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Guest post by Carrick Mollenkamp, Special to ProPublica Jan. 19, 2012, 9:04 a.m.by Jake Bernstein and Jesse Eisinger, ProPublica, Dec. 22by Jake Bernstein and Jesse Eisinger, ProPublica, Aug. 26by Jesse Eisinger and Jake Bernstein, ProPublica, April 9
At a time when mortgage-backed securities were imploding and customers were fleeing the market, a junior analyst at Deutsche Bank AG protested when he was asked to alter the numbers in a spreadsheet to make a Deutsche security look less risky to ratings agencies, according to a person with knowledge of the matter.
The analyst, this person said, was asked by a mid-level Deutsche executive in late 2007 to make it appear that the investment would produce more cash than the bank actually expected at certain time points.
The request came at a crucial moment. In the last months of 2007, investors had grown skittish about such investments amid signs that the housing bubble was deflating, if not bursting. Up and down Wall Street, banks were trying to persuade ratings agencies that large portions of their mortgage-backed securities merited the coveted AAA stamp, meaning that they posed negligible risks of default. The analyst was asked to alter the spreadsheets in order to get a better rating, the person said.
The analyst’s protest prompted an internal investigation conducted by a law firm, according to five current and former Deutsche employees. The protest and probe have not been previously reported.
Much remains unclear about this incident. It could not be learned whether false information was actually provided to the ratings agencies, nor whether the internal investigation dismissed or substantiated the analyst’s account.
Two Deutsche employees who worked on the same team as the analyst told ProPublica they knew of no wrongdoing, and Deutsche issued a strong denial. “Any suggestion that we misled ratings agencies is unfounded and categorically false,” said a Deutsche spokesman, who declined to answer specific questions about the analyst’s protest or the internal inquiry.
But four years later, the revelation that an analyst protested raises questions about how vigorously, if at all, the government is investigating Deutsche Bank and its practices leading up to the financial crisis. In any case, ProPublica has learned, neither the S.E.C. nor any other government regulator or law-enforcement agency has interviewed the analyst.
The SEC’s director of enforcement is Robert Khuzami. Before joining the SEC in 2009, he had been Deutsche Bank’s general counsel for the Americas since 2004. He worked as one of the bank’s top lawyers during the time the analyst raised questions. Khuzami has said he would recuse himself from any actions regarding Deutsche.
Another key SEC official — George Canellos, who oversees enforcement for the New York regional office — used to be a corporate lawyer who defended Deutsche against M&T Bank Corp. M&T, which was suing Deutsche over a security [1] similar to the one the analyst raised objections to, had sought to depose the analyst and obtain the results of Deutsche’s internal inquiry, according to people familiar with the lawsuit.
In December, M&T settled with Deutsche for $55 million in cash, M&T said Tuesday in its fourth-quarter earnings statement [2].
An SEC spokesman said the agency doesn’t discuss whether it is investigating a firm. In general, spokesman Kevin Callahan said, Khuzami doesn’t work on matters related to Deutsche, and Canellos is recused with respect to any matters related to Deutsche Bank’s CDO business.
“We have policies and procedures for all staff to even prevent even the appearance of a possible conflict of interest,” Callahan said. “We have experienced and professional staff … to follow the evidence no matter where it leads, how complicated the product or which firms are involved.”
The analyst’s protest sheds light on a little-understood function, called modeling, that was critical to many of the transactions that wreaked major damage during the financial crisis. Modelers created vast and intricate spreadsheets that estimated or “modeled” how the securities were likely to perform, including on payment schedules.
The Analyst
Through 2006 and into 2007, a part of Deutsche Bank known as the CDO Group was humming. CDOs, or collateralized debt obligations, were securities, underpinned by mortgages, that the bank sold to investors. Even as it hawked these CDOs, Deutsche Bank and some clients were often betting that they would fail, because the mortgages that backed them looked increasingly likely to default. In essence, the bank was selling to investors a product that the bank itself believed was composed of “crap,” as one Deutsche executive famously put it.
