states that food represents about 14% of the U.S. CPI, vs. 33% and 46% for China and India, respectively. Doesn't auger well for biofuels continuing to take 28% of the U.S. corn crop.
  
  

• Looks like another winner

  
  By AH0ZK3UTYM19L on 2008-04-15
  I have just ordered this book, but based on the excerpt published in this month's Harper's, it is a must-read for anyone concerned about our nation's economy and our position in the world. It appears to be lucid and well written, and it is not a political screen. (The bad guys are every administration in recent memory, not just the Bushes.)
  
  Simply put, over the past 30-40 years, various administrations have changed the statistical bases of economic analysis. If consistent standards were used, inflation and unemployment would be shown to be much higher and the GNP much lower than we believe. We are losing the economic battle, but do not understand the extent to which we are because we have succeeded in lying to ourselves.
  
  

• Grandpa Tells the Awful Truth

  
  By A2JGQU3LN3FOJG on 2008-04-19
  Kevin Phillips dedicates his latest insightful work of political and economic history to his grandson. It's a fitting tribute since, by the author's reckoning, the aforementioned young man might be well into his forties, and the U.S. deeply into its post-imperial senescence, by the time the mischief explained in the pages of Bad Money is fully digested by the earth's economic system.
  
  Instead of reflecting upon and compensating for the turn to an unprecedented expansion of finance capitalism that today supersedes manufacturing in this nation by at least six percent of GDP, Wall Street, our empire's "coliseum," chose instead to gamble upon the promulgation of an unregulated class of investments known as derivatives, the size and scope of which, particularly in terms of their capacity to hedge against risk, could only be guessed at. So much for the efficacy of market deregulation.
  
  In a similar context, it was sadly hilarious to hear former Treasury Secretary Robert Rubin state recently that no one could have guessed the present debacle. Or, to recall that Hillary Clinton had proposed a blue ribbon committee, presumably to be chaired or co-chaired by Allan Greenspan, to address the situation.
  
  Warren Buffett has been on record for denouncing derivatives as "weapons of financial mass destruction" since at least 2003. Even so, to paraphrase Pete Seeger, "the big fool(s)" at Citibank and Bear Stearns, "said to push on." Privatize the profits and socialize the losses.
  
  At present, these so-called derivative financial "instruments" are embedded deeply in every sphere of global economic activity, from domestic pension funds to the portfolios of credulous investors throughout the world who believed in the transparency of the U.S. market system. Their ramifications add up to a disaster, aided and abetted at every modern-day turn by America's government, under both Democratic and Republican leadership.
  
  Through his incisive and perceptive use of charts and tables,and,in his exceptionally clear narrative, Phillips makes the case that our government lies to itself as well as us. Now, we are fifty trillion dollars in debt. Go figure. Better yet, read and be ironically comforted by the truths contained in this quietly patriotic book.
  
  

• A sober account of ever-widening realities (3-1/2 stars)

  
  By ABLRWZA40GHJK on 2008-05-15
  The brilliantly unclothed emperor has long been a popular tale: it's lesson is, of course, that delusions (while affording some key players progress) do not always compensate for reality (ultimately leading to the believers downfall on the realization of nakedness).
  
  That tale may have to be altered if one reads this work. It profiles the triumph of financial services over manufacturing, the 2007 mortgage melt down (before the 2008 fiasco), the `Consumer Price Index' (subverted to assure retirees receive minor adjustments by absenting traditional components), the lack of monetary circulation reporting, peak oil production, and several other aspects of the current economy.
  
  Though shorter (and less worthy) than the author's recent books (American Theocracy, American Dynasty, Wealth and Democracy), this work worth reading. If the reader believes inflation is about 3% (as the BLS CPI publishes) and does not want to brave facts and statistics that may prove otherwise, they should not read this book.
  
  
• Help wanted
  By A1979RMB332KSP on 2008-08-23
  Does the mortgage credit crisis bother you? Are you concerned about high oil prices? Do you get the feeling that Wall Street is largely a high-stakes casino, where insiders collect billions on winning bets, and also collect billions on losing bets, payed off with taxpayer bailouts? Do you want to understand why this is happening and how the game works? Then go find a different book. The author of this book is a "big idea guy", and he does nothing to elucidate his major points, all of which I was painfully aware before reading page one.
  
  The writing is in a churning stream of consciousness style, looping back over the same topics several times, in no particular sequence, as if hoping that some meaningful connections would appear just from the proximity of the paragraphs. Most annoying, is the habit of introducing an interesting topic, promising, "more on this in a later chapter", then repeating the introductory comments without pushing further when the later chapter arrives.
  
  There is no way to deny that the problems outlined in the book are important and deserve attention. Most of the positive reviews here award 4 or 5 stars based on that alone. But not only are no solutions offered, the problems themselves are not broken down and explained in any meaningful way. The comparisons of recent American history to the declines of previous empires is interesting, but superficial. If the thesis is that an over-emphasis on financial services leads to decline, I want to know why. I believe it could be true, but I don't understand why. No help here.
  
  I do know that when the government takes the downside out of risky behavior, by promising taxpayer bailouts for failed lenders, that it's a recipe for disastrously risky behavior. That's obvious. Why is it allowed to happen? Who can stop it? Somebody please give me the name of a book that can help.
  
  
• Bad Money
  By A2Q449DPF2LVXH on 2008-04-29
  I have bought my share of books from Amazon over the years, and yet have never written a review before. Most of the books i bought were excellent, yet some weren't. However, even for these duffers, I never felt compelled to write a review. So what made me write my first review for this book?
  
  Two words: OBFUSCATION and FRUSTRATION.
  
  "Bad Money" isn't bad, it may even be great, if reading it weren't so darn difficult. I found Mr. Phillips writing style burdensome. I was left with the distinct impression that Mr. Phillips was more interested in showing others how intelligent he was, instead of making sure he communicated his ideas clearly.
  
  Maybe others will not have the same opinion as I did, and I do not want to persuade others from buying the book. I just wished he wrote a little more like Ernest Hemingway, and less like William F. Buckley, Jr.
  
  
• An Overlong and Not Very Insightful Look at Excess Debt, Peak Oil, Bad Loans, Bubbles, and Reduced Credibility
  By A1K1JW1C5CUSUZ on 2008-06-03
  The short message from this book is that the U.S. economy is in trouble and that trouble is about to get worse. Why? Private and government debt and spending are out of control and the chickens haven't come home to roost yet in terms of higher interest rates and higher costs of imports, the government lies about inflation, the credit crisis isn't over by a long shot, peak oil production will cause prices to shoot through the roof, our manufacturing base is gutted, economic growth is going to be lousy, foreigners aren't going to keep taking dollars, and nobody likes us outside of the country. Are you ready to become a second-rate country?
  
  Unless you want to see some of the excellent tables and charts in the book that document these points, you don't need to read the book. Mr. Phillips doesn't add much to that brief message except to make continual references to prior histories of other nations. You would do better to spend your time working on solutions to the problems.
  
  The book is also very dated, focusing on the conditions of August 2007 and the levels of oil prices and debt problems then. As we all know, those were the good old days compared to June 2008.
  
