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Debt And Delusion: Central Bank Follies That Threaten Economic Disaster (Deluxe Edition)

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It's been almost seven years since I wrote Debt and Delusion. So naturally, readers have a right to ask, "Why produce an updated version at this time?" There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply. More than that, like an abandoned mine, the book It's been almost seven years since I wrote Debt and Delusion. So naturally, readers have a right to ask, "Why produce an updated version at this time?" There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply. More than that, like an abandoned mine, the book stands as a monument to what was already known about the global credit expansion and the strains in the financial system before the halving of equity market prices from the early 2000 peaks. Most importantly, and sad to say, this equity market trauma foreshadows even more disastrous results of the financial folly that has reached proportions unimaginable in the summer of 1998. And so, the primary function of the book -- "as a timely warning of the perils that lie ahead" -- remains valid. Debt and Delusion exposes serious flaws in the development of the global financial system starting in the early 1990s, singling out the world's largest central banks for special criticism. Their negligent oversight has permitted an explosion of corporate and household credit that has fueled a succession of false markets in stocks, bonds, and property. Alarmed by the monster so created, the U.S. Federal Reserve has spent much of the past five years staving off the evil day when foolish lending turns into bad debt. Far from being the architects of economic stability and low inflation, the world's central bankers have ushered in a new era of financial fragility and latent instability. Innovations in the use of derivatives, structured products, and other complex financial instruments have been applauded by the central banks on narrow technical criteria. But these supposed bastions of conservatism have failed to comprehend the wider implications for financial stability. From poorly documented home loans to sub-prime auto loans to subordinated corporate debt and junk bonds, permanently easy access to credit has compromised economic management in the U.S., U.K., and other English-speaking nations and has fostered an illusion of prosperity and well being. Lamentably, this staggering collective flight from reason has been endorsed by the economics establishment. The failure of many of the finest economic minds to engage with the rapid evolution of our financial structures and institutions has led to a superficial assessment of this unprecedented credit experiment. Only now, as various credit markets face the inevitable tests of higher interest rates and the realistic pricing of credit risks, is the threat of a pandemic of debt-related distress beginning to be taken seriously. Government budgets, already strained by the weight of social support, have limited scope to respond. In short, tougher economic times lie ahead, when personal debts will hang more onerously than for 75 years. Debt and Delusion recommends a hasty! reappraisal of the debt requirements of corporations and households alike. Peter Warburton September 2005


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It's been almost seven years since I wrote Debt and Delusion. So naturally, readers have a right to ask, "Why produce an updated version at this time?" There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply. More than that, like an abandoned mine, the book It's been almost seven years since I wrote Debt and Delusion. So naturally, readers have a right to ask, "Why produce an updated version at this time?" There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply. More than that, like an abandoned mine, the book stands as a monument to what was already known about the global credit expansion and the strains in the financial system before the halving of equity market prices from the early 2000 peaks. Most importantly, and sad to say, this equity market trauma foreshadows even more disastrous results of the financial folly that has reached proportions unimaginable in the summer of 1998. And so, the primary function of the book -- "as a timely warning of the perils that lie ahead" -- remains valid. Debt and Delusion exposes serious flaws in the development of the global financial system starting in the early 1990s, singling out the world's largest central banks for special criticism. Their negligent oversight has permitted an explosion of corporate and household credit that has fueled a succession of false markets in stocks, bonds, and property. Alarmed by the monster so created, the U.S. Federal Reserve has spent much of the past five years staving off the evil day when foolish lending turns into bad debt. Far from being the architects of economic stability and low inflation, the world's central bankers have ushered in a new era of financial fragility and latent instability. Innovations in the use of derivatives, structured products, and other complex financial instruments have been applauded by the central banks on narrow technical criteria. But these supposed bastions of conservatism have failed to comprehend the wider implications for financial stability. From poorly documented home loans to sub-prime auto loans to subordinated corporate debt and junk bonds, permanently easy access to credit has compromised economic management in the U.S., U.K., and other English-speaking nations and has fostered an illusion of prosperity and well being. Lamentably, this staggering collective flight from reason has been endorsed by the economics establishment. The failure of many of the finest economic minds to engage with the rapid evolution of our financial structures and institutions has led to a superficial assessment of this unprecedented credit experiment. Only now, as various credit markets face the inevitable tests of higher interest rates and the realistic pricing of credit risks, is the threat of a pandemic of debt-related distress beginning to be taken seriously. Government budgets, already strained by the weight of social support, have limited scope to respond. In short, tougher economic times lie ahead, when personal debts will hang more onerously than for 75 years. Debt and Delusion recommends a hasty! reappraisal of the debt requirements of corporations and households alike. Peter Warburton September 2005