During 2006 and ’07 — when CDO sales peaked — Deutsche ranked fourth in issuing CDOs behind Citigroup Inc., J.P. Morgan Chase & Co. and Merrill Lynch & Co., according to a 2011 report [3] on the financial crisis issued by the U.S. Senate Permanent Subcommittee on Investigations.
Inside Deutsche’s CDO Group, pressure to complete and sell the deals was intense, according to the Senate investigation, court records and people familiar with the Deutsche team. Investors were beginning to balk at purchasing CDOs because of signs the housing market was weakening. Employees often worked until 1 a.m. before being driven home in company-supplied town cars.
Among the hardest workers was a team of financial modelers and analysts. But despite their long hours, they “needed more bodies to process the work that was coming through,” said a person familiar with the situation. So, some of the work was farmed out to a relatively cheap but highly skilled source of labor: Deutsche’s Global Markets Centre in Mumbai, India. There, workers proficient in mathematics helped assemble and input the data for key spreadsheets.
Workers in Mumbai eagerly wanted to join Deutsche’s prestigious and lucrative desks in London or New York. Few got the chance. One employee who did was Ajit Jain.
Jain had studied at the Indian Institute of Technology in New Delhi and joined Deutsche in June 2006, according to employment records kept by the Financial Industry Regulatory Authority. He joined the New York office in September 2007, when the CDO Group was struggling to find investors.
Within a short time of his arrival, according to three people familiar with the matter, Jain raised questions about whether spreadsheets were being improperly altered. His complaints went to senior levels within Deutsche, including its legal and compliance departments, according to people familiar with the matter.
A Deutsche spokesman said Jain wasn’t available for comment.
Those spreadsheets were often so large and complex they could take several minutes to open on a computer, according to a person familiar with them. The spreadsheets involved fiendishly complex arrays of inputs and sophisticated calculations, involving everything from the default rates of the mortgages that backed the CDO, to when borrowers would pay off their loans. But one purpose of the spreadsheets was simple: to estimate how much cash the CDOs would generate at certain time points.
One place those estimates went was to ratings agencies such as Moody’s and Standard & Poor’s.
The Quest for a AAA Rating
A CDO is divided into different slices, called tranches, depending on the risk and potential return. These tranches were rated by one of the ratings agencies. For a CDO to be sold, it was crucial that the largest tranche be rated AAA, indicating that this investment was low-risk because it was the last layer to take losses.
But there was a catch: The ratings agencies relied heavily on the banks themselves to estimate the payment schedule on the underlying assets of the CDO, according to a person familiar with the work done at the ratings agencies. It was an “honors” system, this person said, in which the ratings agencies “outsourced” to the banks the inputs for the spreadsheets.
Those spreadsheets are the essence of what are known as CDO models, because the spreadsheets provide a model of how the CDO is likely to perform.
Meanwhile, banks knew how to engineer the key elements of a CDO spreadsheet so that it would spit out cash flow and other outcomes that would meet the ratings agencies’ off-the-shelf formulas, according to a former ratings analyst and a former CDO manager who worked with Deutsche. In other words, banks structuring the deals knew what outcomes were necessary to receive a AAA or AA rating, and they knew how to adjust the spreadsheets to produce these outcomes, these people said.
That’s the same conclusion that John Griffin came to. A professor of finance at the University of Texas at Austin, he co-authored a 2011 paper on CDO modeling that said banks pushed increasingly for top-tier AAA ratings, and that ratings agencies succumbed to the pressure. This led to a “downward movement in standards over time,” Griffin said in an interview.
“Cash flow modeling is more susceptible to influence from the investment bank,” the paper said.
Griffin and his co-author, Dragon Yongjun Tang of the University of Hong Kong, wrote that former employees at two investment banks told them that banks had learned how to tailor CDO models to obtain good ratings.