  The writing style is also annoying in that Mr. Phillips doesn't assemble his points into a logical pattern to "prove" what might come next. It's an overly qualitative and anecdotal approach to issues that have quantitative implications.
  
  There's not a bit of advice in the book about what you can do to help secure your future: This book seems to be totally aimed at setting the agenda for the next president of the United States.
  
  
• WHAT MARKET UTOPIANS HAVE WROUGHT
  By A3HJQOTY0UCHY1 on 2008-05-13
  
  Kevin Phillips is a national treasure, and, surely by temperament and style, both on the page and in person, is the antidote to the Reagan/Bush era, an era many claim is now at its end. I say that because Mr. Phillips projects a formal, slightly grumpy aura, tempered by a wicked sense of low key humor, which I find refreshing after the Gipper and Crawford Ranch scene. We don't get too much of a biography of him, but I like to imagine him as an old New Englander, hard to fool, the type of teacher that we hope our students will still encounter in their studies. For agree with him or not, you have to take Mr. Phillips seriously. After all, Phillips, 67, a prolific author, has traveled through a good range of our political spectrum, from the right side in 1969 with The Emerging Republican Majority, to his American Theocracy in 2006, and now Bad Money, in 2008, which places him just to the left of center, although he might dispute that and claim that it's the center that has migrated so far to the right since 1980, not him. He is now a registered Independent voter.
  
  The deep frame of Bad Money is the warning that utopian illusions can emerge (and have) in America from the right side of the political spectrum as well as the left, which is where most of our 20th century political dialogue had preferred to locate the threats. Phillips has previously described his 1960's views of the excesses of the left of that era. Now he is horrified at some of his own progeny on the Right and what they have wrought, especially in the realm of the American economy. He lays it out directly in the Preface entitled The Political Economics of Deception: "The most worrisome thing about the vulnerability of the US economy circa 2008 is the extent of official understatement and misstatement - the preference for minimizing how many problems there are and how interconnected they are."
  
  Like all exercises in self-examination, this is a difficult undertaking about a nation which emerged towards the end of its "American Century" as the world's only superpower, and one which has seen itself as a "City Upon a Hill" and has to carry the additional burden of "American Exceptionalism,' which tends to get in the way a bit of a searching national dialogue - especially in a presidential election year, and even one in which large majorities poll that we have gotten seriously "off track." Phillips details just how far we have gotten off track, picking up and expanding upon the final section of American Theocracy, called "Borrowed Prosperity." It seems he wasn't going to write another book for the 2008 election - but the deepening financial crisis of 2007 and a head-in-the-sand attitude by officialdom led him to do it. And I'm glad he did.
  
  He is a patriot in the best sense of the term...not pugnaciously posing as the Patton of market fundamentalism/nationalism, like Larry Kudlow on CNBC, but rather as the prophetic author of Staying on Top: The Business Case for a National Industrial Strategy (1984). That title tells you a lot about what has gone wrong as the FIRE sector (Finance, Insurance, Real Estate) has displaced manufacturing as the leading node of our economy. If it was on a sound footing, we might not be singing the blues, and worse, today. But it's not. Instead, what has emerged is called the "shadow banking system," or the "financial Wild West," or a "liquidity factory," much of it "over the counter" and off the bank's books, unregulated or casually regulated at best. The mortgage crisis, then, was no mere random walk of fate: "Lenders needed to woo high risk borrowers for the good commercial reason that there weren't enough low-risk borrowers to meet the volume demanded by the big commercial banks, investment firms, and other packagers, all pursuing the lucrative fees." So much for the old term "conservative as a banker," now surely one of the great oxymorons of the English language.
  
  While much of the conservative establishment, and a good portion of the Democratic Party as well have wanted us all to obsess over the national debt and federal deficit - public debt - Phillips points out that it is really the frightening growth of private debt - personal and institutional - that is the real problem, having grown from $11 trillion to $48 trillion between 1987-2007. Phillips comments that "`Risky' doesn't begin to describe this new focus in the American economy. Bingeing on debt is reckless, and financialization has a long record of being an unhealthy late stage in the trajectory of previous leading world economic powers." The disturbing thought that "American Exceptionalism" might be subject to the same deep historical forces at work for Spain, the Dutch and the British Empire is necessary but tricky ground to navigate - try calling that notion in to Rush Limbaugh on some slow afternoon at the Credit Default Swap trading desk.
  
  Phillips believes that both parties have testified for this sector as the very essence of the market at work, treating it, in reality, as the key American "mercantilist" sector in the globalization race - one to be bailed out officially or otherwise, whenever it gets into trouble, which is often and expensive, although the market fundamentalists cannot bear to hear it described this way. Here's the vintage Phillips' prose to give you the picture, heading into 2008: "These are not circumstances in which a nation should put faith in an overgrown and overextended financial sector, with its bankrupt mortgage lenders, hotshot hedge funds, and reckless megabanks, several of which (fined years back for colluding with a scheming Enron) wouldn't know a civic obligation from a parking ticket."
  
  The burdens of civic obligation, however, don't fall just on the financial instrument "factories," which are variously described as reckless, malfeasant, dishonest, incompetent and negligent, to give the range of Phillips' wrath. Civic burdens also fall on the citizens' shoulders, a refreshing notion in an election year where families are invariably described as "hard working." He pointedly contrasts the level of economic literacy during the 1890's agrarian Populist Revolt of the south and west, when "periodicals like the National Economist had a hundred thousand subscribers...Compared to early-twenty-first-century torpor and lack of financial debate, the nineteenth-century agrarian civic engagement had an almost Fourth of July quality." Despite all the alarming ingredients being tossed into what would become a witches-brew of financial trouble between 1987-2008, he says these regions of former Populist discontent have been "anesthetized...The principle ethers at work were evangelical, fundamentalist and Pentecostal Christianity, infused with preoccupation with terrorism, evil and Islam that greatly strengthened after September 11." Also noted is the rise of the "Prosperity Gospel" (the religious cousin of the more secular "miracle of the market") among many of the most prolific new churches and its kinship to the religious/prosperity fervor of the Roaring Twenties - and we all know what followed after that.
  
  American consumers scratching their heads in the spring of 2008 over the glaring contrast between the rising prices they face in everyday life and the more soothing reports of the official Consumer Price Index would do well to chew a bit more on that savory title from the Preface - The Political Economics of Deception. The reader is rewarded with a tour of the origins of fiddling with the CPI constituent parts and definitions - and of the possible motives, focused on keeping Social Security and labor COLA clauses down. We learn about one critic - and the critics are growing in number - John Williams, whose work at ShadowStats.com leads to the conclusion that if 1990 CPI methodology were used today, "the government would have been reporting 5 to 7 percent inflation between 2005 and 2007...instead of...2 to 4 percent." It would be enough to have brought the economy close to recession - that's the magnitude hinted at with the difference in these numbers. We also learn that in March 2006, the Federal Reserve dropped "M3," perhaps our best indicator of the overall money supply, and one that would better measure what was going on in those secretive liquidity factories, with the notation from our author that "for 2007, M3 numbers show runaway inflation in the annual range of 14%." No wonder so many of Milton Friedman's remaining disciples are fuming.
  
