The sub-prime mortgage crisis is only the beginning: A more profound economic and political restructuring is on its way. We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions. According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it. The Trillion Dollar Meltdown explains how we got here, and what is about to happen. After the crash our priorities will be quite different. But things are likely to get worse before they better. Whether you are an active investor, a homeowner, or a contributor to your 401(k) plan, The Trillion Dollar Meltdown will be indispensable to understanding the gross excess that has put the world economy on the brink--and what the new landscape will look like.
Author: Charles R. Morris
Publisher: PublicAffairs
Customer Reviews
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Useful study of the great crash of 2008
Charles Morris, an American writer, lawyer and former banker, has written a useful account of the long-building credit crash.
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<br />The last three decades saw the most reckless speculation ever, and the greatest global real estate bubble. By 2005, global financial assets - stocks, bonds, loans and mortgages - were worth four times global GDP. Financial derivatives - a form of claim on these financial assets - had a notional value of ten times global GDP, about $500 trillion.
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<br />Morris warns that the write-downs and defaults will take a trillion dollars, but due to capitalism's chaotic nature could cost two or three times more. The crash is in every kind of financial asset: there are no firebreaks. Thatcherism's free-market mania for asset stripping, abusive lending, and hedge fund secrecy has ended in ruin.
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<br />The USA's accumulated deficit between 2000 and 2006 was $4 trillion, funded by foreign countries, companies and banks. So now all the surplus nations - Russia, China, Japan, the Middle East countries - are moving away from the dollar and, like the pound, it is now in freefall, causing what the Economist called 'the biggest default in history'.
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<br />The US and British governments are turning a debacle into a decades-long disaster, backing their financial capitalists and covering up their problems (hedge funds, like tax havens, do not disclose their balance sheets). Likewise, when Japan's credit and property bubbles burst in the early 1990s, its ruling class defended Japan's financial capitalists, producing a slump that has not yet ended.
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<br />Morris urges a bigger public health care sector and a re-regulation of finance, which would be a start. He concludes, "market dogmatism ... has become the problem, rather than the solution." And he urges us to end what Adam Smith called "the disposition to admire, and almost to worship, the rich and powerful - the great and most universal cause of the corruption of our moral sentiments."
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