That is very similar to what Jain told his bosses was happening at Deutsche. According to the person familiar with the matter, a mid-level Deutsche executive asked Jain to alter the spreadsheets by changing certain payment schedules to win a higher rating.
It is not known whether Deutsche submitted such modified spreadsheets to a ratings agency to receive better ratings. As best as could be determined, the specific CDO Jain complained about was not sold to investors. It is not known why.
The Internal Investigation
According to people with knowledge of the internal probe, the alarm Jain sounded went to senior levels inside the bank, including Deutsche’s compliance and legal departments.
Soon, Deutsche called in the New York law firm Milbank, Tweed, Hadley & McCloy to conduct an investigation. The law firm interviewed employees on the CDO desk, according to people familiar with the situation.
Two employees on the desk, in interviews with ProPublica, said they knew of no improper modeling, and a third said he didn’t know because he wasn’t part of the modeling unit.
“I personally don’t think there is anything interesting,” said Konstantin Kulev, who worked as a modeler on the CDO team, according to people familiar with the situation and internal Deutsche documents. In an interview with ProPublica, Kulev declined to answer specific questions.
Milen Shikov, another senior modeler, said in an interview that he knew Jain “did raise some questions” about the CDOs. But Shikov said the matter was “resolved.”
Shikov recalled that he was interviewed by a law firm — he could not remember the firm’s name — for three hours. He said he gave the law firm’s questioners an email exchange with a ratings agency that he said showed Deutsche had followed the ratings agency’s guidelines for preparing cash flow estimates.
A Milbank, Tweed spokeswoman declined comment. A Deutsche spokesman declined to discuss the inquiry or release the law firm’s findings, but he categorically denied the bank had misled any ratings agency.
Lawsuits and a Senate Investigation
It is not known whether the SEC is investigating Deutsche. The SEC has settled with other large banks, such as Citigroup Inc. [4] and JP Morgan Chase & Co. [5] Critics of the agency say its settlements have been too small and have allowed the banks to neither admit nor deny wrongdoing.
Last month, M&T settled its civil suit against Deutsche, ending the high-profile case that had been wending its way through a New York state court.
M&T had alleged that Deutsche improperly sold slices of a $1.1 billion CDO called Gemstone VII that lost more than 95 percent of their value within months. M&T, according to its complaint [1], bought two layers of Gemstone VII: a $42 million layer rated AAA and a $40 million layer rated AA. “The AAA ratings and AA ratings were major considerations in M&T’s determination to invest in the Gemstone VII notes, because they indicated that the notes were safe, stable and nearly risk-free investments,” M&T claimed [6].
The complaint does not mention how payment schedules were modeled. But M&T contended that Deutsche and the outside Gemstone VII manager “gave false information to Standard & Poor’s and Moody’s, the two leading credit ratings agencies, to induce them to rate the Gemstone VII CDO notes higher than the notes deserved so as to overstate their quality and safety.”
Jain’s objections did not concern Gemstone VII but a later, similar CDO, according to people familiar with the matter. As part of its investigation for the suit, M&T learned of Jain’s protest and the internal Deutsche inquiry, according to the person familiar with the suit, and sought to depose Jain and obtain the inquiry report.
Judge John Michalek sealed the case in April, and now M&T has settled. So the suit has revealed very little new information about Deutsche’s practices.
Deutsche declined to discuss the lawsuit. In court papers, Deutsche and its law firm, Milbank, Tweed, said M&T knew the risks of investing in securities underpinned by subprime loans. A Deutsche court filing in 2008 called M&T a “sophisticated participant” in mortgage securities and that the bank had “received detailed written disclosures about the risks of the investment.” The document added that M&T “was counseled to perform its own due diligence” and was told “it could not rely” on Deutsche.