  And that brings us to Phillips' treatment of the "Plunge Protection Team's" alleged intervention into the futures' indexes to stabilize the stock market at times of extreme turmoil. (A cautionary note here: any consideration of the resemblance between this line of inquiry and the plot line of "The Wizard of Oz", where Dorothy learns that behind the curtain is... hereby formally deferred to a later time...). It was founded in 1988 by Reagan's presidential proclamation as the President's Working Group on Financial Markets. He's doubtful we'll ever get official recognition if indeed these actions happened, due to the lawsuits such a confession might trigger. And, after all, a tactic like this can be financial death to those shorting the market - and also acknowledgment that things are worse than they seem and the "free market" far more dependent on government intervention than market utopians would ever be comfortable with. Phillips disclaims that "I have no personal firsthand knowledge and am not interested in becoming a conspiracy investigator." But he does look closely at the possibility that the team more broadly represents a commitment to a sector too important to fail, worthy of the grandest stretches in existing policy instruments - witness the ground covered by Fed. Chairman Bernanke in the rescue efforts of March 2008. He notes, glumly, that our manufacturing sector received no such considerations of magnitude or imagination during the decades of its long deathwatch.
  
  This review will close with a call to pay close attention to a worry Phillips broaches in Chapter 5, "Peak Oil." This call comes in May, 2008 with oil prices hovering near $125 a barrel, prices which are mesmerizing a nation still stuck on overseas sources. Please consider Phillips' long track record of accurately anticipating our troubles, and listen carefully to the background drumbeat of many not too subtle administration voices pointing to the evil Iran has in store for us and others in the Middle East. It's a time to ponder Phillips' warning: "Political imperatives being what they are, the temptation of conservative civilian leaders in the United States to pursue oil-related military action against targets like Iran is easy to understand...The tinder is almost perfect for a war or military strike rooted in the frustration of a great power in decline."
  
  There is no surer way to usher in the specter of 1929-1933 than to head down this oil strewn path, with all due respect to the powers, real or imagined, of the Plunge Protection Team. By clearly naming the threat, let us all hope we can head it off.
  
  William R. Neil
  May 12, 2008
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
• A tough read but a timely and truly urgent one
  By AP1WE2DB14IL1 on 2008-08-08
  Kevin Phillips' latest book - Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism - is not an easy read and not an easy book to review. To properly review it would take more space than is practical in this format. What I truly want to do with this review, then, is to convince people how very important this book is and, as other reviewers have noted, how important it is for anyone willing to tackle its complex subject matter to read it _now_. It will truly change your perception of what is happening in the US economy and in the US political scene. And, also as other reviewers have noted, it is in the end quite depressing as to how bad our current situation and how bad our prospects for the immediate future are.
  
  Reading Phillips' books, I often get the feeling that I have walked
  into a classroom where the professor is delivering his third lecture on
  the subject and I must scramble to follow what he is saying. Bad Money is
  no exception. I wish his editor(s) had pushed him to put in a few well
  laid out examples that would endable the reader to properly understand
  just what a CDO or an SIV actually consist of, how they function, how
  they're handled in the marketplace and so on. Again, this is not an
  easy read.
  
  That said, however, the points Phillips makes are well backed up in
  economic analysis and facts, and in historical relevance, both of which
  areas Phillips is intimately familiar with. He is sounding an alarm to
  anyone willing to listen, and what he lays out in this book is very
  disturbing to anyone who has noticed the growing chaos in our financial
  markets, the rising insecurity of our economic situation, and the
  seeming inability and unwillingness of our political leadership to deal
  with these growing problems.
  
  The preface, with its subtitle "The Political Economics of Deception",
  starts with these paragraphs that lay out in startling clarity the
  central concern of the book:
  
  "The most worrisome thing about the vulnerability of the U.S economy
  circa 2008 is the extent of official understatement and misstatement --
  the preference for minimizing how many problems there are and how
  interconnected they are... Whether the U.S. government and the
  Republican and Democratic parties can remedy the debt and oil-related
  transformations of the last two or three decades is dubious enough. Far
  more worrisome is the possibility that neither Washington nor Wall
  Street is willing to confront the deeper problem -- the ascendancy of
  finance in national policymaking (as well as in the gross domestic
  product), and the complicity of politicians who really don't want to
  talk about it."
  
  One important point Phillips makes is one people can instinctively
  relate to: the debasement of government statistics. People know from
  their daily lives that the economy is not good, that prices of almost
  everything are on the rise, that jobs are harder to come by, and that
  overall, things just aren't as good as they once were. But at the same
  time, the government keeps insisting that unemployment and inflation
  are low and that the economy is growing, citing figures that people
  can't reconcile with what they're experiencing every day. The reason is
  because the numbers have been cooked to support the government's claims
  and no longer represent any meaningful measure of the things they are
  supposed to relate to. And the numbers they can't cook, they suppress.
  For example:
  
  "Beginning in March 2006, the new Fed chairman, Ben Bernanke, ordered
  that the government cease publishing data on changes in the broadest
  measurement of the U.S. money supply, the so-called M3. It was
  expanding at a 10-12 percent annual rate in 2006; outsiders calculated
  that as of August 2007, that growth had accelerated to a high-powered
  14 percent.... Continued publication of M3 reports would have undercut
  the assertion of Bernanke... that the inflationary expectations of the
  public had been safely 'anchored' at a low level by the tame core
  CPI... For 2007, the U.S. M3 numbers show runaway inflation in the
  annual range of 14 percent."
  
  Another point Phillips makes in the book is that our growing financial
  problems are compounded by our energy and political problems:
  
  "the prior eminence of the United states in global petroleum matters
  has left not only an outdated infrasturcture but a spectrum of
  disabilities, unwarranted smugness, vested interests, and booby traps.
  These range from currency vulnerabilities and lack of a serious
  national energy strategy to apparent policy inertia in Washgton, where
  many officeholders seem unable to understand how much has changed for
  the United States over the last decade."
  
  Other warnings include the rise of oil consumption by countries like
  China and India and the extent to which oil-producing countries are
  already re-directing their output towards those markets.
  
  "In the wake of the unpopular U.S. invasion of Iraq, the Saudis showed
  their displeasure... continuing to reduce oil sales to the United
  States... after peaking at the equivalent of 1.7 million barrels per
  day in 2002, Saudi sales to the United States fell to 1.1 million
  barrels per day in May 2004... China soon jumped ahead of the United
  States in oil exports from the Saudi kingdom... the demand for oil in
  China alone will, before long, equal the entire production of Saudi
  Arabia... China stands to be the world's largest oil market of the
  2030's, possibly replacing the United States in that capacity by 2025."
  
  Phillips also touches on why the political leadership seems both unable
  and unwilling to deal with the array of problems the country is facing
  and shows how this same deadly political inertia has afflicted other
  great powers in history, citing examples from the Spanish, Dutch and
  British economic empires that preceded our American economic empire.
  The comparisons are fascinating and disturbing at the same time.
  
  Again, in looking at what I have written, I know that I have barely
  scratched the surface of all there is in this book that merits being
  read. All I can do is urge anyone who wants to understand why the
  economy seems to be in such bad shape, why the government figures seem
  to be so contradictory with what is happening, and why our political
  leaders seem neither willing nor able to deal with the problems, this
  is the best book you can possibly read and the time to read it is
  _now_, before the election, so you can see through the utterly
  meaningless drivel that politicians are putting out instead of talking about the very real problems we're facing, about what our options - however painful - are, and about what the consequences to us as as nation are if we continue to do nothing.
  