36 review for Debt And Delusion: Central Bank Follies That Threaten Economic Disaster (Deluxe Edition)

  1. 4 out of 5

    Waylaid

    "Prepare for an explosion that will rock the western financial system to its foundation". So ends what will, hopefully, one day, be recognised as a classic. Yes, we've all heard it. Except that this book was written in 1999! Warburton is probably the first person to predict what we're all currently going through. If anyone has deserved the accolade of the first to predict, it's Warburton. Warburton warned about excessive bonds, complex derivatives, you name it, more than 8 years before they actual "Prepare for an explosion that will rock the western financial system to its foundation". So ends what will, hopefully, one day, be recognised as a classic. Yes, we've all heard it. Except that this book was written in 1999! Warburton is probably the first person to predict what we're all currently going through. If anyone has deserved the accolade of the first to predict, it's Warburton. Warburton warned about excessive bonds, complex derivatives, you name it, more than 8 years before they actually became a problem. He pointed the finger at central banks - which are currently printing money - and naive governments. What's impressive about this book, is that, despite all that has happened, it is not out of date. The fact that the second chapter concerns inflation - something yet to take effect - gives an indication of this. This book may yet predict the future. The details might have changed (there's not much about China), but the story remains the same. Warburton also gives succinct advice. His advice for individuals is, your money is not safe in banks! "[I]t is advisable to distribute liquidity around six or even a dozen accounts, with at least one in a reputable foreign currency." Keep debt down, liquidity up and well spread. He also suggests both keeping reasonable liquidity for bargain hunting! This really is an interesting book, and very practical.

  2. 4 out of 5

    Karen

    This book paints with too broad a brushstroke for me. It lumps all the advanced economies together and makes assertions that don't necessarily fit the USA in particular. Inflation may have been Public Enemy Number One in Europe over the last few decades, but high unemployment was viewed as much more fearsome for most of that time by US leaders. The book basically predicted the financial blowup of 2007, back in 1998, though. Apparently financial innovation was already in full swing in the 1990s. Th This book paints with too broad a brushstroke for me. It lumps all the advanced economies together and makes assertions that don't necessarily fit the USA in particular. Inflation may have been Public Enemy Number One in Europe over the last few decades, but high unemployment was viewed as much more fearsome for most of that time by US leaders. The book basically predicted the financial blowup of 2007, back in 1998, though. Apparently financial innovation was already in full swing in the 1990s. There is a fair amount of interesting information in this book, but I guess the problem is (1) it isn't all tied together very well, which makes it hard to remember it all, plus the aforementioned (2) too many expansive generalizations and too few supporting details. Not as good as hoped for, but still worth the time to read.

  3. 4 out of 5

    FrancisR

  4. 4 out of 5

    Nudgem

  5. 4 out of 5

    Chris Diniz

  6. 5 out of 5

    Wajahat

  7. 5 out of 5

    Maxgw

  8. 4 out of 5

    P

  9. 5 out of 5

    Hristos Dagres

  10. 4 out of 5

    Lucie

  11. 5 out of 5

    Stephen Hemingway

  12. 5 out of 5

    Josh Miller

  13. 5 out of 5

  14. 4 out of 5

    KC

  15. 4 out of 5

    Elizabeth Tarasevich

  16. 4 out of 5

    Lightgrey

  17. 4 out of 5

    Bob

  18. 5 out of 5

    Josip Cmrečnjak

  19. 4 out of 5

    Ken Buchanan

  20. 4 out of 5

    Michael Thom

  21. 5 out of 5

    A.W. Jones

  22. 4 out of 5

    Trish

  23. 4 out of 5

    Dave

  24. 4 out of 5

    DesMoines

  25. 5 out of 5

    Om Prakash

  26. 5 out of 5

    Rodrigo Paredes

  27. 5 out of 5

    Oby

  28. 4 out of 5

    Danny

  29. 4 out of 5

    Pritesh

  30. 4 out of 5

    mt

  31. 4 out of 5

    John

  32. 4 out of 5

    Thomas

  33. 5 out of 5

    We We Ew

  34. 4 out of 5

    Ján Skácel

  35. 4 out of 5

    Nikolaos Tsoutsas

  36. 5 out of 5

    Joshua

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