At least one lawsuit concerning Deutsche’s CDOs is continuing. An affiliate of Germany’s IKB Deutsche Industriebank AG sued Deutsche in October after the affiliate lost money investing in five Deutsche CDOs, according to court documents from that case. The IKB affiliate alleges that by late 2005, “Deutsche knew that the subprime market had increasingly come to resemble a house of cards teetering on the verge of collapse.” The court filings do not mention the modeling Jain raised questions about.
A Deutsche spokesman declined comment. One of the most detailed public accounts of Deutsche’s CDO business [7] is the 646-page, 2011 report produced by the Senate investigation. But the report does not discuss how payment schedules for Deutsche CDOs were modeled, or the internal inquiry that stemmed from Jain’s alarm.
The Senate report discusses Greg Lippmann, a Deutsche risk manager who oversaw the assets in Gemstone VII and other CDOs, and helped Deutsche earn $200 million by betting against some of the bank’s mortgage-backed securities. Lippmann called assets that went into the CDO a “pig” and “crap,” [8] according to the Senate report.
Deutsche’s views “were fully communicated to the market through research reports, industry events, trading desk commentary and press coverage,” a bank spokeswoman said. “Despite the bearish views held by some, Deutsche Bank was long the housing market and endured significant losses.”
Within a few months after Jain raised the alarm, many on Deutsche’s CDO team had left the bank, according to FINRA records, and now work for boutique firms that specialize in buying distressed mortgage bonds — exactly the kind of bonds that destroyed the CDOs they once created at Deutsche.
Jain remains at Deutsche.
In news that seems to be fairly ignored by the mainstream media, Fitch (the ratings agency) has stated that Greece is effectively insolvent and will likely default on its March 20
th bond payment of 14.5 billion euros. According to Fitch Ratings Managing Director, Edward Parker, “The so-called private sector involvement, for us, would count as a default, it clearly is a default on our book.”
So Greece’s goose is cooked and it will likely need to re-negotiate the terms of its loans, with creditors possibly writing down 50% of their Greek ‘assets’. Although Fitch clearly considers this a default, whether this triggers Credit Default Swaps (CDS) is anyone’s guess. Somehow, the financial community has danced around that issue despite the end-game in Greece, which has been painfully obvious for a couple years now. Perhaps the dance had a purpose – perhaps it bought financial institutions with net long exposure to Greek debt (via writing CDS) time to hedge their positions. On the other hand, institutions that wrote CDS contracts on US mortgages before 2008 had plenty of time to see the slow-motion train wreck heading their way, yet they did little to prevent their off balance sheet liabilities from exploding.
Regardless, a 50% write-down is hardly solvent and CDS holders, which incidentally includes widows-and-orphans funds attempting to hedge exposure to risk, want to get paid.
And other commentary on the imminent Greek default:
Ann Barnhardt, Founder at Barnhardt Capital Mangement Inc, is anything but mainstream. You don’t have to agree with all her views, but she raises some good points on the soundness of the financial system.
Listen to the interview by Jim Puplava
America is the most free nation in the world. Or is that what we try to convince ourselves?
Perhaps on a sliding scale much of the Western World is relatively free, but I still think much of it is a facade. What other nations achieve with blunt force America does with surgical precision. American politicians have mastered the art of surreptitious manipulation, leading us to believe we are free. We have our iPods, Big Macs and Dancing with the Stars. And with the brainwashing by mass media, we know our ‘enemy’ – the ill-defined terrorist – and we fight for freedom and democracy. Most are convinced that questioning any of this is unpatriotic.
We have been numbed and re-directed so we don’t see or feel the real pain.
Individually we are satiated, yet collectively we are deficient. Change happens when individuals are hungry or hurt – perhaps this is why we see these injustices as someone else’s problem and do nothing ourselves.
The 7 truths below won’t surprise most. Yet we sit complacently as we’re all silently screwed over.
- The big banks run the White House – via heavy lobbying, transplanted personnel and large donations
- Salaries at bailed out banks were capped at $500k – more than the average family makes in a decade.