  
  
• 4.5 stars-America as a speculator economy.
  By A1UI9T8WKJPZN5 on 2008-04-29
  Phillip's book is similar to several other books currently available that show how the deregulation,especially of the banking and financial services sector, and privatization polices,started by Carter in 1978 and continued by all American Presidents since then ,has converted the United States of America into a speculator type economy where financial sector firms seek to extract a profit by the manipulation of balance and income statements .The goal is to make a return without any actual production of goods or services.
  There are two minor shortcomings in the book.First,Keynes's chapter 12 in the General Theory(1936)explained exactly how the USA had been converted into a speculator economy during the 1920's.There is no mention of Keynes's contribution anywhere in the book.Second,Adam Smith was perhaps THE major proponent in history of a heavily regulated banking and financial services sector.Smith warned against allowing banks to make any loans available to projectors(Keynes's speculators and rentiers),prodigals ,and imprudent risk takers.Smith warned of the very serious consequences that would probably result if such loans were made-the aggregate savings of the nation would be"... wasted and destroyed..."[Smith,1776,Wealth of Nations,pp.339-340,Modern Library (Cannan) edition].Smith,contrary to Phillips, was not a believer in laissez fairy land.Smith was, in fact, the last of the Scholastic philosophers.He improved Scholastic thought and brought it up to date through the 18th century .The warnings of Smith and Keynes concerning the dangers of allowing speculators to run economic policy have been ignored.I have deducted 1/2 of a star from my rating because Phillips has ignored these warnings also. Nevertheless,I recommend this book .
  
  
• Just read the preface and save yourself 3 hours!
  By A2F2GNA5AJWNB4 on 2008-06-05
  While this book makes some very insightful and valid points, unfortunately those points are buried in a pile of words in dire need of an editor. Just read the preface and skip the rest of the book. The preface is a quick summary of the entire book - mostly word for word of major points. Better yet, read the preface while standing in the bookstore and save yourself the $25.
  
  
• Bad Money Tedious, no solutions
  By A1KX3CVWIS5YAY on 2008-07-17
  Phillips' book Bad Money is one of the most poorly written, tedious books I have ever tried to read. It has a lot of disturbing facts through-out; things the american public should be informed about, and elected officials should be held accountable for. But GEEZ! Why doesn't the author abide by basic writing principles, for example having one main subject per paragraph, clear and concise language, etc. The book reads like a rough draft.
  
  What are we supposed to DO about the problem??? No help here.
  
  
• Good But Could Have Been Better
  By AYJ2OZDJMSPEF on 2008-04-30
  The thesis statement for Bad Money: In modern America wealth can be increased without creating or manufacturing anything, but just by "moving paper (e.g., debt instruments) around" [p.96].
  
  According to Kevin Phillips' bio page on Wikipedia he has reliably cranked out a book every 2-3 years or so since 1969. And while there are exceptions for the most part they have been either the-sky-is-falling screeds about the American economy, faux populist rants about social class and ad hominem attacks against people he doesn't like.
  
  And says Phillips, the American elite's belief in "market triumphalism" [sic] [p.180] leads to a blind arrogance and that this all shows what becomes of an economic superpower that leaves its destiny to the vicissitudes of the marketplace [p.181-2]. And leading this charge of the lemmings is an entrenched but dissipated class of elites who clog up Washington, D.C. lobbying after their own interests [p.156]. Phillips also hates religion, conservatism, unearned wealth, the wealthy in general and the Bush family (or Dynasty) in particular [p.72].
  
  The only thing that really gives Phillips any credibility at all is his extensive research and documentation complete with original graphs and charts that purport to prove his points. So far so good. However another look at Mr. Phillips' bio page shows that he went to a fancy East Coast prep school, Colgate University and Harvard Law so who is he to point fingers about entrenched elites in American politics and commerce? Takes one to know one I guess.
  
  Phillips' reformist critique would be very persuasive indeed (or at least more plausible) if he could refrain from expressing his views in such a caustic manner and refrain from the ad hominem attacks and paranoid conspiracy theories which don't seem very believable no matter Phillips' excellent research complete with graphs, charts, footnotes and appendices.
  
  
• Unmasking of the Greenspan
  By ACA1XD8WF8EL4 on 2008-05-24
  This is a scholarly, intellectually courageous and very timely expose of the rise and fall of America's twenty-five year experiment with unfettered laizze faire capitalism, and it's destruction of the U.S. economy, the U.S. dollar, and the U.S. standard of living.
  
  He shows how Greenspan, the Bushs, and the Clintons, essentially turned America into a nation of debters.
  
  For example, Phillips shows how Greenspan and company quietly and unilaterally lowered social security benefits by replacing the original Consumers Price Index or CPI which measures inflation with a completely bogus index that understates the tue inflation rate by half or more. This not only reduced the COLAs to which retirees are entitled to by law, but also reduced the pay checks of tens of millions of working people, while making it appear that the Fed was sucessfully controlling inflation while inflation was in fact completely out of control. Wait till the social security and AARP learn how they have been cheated out of their full and rightful benefits.
  
  Phillips discusses in depth and in detail the creation of the housing bubble in which the Fed and banks actually orchestrated the defrauding of millions of Americans who now own houses that are worth less each month than they owe on them. He presents a range of possibible outcomes, non of them good, and all of them already overtaken by actual events, i.e. the continued collapse of house prices with no end in sight. (See [...] for daily updates of the housing bust.)
  
  He documents how the Fed under Greenspan repeatedly rescued the rich and powerful, using the tax money of the middle-class, which enabled the rich to become even more rich while impoverishing the middle class.
  
  Phillips discusses the trillion dollar student loan industry, unique to the U.S. No other country requires its students to mortgage their futures to get advanced education and in fact neither did we until very recently. I would have appreciated a more in depth and detailed discussion of the student loan racket, such as provided by Marty Nemko, the author of COOL CAREERS FOR DUMMIES who says the problem with the student loan program is that the colleges and their lobbyists manipulate legislators into increasing govt-funded financial aid, which merely allows the colleges to raise their prices more i.e.the taxpayers are lining the colleges' pockets while providing the student borrowers with a TERRIBLE education.
  
  Nevertheless, this is a must read book.
  
  
  
  
• Phillips Loses Sight of an Essential American Trait
  By A23SB6VGGB9E8U on 2008-06-24
  I have spent four decades reading Kevin Phillips' books. In other forums, I have identified him as one of my favorite authors and analysts.
  
  In my mind he has authored at least brilliant books: The emerging Republican majority, The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath and Wealth and Democracy: A Political History of the American Rich. It is difficult for me to say, this book does not measure up to his early high analytic standards
  
  He is not known as a flamethrower. In the past he offered clarity where there was confusion. These books provided my first exposure to emerging national trends. He was trained as a lawyer. His research is meticulous; his arguments convincing.
  
  But he is wrong.
  
