Satyajit Das presents an erudite, insider's view of the world of very high finance, far removed from the every day money transactions on "Main Street." This world is as different, and as counter-intuitive, as quantum mechanics is from classical Newtonian physics. Das has "paid his dues," working on both the "buy" and "sell" side in this ethereal world for 33 years. His 2006 book Traders, Guns and Money: Knowns and unknowns in the dazzling world of derivatives Revised edition (Financial Times Series) raised the specter of a "crash," due to leverage and the concentration of economic power, as opposed to the carefully promoted image of "risk management" that has been flogged by the salesmen for derivatives, including Alan Greenspan. As is well-known, the crash did come in 2008, requiring a massive government bailout as it is politely called (in actuality, it is the many who pay, and continue to owe so much to the few). The Few have survived, Masters again of the universe, and the good times (for them) roll on. Das does a fairly good job of making these whirlwind events intelligible.
Fittingly, his Prologue is entitled "Hubris." As indeed it was (and is). I was recently at a dinner in Orange Co. CA., and the consensus was the 2008 debacle was all Barney Frank's fault! Well, Das has a more nuanced, and comprehensive view. Starting with George Bush, who wanted home ownership to be as widespread as possible in America, and that meant more "affordable" products which led down a very slippery slope to a toxic asset cesspool that was somehow labeled "Triple A." The author fleshes out this story with abundant anecdotes; certainly the one most referenced is über-hedge fund manger Steve Cohen's $12 million purchase of a shark stretched over a weighted fiberglass mold entitled: "The Physical Impossibility of Death in the Mind of Someone Living." And, no doubt as intended, the shark was a wonderful metaphor for the business.
The book is divided into five parts. The first looks at the sheer faith involved in money transactions, and how it has involved from shells and silver coins to bits and bytes. The second part looks at financial "fundamentalism," an all too apt term, with the ground center of such thinking, which has come to dominate the world, being at the University of Chicago, with its arch-gnome, Milton Friedman. Personally, I think Naomi Klein, in The Shock Doctrine: The Rise of Disaster Capitalism covered this ground much better, but Das is incisive too, with a chapter entitled "False Gods, Fake Prophecies." Imagine being dominated by the thoughts of an individual who believed government should not be involved in the business of education or the national parks, as a small sample (ah, but it should be involved in enforcing contracts). Yet that has come to pass, since the so-called "free market" is the magic elixir that fixes all. The third part focuses on how we have become enthralled with debt (and drowned in it), all because one makes a higher percentage return when less actual equity is retained in a company (well, when one makes a return at all). In this part there are numerous diagrams which readily explain to the non-financial "layman" how those mortgages were "sliced and diced," and what the actual underlying assumptions were that governed the "tranches." In the fourth part, on the oligarchy that now governs us, Das explains how Ayn Rand has dominated the thoughts of so many of the elites, and reminds us, fittingly again, of a particular S-M scene in The Fountainhead (Centennial Edition Hardcover). And I shuttered to learn that now Fed Chairman Bernanke was attending Milton Friedman's 90th birthday party. More frightening still, is Bernanke's thesis that the real problem is a GLUT of global savings! The concluding part, and epilogue are not optimistic; featuring Bernanke's comment that the future will be "unusually uncertain."
Das repeatedly references his financial story to both the popular and academic culture. There are plenty of "bon mots," like: "Greenspan excelled at lacquering a slate of ignorance with a thin coating of knowledge." Das also refers to the "Greenspan put," meaning that there was always an assumption the Fed would bail Wall Street out of any folly; an assumption that came to pass. Das quotes Martin Baker on the magic formula of hedge funds: "Take a speculative cocktail shaker. Add four parts public ignorance, and 33 parts greed. Toss in a little perceived genius...Season generously with mystique. Add apparent publicity shyness to taste. Serve in opaque tumbler of awed, to ill-informed media coverage." Das even works in my favorite quote (and proverb for paranoids) from Thomas Pynchon's Gravity's Rainbow (Penguin Classics Deluxe Edition): "If you have them asking the wrong questions, you don't have to worry about the right answers."
But that is also the problem with this book. I hate to say it, since in general I like the references, but there are simply TOO many, madly tacked together at times, and they simply don't work. And Das throws them at the reader staccato style, bam, bam, processing the relevant and the irrelevant like the trader he once was. For example, one paragraph of three sentences goes from an expert at the Heritage Foundation to another commentator on the 2008 Beijing Olympics to Lillian Hellman. He does this repeatedly. Another swings from Arundhati Roy to John Steinbeck. He ties in Edward Abby's comment about growth and cancer cells; aphorisms from Yogi Berra and Mark Twain, and obscure 16th century Portuguese writers. Erudite yes, but also slap-dash, lacking a central thesis that holds it all together. At times, it dazzles; at others, it was simply exhausting, and seems to reflect Baker's comment above about tossing in a little perceived genius.
Overall, though, a book well marked-up, with passages that will be reviewed, and re-reviewed in the future. 4-stars.