- Iraq crusade was based on lies about terrorism and WMDs
- Any American can be detained indefinitely at any time for any number of ambiguous reasons
- Marijuana is illegal, yet the cigarette industry legally pumps highly addictive chemicals into tobacco
- There are no real ‘outsiders’ in Washington: America’s leaders are either family, ex-clients or ex-coworkers
- Oil prices are 400% higher than they were a decade ago, yet the government has yet to acknowledge the growing energy crisis
A few regular readers have asked for our list of ‘must read’ books on finance, economics and investing for 2012. The following list includes books I have read (and want to re-read) and books that have been recommended to me by respected colleagues. I intend to read all 12 this year.
If you intend to purchase any of the following, please use the links below. A small fraction of the proceeds will be re-directed to Plan B Economics, helping us keep the analysts well-caffeinated.
1. The End of Growth: Adapting to Our New Economic Reality (Richard Heinberg)
Description:
Economists insist that recovery is at hand, yet unemployment remains high, real estate values continue to sink, and governments stagger under record deficits. The End of Growth proposes a startling diagnosis: humanity has reached a fundamental turning point in its economic history. The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits.
Richard Heinberg’s latest landmark work goes to the heart of the ongoing financial crisis, explaining how and why it occurred, and what we must do to avert the worst potential outcomes. Written in an engaging, highly readable style, it shows why growth is being blocked by three factors:
- Resource depletion
- Environmental impacts
- Crushing levels of debt
2. Currency Wars: The Making of the Next Global Crisis (Jim Rickards)
Description:
In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.
Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of countries’ stealing growth from their trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation, and sometimes actual violence. Left unchecked, the next currency war could lead to a crisis worse than the panic of 2008.
3. Extreme Money: Masters of the Universe and the Cult of Risk (Satyajit Das)
Description:
The human race created money and finance: then, our inventions recreated us. In Extreme Money, best-selling author and global finance expert Satyajit Das tells how this happened and what it means. Das reveals the spectacular, dangerous money games that are generating increasingly massive bubbles of fake growth, prosperity, and wealth–while endangering the jobs, possessions, and futures of virtually everyone outside finance.
“…virtually in a category of its own — part history, part book of financial quotations, part cautionary tale, part textbook. It contains some of the clearest charts about risk transfer you will find anywhere. …Others have laid out the dire consequences of financialisation (“the conversion of everything into monetary form”, in Das’s phrase), but few have done it with a wider or more entertaining range of references…[Extreme Money] does… reach an important, if worrying, conclusion: financialisation may be too deep-rooted to be torn out. As Das puts it — characteristically borrowing a line from a movie, Inception — “the hardest virus to kill is an idea”.
-Andrew Hill “Eclectic Guide to the Excesses of the Crisis” Financial Times (August 17, 2011)
Extreme Money named to the longlist for the 2011 FT and Goldman Sachs Business Book of the Year award.
4. This Time Is Different: Eight Centuries of Financial Folly (Carmen Reinhart and Kenneth Rogoff)
Description:
Throughout history, rich and poor countries alike have been lending, borrowing, crashing–and recovering–their way through an extraordinary range of financial crises. Each time, the experts have chimed, “this time is different”–claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes–from medieval currency debasements to today’s subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much–or how little–we have learned.
Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts–as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur.
An important book that will affect policy discussions for a long time to come, This Time Is Different exposes centuries of financial missteps.
5. When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany (Adam Fergusson)
Description:
When Money Dies is the classic history of what happens when a nation’s currency depreciates beyond recovery. In 1923, with its currency effectively worthless (the exchange rate in December of that year was one dollar to 4,200,000,000,000 marks), the German republic was all but reduced to a barter economy. Expensive cigars, artworks, and jewels were routinely exchanged for staples such as bread; a cinema ticket could be bought for a lump of coal; and a bottle of paraffin for a silk shirt. People watched helplessly as their life savings disappeared and their loved ones starved. Germany’s finances descended into chaos, with severe social unrest in its wake.