  His argument ignores an essential trait of the American people: we are practical; we pride ourselves in being problem-solvers. Each day at work, we are asked to place a size 13 foot into a size 10 shoe. Not only are we good at the "impossible," we love the challenge.
  
  In his latest book, Phillips argues what he terms "megafinance"-- the perilous interaction of debt and financial recklessness coupled with cost of oil dooms us to a crisis. Readers familiar with his work, already recognize he has lost one evil leg of his previous argument in American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21stCentury - the danger of what he termed "Patriot Pastors." Those of us who are not quite so alliterative know them as right-wing evangelicals. The American voter dispatched them during the last mid-term elections.
  
  I am not positing everything is rosy. It is not. As a country we face serious problems. What I am saying, however, is that anytime during the past 40 years Phillips has been analyzing the American scene he could have seized on any number of problems at the time those books were published and come to the same this book's conclusion.
  
  But it did not happen.
  
  The American people rose to the occasion and conquered the problems they faced. I have no doubt they do the same this time.
  
  Phillips, as he always does, delivers a skillful and thought-provoking argument against dynastic leadership. The book is worth reading. According to Phillips, Americans will knuckle under. I believe they will rise to the occasion.
  
  
  
  
• It is worse than you think
  By A1OCNCN9YQH53K on 2008-09-06
  Kevin Phillips, you have done it again. I don't know why you morphed from a Republican strategist into a harsh critic of right-wing, robber barons' assault on the welfare state and its dream of economic justice. But you hit the nail on the head time-and-time-again: entrenched interest groups, the collapse of real political debate, the transition from productive to financial capital, the politics of oil, the protection of Wall Street by the Fed. giving rise to meltdowns rather than tamable booms and preventable busts, the shift of wealth from those who labor or save to those who speculate, financial gambling in the form of derivatives and other synthetic securities which reward their inventors and defraud both latecomers and the public at large, the embrace of moral hazard which is a subsidy for those too big to fail and happen to be friends and peers of the government officials who are supposed to regulate them. I know someone who hustled subprime mortgages for speculators by knowing how to work the computer programs lenders use to assess mortgage risk; his clients had absolutely no equity. There was so much money to hustle, lenders were not interested in due diligence. They chopped the loans into little pieces, packaged them to disguise risk and sold them as equities. I am not sure the broker is not in jail. He was small potatoes. How about the Mertons, Greenspans, Bernankes and legions of Ph.D.s from MIT who claimed they were diversifying risk only to discover when things went wrong they were gambling on air and there was no liquidity? A fixed roulette wheel does not help when too many people learn how it is loaded. See Bookstaber's excellent A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. As Phillips points out, a good deal of finance in the US is a giant subsidized Ponzi scheme. Only in a world of greed and class oppression would labor be taxed more than return on capital.
  It is a pretty shabby picture but unfortunately 90% of the voting public has little ability or interest in understanding it. No wonder, as Phillips points out, Obama's backers will swallow his hedge fund contributors without noticing what their presence in his camp means. Although Joe Biden may bring a white bread image to the Democratic ticket, he also brings the bipartisanship which makes it impossible to honestly name, if not solve, both foreign policy problems and the increasingly skewed distribution of wealth in the US. If I were to talk to my middle/upper-middle class friends about how much we all benefit from the set up as it is, they would either not listen or regard me as attacking them.
  Kevin, you have the courage to tell it like it is. But is anyone listening?
  Besides the fact that the book is a bit repetitive and, having listened to it as a book on tape, the narrator is overly dramatic making each nugget of corruption sound like an apocalypse, I find some of the overarching historical comparisons a bit of a stretch. The declines of Rome, Spain, the Dutch Confederation, and finally Britain are interesting background, and some aspects are reminiscent of what is happening to
  America now, but each had its own very individual causes. Metropolitan Spain, the master of a great empire, was always a debtor. That is how it fought its wars. New World silver and gold just made it possible to fight nastier wars of the counter reformation. Indebtedness was not some declining empire phenomena. Italian and German bankers were paying for the conquest of Granada years before Columbus sailed. Similarly depopulation and decline don't really fit either England or Spain. Spain had plenty of poor from denuded Andalusia to get rid of and opportunity lay abroad. Besides wool for the Low Lands, wine and olives, Spain had little industry and needed less when the geld started pouring in. And, at the height of the industrial revolution, England was exporting it street ruffians and poor to Australia. There was no place for them at home even though industry needed surplus labor to keep wages down. It had all the displaced, barefoot Irish it needed. England only really bankrupted itself in WWII. Where its decline began is hard to say. It may have been initiated way before coupon clipping and remittance men of Edwardian England became subjects of literature. How about sometime between the Crimean and Boer wars? An interesting take on Britain is in Correlli Barnett's reactionary book Collapse of British Power (History/20th Century History). He sees the decline as a function of free trade, public schools' crippling of ruling-class moral fiber, post WWI pacifism, and the greater cost of defending the empire and Commonwealth in comparison to its military return especially during WWII. As for the Dutch Republics, I guess I need to find a good economic history of them. From I had thought their small population and increasing cost of shipping made them hopelessly outflanked by their larger English neighbors. The Dutch had prospered by early textile manufacture, shipping cheaper (paying their sailors less in the Baltic trade) and stealing weaker Portugal's overseas entrepots. ( See Charles Boxer, The Dutch Seaborne Empire 1600-1800 and John Keay The Spice Route: A History (California Studies in Food and Culture).) In the end the Dutch Republics were outcompeted and outfought by England.
  Despite the shortcoming in Phillips' comparative history, his clarion call of decline is well taken. I like to think of Fulbright's "arrogance of power." We are headed for a fall, but maybe not the apocalypse Phillips trumpets. Our increased productivity from the US lead in computers has a lot to do with the wealth generated since the late 1980's. That is production, not finance. It just was, and still is, being lopsidedly distributed leading to private splendor (fed much by finance) and public squalor. The consequences of Lyndon Johnson's guns and butter and the 70's oil boycott stopped middle/lower-middle class growth and Reagan reached into their pockets and gave their subsidence to the upper/middle and upper classes along with a giant share of the new productivity. More people should read Phillips' books. But then it is not in many peoples', who know better and vote, interest to advocate for his implied solutions. It might preclude million dollar houses, jet-setting and three Volvos in the drive way . And as for the lower classes who might really profit from his criticism, they are too busy paying their subprime mortgages, watching television, playing video games or shopping at Wal-Mart. So we have a world of unnecessary conflicts and economic injustice. Remember Tolstoy's description of the Russian nobility ignoring Napoleon's advance on Moscow. Rather than Götterdämmerung, we have the twilight of our empire which is OK because of all the harm to which our arrogance has led. Our successors, the Chinese, don't give any sign they will dominate the world any more fairly.
  Charlie Fisher author of Dismantling Discontent: Buddha's Way Through Darwin's World
  
  
  
• Plunge Protection
  By A3CB08BP6ES00 on 2008-04-28
  The Fed's Plunge Protection Team buying the S&P during market drops is accurately described here. I'd love to see a satirical TV spoof of it in action. Kevin Phillips is great at supplying the doomsday data and analyzing it coherently. I hope Barack will read this soon to guide him in the decisions he must make next year.
  Perhaps we are set to decline like Spain, the Dutch and England (as wonderfully explained) but are those folks really so unhappy? Maybe we can be content without money buying the latest high tech gizmo or having someone else wait on us hand and foot. Is passing wealth to our offspring alone to be our life's priority? Our Renaissance after the debt crash will focus on essentials and be our socialization with each other based on fairness and community, and not on perceived opulence.
  
  
  
• Sound Message, Poor Writing
  By ADE9OU2OLWS3N on 2008-07-18
  The book brought forth a significant message about what ails America and how/why the dollar is facing collapse. The problem is that Phillips writes in a high-brow academic style and with an assumption of knowledge probably not possessed by the average reader. He has been poorly served by his editor/publisher in this regard. This important and timely work could've delivered the same message to a much wider audience had he written in plain English. Phillips gets an 'A' for concepts/ideas/analysis, but a 'C' for rendering his thoughts in a marketable manner. Pity.
  
  
• Meaningless jumble of quotes, numbers, and associations
  By A2H8NP7I9LF6O8 on 2008-05-29
  I may change this review, becuase I am only about 2/3 of the way through the book. I got this book because this is the subject of America. This financial takeover of the country is killing America, or at least the American people, and the hidden part of it is killing democracy. I can see that and I wanted to find out more about this problem, who is behind it and who might have ideas on how to stop it and turn it back.
  
  What I get from page 1 is a lot of out of context quotes seemingly with nefarious intent. Numbers and statements with no broader background. History out of sequence.
  
  Unless Kevin Phillips pulls all of this together in the last few chapters of the book this book will be pretty much useless in terms of any criteria you look at it with, except maybe the far left who just wants to find thing that look bad and say "see, I knew things were screwed up".
  
  Well, I think 85% of the country knows there is something wrong, and I think Kevin Phillips has the problem narrowed down to the financial takeover of almost, no all, aspect of the country. The financial expansion that has gotten rid of America's industrial base, and forsaken its people unless they can afford to invest abroad, and even then, most of them.
  
  The problem is that this book does not tell you who the players are, what they have done. All it does it wind the reader up with lots of hot air and leave them with nothing to do.
  
  The writing style of this book seems to be like he might have taken a historic document and put it in a shredder and then put it back together in the present form. There is no linearity or logical sequence or flow to this information. It is almost 100% out of context out of time quoations and statistics.
  
  If anyone knows of a better book on this subject that is not some conspiracy theory, please let me know. So far I am disappointed in this one.
  
  
  
• Bad Money, Bad Writing
  By A5YIZ20C7BJCE on 2008-06-04
  Phillips' book contains much information on our 21st Century economy that is not easily available elsewhere. There are some startling statements on the connection between Wall Street and the Democratic Party that I have found nowhere else. I think it is an important work that commands the attention of the American public.
  
  The book is short in pages but long in comprehension. It is a pity that the work is so badly written, as are the other books of his that I have attempted to read. Where are the editors when you need them? Is there a "Maxwell Perkins" for this modern-day "Thomas Wolfe"? Since his editors have abandoned their posts, to Mr. Phillips I offer some advice: one thought, one sentence. Also, use standard English constructions and stay away from (what I assume is) Wall Street jargon and linguistic peculiarities. And best wishes for an easier read on your next book.
  
  
  
• Haven't We Heard All This Before?
  By A2XQMGE2YY88DC on 2008-08-05
  The American political scientist Kevin Phillips' new book "Bad Money" is subtitled "Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism," and if you are a liberal -- which would be the only ones buying this book -- you need not read any further because this book tells you exactly what you know is wrong with America today.
  
  First and foremost the American economy is dominated by speculative capital, as evidenced by the recent Internet bubble and the subprime fiasco. But much worse America's financiers gamble without any risk -- because right now in America finance and politics are too entangled. Washington believes that American finance must be encouraged and protected, and Wall Street is a big giver to political campaigns. As a result America has become debt-ridden, and a very unequal society where the rich just get richer.
  
  Making things much worse is America's problems abroad. First, America has lost much of what political scientists call "soft power" with the Iraq invasion -- the world no longer feels that America is good and noble. This has consequently lead to a big spike in the price of oil, a commodity that Americans are completely dependent on. And worse of all oil is in the control of some of America's arch-nemeses -- Russia, Venezuela, and of course Canada. Even the once reliable Saudis have turned against America.
  
  In Kevin Phillips' analysis America is merely following the path of other great powers -- Hapsburg Spain, Holland, and Britain -- in its decline, and he spend a lot of time drawing historical parallels between America and these past empires. He concludes that there will be an inevitable re-balancing of power from America to Asia.
  
  Given that every liberal holds this analysis to be the new faith Kevin Phillips will be indubitably lauded in the liberal press: The New York Review of Books, New York Times Book Review, and the New Yorker. But this is a very flawed book. It's merely a re-hashing of Kevin Phillips' previous books: "American Dynasty" and "American Theocracy." Moreover, I had to struggle to get used to his clunky academic writing. But it's the analysis itself which is most problematic.
  
  First, let's talk about one of his arguments, an argument that is in his eyes is so obvious it's an assumption -- that the 21st century belongs to Asia. Mr. Phillips, with all due respect, have you been to Asia?
  
  The idea that the global economy will roar on, and leave America is totally absurd. The American consumer is what drives the global economy -- if America goes into recession then so does the rest of the world. If the American dollar collapses then World War III will just be around the corner.
  
  Consider America's trade deficit with the rest of the world. America buys oil from the Saudis and McDonald's toys from China, and America pays using Treasury bonds -- which is long-term debt, which is in itself no more useful than toilet paper. By last count America owes $1.3 trillion dollars to China. Does China have a prayer in the world of collecting on this debt? No chance in hell. But who else is going to buy Chinese goods? And China has 1.3 billion people -- that's a lot of people to have to keep employed. Like it or not China is stuck because Americans are the only ones materialistic enough to want what they manufacture. So if China and America stopped trading with each other American consumers can only buy one new shirt per year instead of 100 from Walmart. But China's unemployment problem skyrockets, its manufacturing base collapses, its assets bubbles burst, and the country goes bonkers.
  
  Even with George W. Bush as president America cannot fail. America is just too wealthy -- it has too many resources and too many talented individuals -- plus if it's ever in trouble it can just decide to take over Canada. And America is just too resilient -- its greatest advantage is that it's constantly ability to transform itself without violent revolution (the one exception is of course the American Civil War). But America is dangerous because the wealth and strength of the global economy is completely dependent on America, and America -- ever since the collapse of the Soviet Union -- has chosen to be greedy and irresponsible. And the real effects of an American recession will be felt less on main street America and more in the factories of China and the oilfields of Saudia Arabia.
  