Money may no longer be physically printed and distributed in the voluminous quantities of 1923. However, “quantitative easing,” that modern euphemism for surreptitious deficit financing in an electronic era, can no less become an assault on monetary discipline. Whatever the reason for a country’s deficit—necessity or profligacy, unwillingness to tax or blindness to expenditure—it is beguiling to suppose that if the day of reckoning is postponed economic recovery will come in time to prevent higher unemployment or deeper recession. What if it does not? Germany in 1923 provides a vivid, compelling, sobering moral tale.
6. The Modern Survival Manual: Surviving the Economic Collapse (Fernando Ferfal Aguirre)
Description:
My book is a Modern Survival Manual based on first hand experience of the 2001 Economic Collapse in Argentina. In it you will find a variety of subjects that I consider essential if a person wants to be prepared for tougher times: -How to prepare your family, yourself, your home and your vehicle -How to prepare your finances so that you don’t suffer what millions in my country went through -How to prepare your supplies for food shortages and power failures -How to correctly fight with a chair, gun, knife, pen or choke with your bare hands if required -Most important, how to reach a good awareness level so that you can avoid having to do all that These are just a few examples of what you will find in this book. It’s about Attitude, and being a more capable person and get the politically correct wimp out of your system completely.
7. The Age of Deleveraging, Updated Edition: Investment Strategies for a Decade of Slow Growth and Deflation (Gary Shilling)
Description:
Top economist Gary Shilling shows you how to prosper in the slow-growing and deflationary times that lie ahead
While many investors fear a rapid rise in inflation, author Gary Shilling, an award-winning economic forecaster, argues that the global economy is going through a long period of de-leveraging and weak growth, which makes deflation far more likely and a far greater threat to investors than inflation. Shilling explains in clear language and compelling logic why the world economy will struggle for several more years and what investors can do to protect and grow their wealth in the difficult times ahead. The investment strategies that worked for last 25 years will not work in the next 10 years. Shilling advises readers to avoid broad exposure to stocks, real estate, and commodities and to focus on high-quality bonds, high-dividend stocks, and consumer staple and food stocks.
- Written by one of today’s best forecasters of economic trends-twice voted by Institutional Investor as Wall Street’s top economist
- Clearly explains what to invest in, what to avoid, and how to cope with a deflationary, slow-growth economy
- Demonstrates how Shilling has been consistently right about major economic trends since he began forecasting in the early 1980s
8. The Crash Course: The Unsustainable Future Of Our Economy, Energy, And Environment (Chris Martenson)
Description:
The next twenty years will be completely unlike the last twenty years.
The world is in economic crisis, and there are no easy fixes to our predicament. Unsustainable trends in the economy, energy, and the environment have finally caught up with us and are converging on a very narrow window of time—the “Twenty-Teens.” The Crash Course presents our predicament and illuminates the path ahead, so you can face the coming disruptions and thrive–without fearing the future or retreating into denial. In this book you will find solid facts and grounded reasoning presented in a calm, positive, non-partisan manner.
Our money system places impossible demands upon a finite world. Exponentially rising levels of debt, based on assumptions of future economic growth to fund repayment, will shudder to a halt and then reverse. Unfortunately, our financial system does not operate in reverse. The consequences of massive deleveraging will be severe.
Oil is essential for economic growth. The reality of dwindling oil supplies is now internationally recognized, yet virtually no developed nations have a Plan B. The economic risks to individuals, companies, and countries are varied and enormous. Best-case, living standards will drop steadily worldwide. Worst-case, systemic financial crises will toss the world into jarring chaos.
This book is written for those who are motivated to learn about the root causes of our predicaments, protect themselves and their families, mitigate risks as much as possible, and control what effects they can. With challenge comes opportunity, and The Crash Course offers a positive vision for how to reshape our lives to be more balanced, resilient, and sustainable.