  
• Tough read but worth checking out
  By A24PTVSZSM8968 on 2008-08-13
  Since there are so many long reviews of this book that pretty much cover most of the salient points, I'll keep mine fairly short. This book is interesting if you are one of those people that suspect there is something wrong with the way our country has been doing things, and there are a number of important ideas you may not have heard about or thought about in the way they are presented. I have only a couple of small complaints. As others have pointed out, the style is often extremely dense, especially when dealing with economic issues, and sometimes he seems repetitive. A layperson will feel like he or she pretty much has to trust the author because he uses so much jargon and brings in so many complex examples that there is no way a non-expert can evaluate his arguments. The book is mostly a rehashing and updating of his earlier book American Theocracy which might make more interesting and easier reading. The book is quite recent, yet it seems quite out of date because it pretty much assumes Hillary Clinton will be the Democratic nominee in 2008 and barely even mentions the actual nominee in an aside. Finally, as others point out, the author doesn't really give any hints of where he thinks it will all lead or what we should do about the problems we face. Part of this is by design and he gives an explanation of why he doesn't do it, but in my opinion, this leaves the book open to many interpretations, and it is easy to jump to severe conclusions. On the positive side, the author does briefly point out, without dwelling on it, that the US does enjoy some potential advantages in geography that previous empires did not, and he also mentions that many of those previous empires now enjoy a relatively successful existence as a non-empire.
  
  This book is relatively short so it's woth checking it out if you are interested in the topic. You might want to read his book American Theocracy first.
  
  
• Powerful but Depressing
  By A1ISVOK9TCLP5N on 2008-08-13
  I read this book after hearing the author, Kevin Phillips, give a radio presentation to the Cambridge Forum. Phillips was familiar to me as a spokesman for conservative perspectives over a span of decades, a perspective that I never shared. Thus, I was a bit skeptical when I first heard his presentation on this topic. However, I was quickly impressed by his careful, scholarly analysis, and have come to agree that he is exactly right. Phillips' central point is that the United States has abrogated its leadership position in the world by virtue of having stopped being a nation that produces goods and services of real value and becoming a nation who's primary business is the manipulation of financial markets and debt. He cites earlier examples of the Maritime Dutch republic of the 1700s, Great Britain around the time of WWI, and even Rome. The sobering point is that once a nation has gone this route, the course is irretrievable. He finds lots of blame for this situation, and it is not all deposited on any single political party...there is plenty to go around! He discusses our biggest product, Credit Debt, the root causes of the rise in oil prices, and the impact of right-wing evangelicals on the administration's feeble approach to dealing with our major challenges. This is not a feel-good book, but it is an important contribution to helping Americans understand our current situation. HIGHLY RECOMMENDED
  
  
• a better than adequate primer rev the financial crisis
  By A2EJFASU4ZHZLS on 2008-05-11
  Phillips has written an informative introduction to the financial meltdown. (He's got a review and update in the May issue of Harper's Magazine.) Phillips is not an economist and it is clear that he has recently made it his business to gain basic literacy in matters economic. Parts of the book read like a very good term paper. Still, Phillips is a smart guy and the novice has much to learn from this book. It would have helped had Phillips placed his analysis in the proper historical and economic context: after deindustrialization both the U.S. and the world economy have been plagued by excess capacity in key productive sectors like automobiles, steel, shipbuilding, petrochemicals and others. Hence the turn from using money to profit from production to using money to profit from using money (to create worthless paper assets). Phillpis does rightly see the financial crisis as a more general crisis for capitalism as a global economic system, which you will not find in the writings of most commentators. The reader will not be disappointed.
  
  
• Makes you want to put your money in the mattress
  By A35MGCYI1UG8JB on 2008-07-04
  Mr. Phillips hardly needs another glowing review, but his analysis will make you want to pull your money out of whatever U.S.-based investment it is in now, and stick it in the mattress (Don't! Inflation will eat it up). What blows me away is that Mr. Phillips wrote the book I wanted to publish. In fact, the prospectus I wrote at the end of last year to interest my publisher in such a work eerily echoes almost all of the major themes hammered on in "Bad Money."
  
  What Phillips does best is profusely illustrate and provide evidence for the complicity of the traditional Wall Street firms, the "shadow" banking system (private equity and hedge funds), and the US Government (Federal Reserve, Secretary of the Treasury, etc) in perpetuating the myth of U.S. economic well-being. What you are led to conclude is the economic crisis we are currently experiencing, not even close to bottoming out, is simply the five year delay of the collapse of the dot.com, telecom, and energy (e.g., Enron) sectors, caused by the same financial shenanigans perpetrated by the same financial engineers.
  
  The only weakness I can see in the book is that Phillips only hints at who these people are and how they seem to move comfortably from one economic crisis to another. He provides a glancing history of how other world powers were felled by their infactuation with financial mercantilism, facilitated by migrant financial engineers. While he acknowledges that there's more here the reader needs to know about, it seemed painfully obvious to this reader that he felt this was a line in inquiry better left to others.
  
  Thankfully, Phillips sets aside any poliitcal and economic ideology. He is unsparing in his critique of politicians from all sides of the spectrum and shows how this crisis has nothing to do with party affiliation and everything to do with the crony-capitalism that has reduced free-market economics to a shadow of its former self.
  
  Every American with an inquiry mind should read this book.
  
  Jason Makansi, author of "Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You."
  
  
• Disappointed
  By A21YEUH7S5G16G on 2008-06-05
  The reason you would want to read a book like this is if they can go into more details or background that the newspapers don't get into but this book doesn't do it. It's like a group of newspaper articles strung together seemingly to take advantage of the attention on the credit crisis. If you keep up with the news it's just rehash but it's harder to read. It constantly uses quotes and references which simply refer to other articles but don't really flesh out details. The chapter on CPI takes a strong position that it's too low but doesn't really explain it. Instead you have a quote from so and so and so on with all the () [] and jumbled symbols. Anybody can see lately that certain items have been going up like food or oil, but others like clothes or computers are constantly falling so it's not clear how that evens out. He critcizes the way the government accounted for computers but it actually makes sense. You do get more for less! Did he write on a typewriter? How could he not know that?
  
  
• A Labor Perspective
  By A2ZHZ8ZTHJKOS0 on 2008-06-30
  The fact that Joe "I'm-mortgaged-to-the-hilt" is now living in a car he can't afford to move may mean more than a temporary adjustment in the credit system. That's according to author Phillips, and his book makes good sense. As he shows, our financial underpinnings are rickety, to say the least. Worse, our financial bubble no longer rests on an industrial foundation, but has become the economic foundation itself.
  
  Now talk of "foundations" has slipped out of fashion with the rise of post-modernism, and certainly Phillips does not himself use the term. Instead, he talks about an economy that lacks its former variety, and as a result has come to put too many eggs in the financial basket, as it were. Thus, when the various financial shocks including oil pricing reverberate, there are few other sectors to cushion the blows. Thus, the US may be on the way to losing leadership of the capitalist world to the fast rising industrial economies of Asia. This, I take, to be a major thesis of the book.
  
  I want to suggest a slightly different perspective on the current financial shake-up than the book's more narrowly internal one. A moment ago I alluded to an economy of goods and services resting on an industrial base. The reason for suggesting such is that historically the concept of industry implies a working class in a way that the concept of a financial world does not. And, it's the relative absence of a labor component to the analysis that I believe detracts from the book's overall framing.
  
  It's no secret that wages and benefits for American workers have been stagnant or in decline for some time. The trend has spread across administrations of both major parties. Moreover, the proportional share of wealth gained from productivity has also declined for wage-earning Americans. These I take to be uncontested facts that reflect the widening wealth disparities of the last 30 years or so. The agents and effects of this decline are more central, I believe, to the current crisis than a basically conservative commentator such as Phillips allows for.
  