9. Endgame: The End of the Debt Supercycle and How It Changes Everything (John Mauldin)
Description:
Greece isn’t the only country drowning in debt. The Debt Supercycle—when the easily managed, decades-long growth of debt results in a massive sovereign debt and credit crisis—is affecting developed countries around the world, including the United States. For these countries, there are only two options, and neither is good—restructure the debt or reduce it through austerity measures. Endgame details the Debt Supercycle and the sovereign debt crisis, and shows that, while there are no good choices, the worst choice would be to ignore the deleveraging resulting from the credit crisis. The book:
- Reveals why the world economy is in for an extended period of sluggish growth, high unemployment, and volatile markets punctuated by persistent recessions
- Reviews global markets, trends in population, government policies, and currencies
Around the world, countries are faced with difficult choices. Endgame provides a framework for making those choices.
10. Unexpected Returns: Understanding Secular Stock Market Cycles (Ed Easterling)
Description:
Why is the stock market acting differently in the 2000s than in the 1980s and 1990s?
Before you read any how-to investment books or seek financial advice, read Unexpected Returns, the essential resource for investors and investment professionals who want to understand how and why the financial markets are not the same now as they were in the 1980s and 1990s. In addition to explaining the fundamentals, this book takes you on a graphic journey through the seasons of the market, tying together economics and finance to explain the stock market’s cycles. Using comprehensive full-color charts and graphs, it offers an in-depth exploration of what has changed over the past five years – and what you can do about it to avoid disappointment with your investments. This unique combination of investment science and investment art will enable you to differentiate between irrational hope and a rational view of the current financial markets. Based on years of meticulous research, it provides the sensible conclusions that will drive your future investment choices and give you the confidence to rely on your investment outlook, whatever your financial strategy.
11. Debunking Economics – Revised and Expanded Edition: The Naked Emperor Dethroned? (Steve Keen)
Description:
Debunking Economics – Revised and Expanded Edition, now including a downloadable supplement for courses, exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong. When the original Debunking Economics was published back in 2001, the market economy seemed invincible, and conventional “neoclassical” economic theory basked in the limelight. Steve Keen argued that economists deserved none of the credit for the economy’s performance, and “The false confidence it has engendered in the stability of the market economy has encouraged policy-makers to dismantle some of the institutions which initially evolved to try to keep its instability within limits.” That instability exploded with the devastating financial crisis of 2007, and now haunts the global economy with the prospect of another Depression. In this expanded and updated new edition, Keen builds on his scathing critique of conventional economic theory while explaining what mainstream economists cannot: why the crisis occurred, why it is proving to be intractable, and what needs to be done to end it. Essential for anyone who has ever doubted the advice or reasoning of economists, Debunking Economics – Revised and Expanded Edition provides a signpost to a better future.
12. Debt: The First 5,000 Years (David Graeber)
Description:
Before there was money, there was debt
Every economics textbook says the same thing: Money was invented to replace onerous and complicated barter systems—to relieve ancient people from having to haul their goods to market. The problem with this version of history? There’s not a shred of evidence to support it.
Here anthropologist David Graeber presents a stunning reversal of conventional wisdom. He shows that for more than 5,000 years, since the beginnings of the first agrarian empires, humans have used elaborate credit systems to buy and sell goods—that is, long before the invention of coins or cash. It is in this era, Graeber argues, that we also first encounter a society divided into debtors and creditors.
Graeber shows that arguments about debt and debt forgiveness have been at the center of political debates from Italy to China, as well as sparking innumerable insurrections. He also brilliantly demonstrates that the language of the ancient works of law and religion (words like “guilt,” “sin,” and “redemption”) derive in large part from ancient debates about debt, and shape even our most basic ideas of right and wrong. We are still fighting these battles today without knowing it.
Debt: The First 5,000 Years is a fascinating chronicle of this little known history—as well as how it has defined human history, and what it means for the credit crisis of the present day and the future of our economy.
Debate between Peter Schiff, David Rosnick, and Roger Farmer
Barry also discusses gold, banking and housing.