  At the most obvious level a better paid workforce would have less need for risky sub-prime and credit card gimmicks, other factors being equal. Indeed, homes and products were within the pay-check reach of most wage-earners for several decades in mid-century past. Unsurprisingly, real wages and proportional shares for blue-collar America also rose during that same period. Much of that prosperity came from rising shares in the nation's wealth distribution, while those shares were largely kept in place by the clout of organized labor at both the work site and in the nation's capital. In an important sense, I would argue, strong unions acted as a break on capital's natural tendency to over-reach and suffocate effective demand by pushing down wages.
  
  However, a number of factors conspired to weaken organized labor, whose presence was never really accepted in the halls of power, anyway. The inflationary spiral of the 70's, the off-shoring of the Clinton-Bush years, along with the albatross of Taft-Hartley, all contibuted heavily to labor's decline. The point here is that people who could formerly shop at Safeway and May Co. were soon faced with a choice. With a shrinking wallet, they could either go to Walmart or take out a credit card, while for many, the situation meant doing both. In short, a fast receding American Dream not only jeopardized those working people reaching out for it, but also those who had already attained a measure. Put broadly, the relative loss of purchasing power among wage-earners opened up a fertile field for the credit exploitation and the financial speculation to come.
  
  There's a second and much less noticed factor at work here. This one has more indirectly to do with what Phillips calls the crisis in American capitalism. And that is the sudden demise of Wall Street's great rival, the Soviet Union. Ironically, in my view at least, that so-called socialist system (really a state-capitalism) acted as a foreign brake on the Wall St.'s most aggressive and adventurous tendencies, such as the risky deregulation campaigns of the Clinton-Bush era, a direct precursor of the credit fiasco.
  
  Now, whatever it's real life failings, the Soviet system did present an alternative to American style capitalism, and one whose worker-peasant appeal resonated among Third World nations. Thus the ideological competition was intense. At a policy level, Washington was forced to remain concerned with the general health of wage-earning America. After all, vast tracts of middle-class suburbia, along with abundant, affordable consumer goods amounted to an important component of America's overseas appeal. On the other hand, large numbers of people seen living in cars or getting kicked off welfare or retiring without pensions or getting sick without health insurance, would have cancelled much of that appeal. And image mattered to the rivalry.
  
  Of course, a Soviet presence couldn't stop the Vietnam disaster, nor prevent industries from relocating along the Mexico border, nor halt partial deregulation under Reagan's aegis. Nonetheless, it's hard to conceive of even a Bush Jr. embarking on an Iraq adventure with a counter-force so close by, or de-industrializing the economy by taking manufacture out of the country, or ignoring pressure from a Soviet backed PLO to finally settle that 60-year running sore. In fact, the Soviet collapse, whatever its true benefits, disastrously freed Washington's most aggressive corporatists from their boardrooms and think tanks. Now, those strategists could reach for global empire without an over-concern with domestic repercussions. And it's those effects that are now being felt in a shrinking dollar, a debt crisis, and a Wall St.-led Democratic Party as committed to world hegemony as the Republicans.
  
  The irony is that the very economics accentuated by the global power grab are not only undermining the grab itself, but threatening to undo the primacy of American capital. Phillips is right to be alarmed. But a labor perspective is much more important to the picture than Phillips provides.
  
  
• Bad Money
  By A3VSUA7ZMQJ3KR on 2008-07-08
  I found parts of this book to be very difficult to comprehend and enjoy, i.e. the details of the financial industry and their various methods/schemes. However, the chapters on Peak Oil and the Politics of Delusion were outstanding! In fact, I would recommend the purchase of the book for the Peak Oil chapter alone. Every American should read that chapter; especially those who think we're fighting a military war with the rest of the world. In fact, we're fighting an economic war with the rest of the world and we're losing it; partially because of the slow, steady drain that fighting a military war brings with it.
  
  
• The Financialization of America
  By ARNEUO7BF3J55 on 2008-08-07
  `Bad Money' tends to jump from subject to subject but the main point is that increased financialization is a sign of a nation in decline and the U.S. is traveling a path previously taken by other world powers including Britain, Spain and Holland. Mr. Philips writes that in the 1980's "elements of the U.S. government decided... that finance, not manufacturing or even high technology, had to be the sector on which Washington would place its strategic chips" The wisdom of the "efficient market" is seen as the apex of decision making and with enough creativity and guile Wall Street believes it can literally create money from thin air. The evidence of finances most favored status is all around us. Financial services have shot past manufacturing as a percentage of the GDP and finance is the one sector of the economy that the Feds have decided must be preserved at all cost.
  
  It is within this protective cocoon that financial institutions have operated with reckless abandon knowing that the rules of the game are heads they win, tails the rest of us lose. Quoting the author, "over five years, the housing sector seems to have provided some 40 percent of the growth in U.S. GDP" but the cost of that growth has been devastating. Lenders felt free to engage in incredibly risky loans knowing that they had little if anything to lose. The author is not the first person to suggest that the Federal government was complicit in growing this bubble as lenders let rationality fly out the door in their mad quest for profits. In fact like an overprotective parent the Federal government has demonstrated that it will go to extreme lengths to shield the market from bad news. In 2005 the Feds changed the criteria for calculating inflation lowering it by 2 points. Of course the classic is the absence of food and energy costs in calculating inflation.
  
  The middle of the book is jam packed with descriptions of money making schemes cooked up by Wall Street. Reading through the myriad of acronyms, confusing loan setups and baffling hedge funds left my head spinning but that's kinda the point. Finance has become so obfuscated and non-transparent that debacles like the sub-prime mess are inevitable.
  
  The Bush administration seems to have two settings, wild overreaction ala Iraq and Social Security and near total disinterest as in global warming and Katrina. I firmly believe that it is the administrations stubborn refusal to address global warming that will damn them by history but as the author writes Bush has pretty much put the country in neutral for the past eight years particularly when it comes to Bad Money's other main topic, peak oil. The author suggests that the invasion of Iraq may have been the sum total of Bush's oil strategy.
  
  `Bad Money' is really an extension of the ideas presented by Kevin Philips' in his previous book `American Theocracy' with updates for recent events. This book is significantly shorter than his previous effort which is fine with me. One change in the authors is to push the threat of religion to the back burner as much larger looming problems of financialization and peak oil take center stage. I was a little bothered by the authors' `a pox on both houses' desire to blame both Democrats and Republican's for this mess particularly when it comes to alternative energy sources. The Dems may put up modest resistance against some oil exploration but the Republican's have been absolutely manic in refusing to address peak oil and global warming. I was also getting a little tired of the constant parallels between the U.S. of today and previous nations in decline. After `American Theocracy' and this book I kinda got the point.
  
  It's a very good book if a bit unfocused. The author tosses out some major accusations including implications that the Federal government personally pumps money into Wall Street in times of worry and a suggestion that the Bush administration may be actually pursuing a weak dollar strategy (may not be so far fetched). I wish the book had spent a bit more time on these two topics.
  
  

• The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
• The Limits of Power: The End of American Exceptionalism
• American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21stCentury
• The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means
• The Post-American World