Book Bits | 22 February 2020

The Wolf at the Door: The Menace of Economic Insecurity and How to Fight It
By Michael J. Graetz and Ian Shapiro
Q&A with co-author (Graetz) via Yale News
Q: Why prioritize economic insecurity over economic inequality?
A: There are several reasons. The first is that economic insecurity is rampant in the United States. About 40% of Americans say they couldn’t cover an unexpected $400 emergency expense with cash or a credit card charge they could pay off at the end of the month. Unless this insecurity is addressed, our politics will become increasingly ugly. You’ll see increased polarization and anti-immigration sentiment.
Second, as we learned from Daniel Kahneman and Amos Tversky’s critique of conventional economics, the prospect of loss is a more potent political motivator than the prospect of gain. Trump’s slogan “Make America Great Again” was effective because it implies that he would restore something that was taken away. It wasn’t about addressing inequality. He didn’t promise to make people rich or redistribute wealth. In fact, he bragged about his own wealth. Two-thirds of Trump’s primary voters earned above the U.S. median income of $50,000 for a family of four. These are not blue-collar folks, but they fear that they’re losing things. They’re worried about downward mobility — that their kids will be less successful than they are.

Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction
By David Enrich
Summary via publisher (Custom House/HarperCollins)
In Dark Towers, award-winning journalist David Enrich reveals the truth about Deutsche Bank and its epic path of devastation. Tracing the bank’s history back to its propping up of a default-prone American developer in the 1880s, helping the Nazis build Auschwitz, and wooing Eastern Bloc authoritarians, he shows how in the 1990s, via a succession of hard-charging executives, Deutsche made a fateful decision to pursue Wall Street riches, often at the expense of ethics and the law. Soon, the bank was manipulating markets, violating international sanctions to aid terrorist regimes, scamming investors, defrauding regulators, and laundering money for Russian oligarchs. Ever desperate for an American foothold, Deutsche also started doing business with a self-promoting real estate magnate nearly every other bank in the world deemed too dangerous to touch: Donald Trump. Over the next twenty years, Deutsche executives loaned billions to Trump, the Kushner family, and an array of scandal-tarred clients, including convicted sex offender Jeffrey Epstein.

The Third Pillar: How Markets and the State Leave the Community Behind
By Raghuram Rajan
Review via International Monetary Fund
Markets and the state have long competed to control what Lenin called the commanding heights of the economy. After the Berlin Wall fell, markets seemed to reign supreme. Even many on the left, traditional supporters of a strong state, became champions of free markets. The brilliant economist Larry Summers professed “grudging admiration” for Milton Friedman and, while at the US Treasury in the 1990s, pushed for financial globalization, the free flow of capital across national borders.
Raghu Rajan never succumbed to the euphoria. While a firm believer in free markets and their benefits, he has been vocal about their costs. In Saving Capitalism from the Capitalists he wrote that the victims of competition should get help to ease their pain and secure their future: “Markets need a heart for their own good.” In 2005, in a now-famous speech, he warned that the excesses of financial globalization raised the odds of a “catastrophic meltdown,” earning a rebuke from Summers that Rajan was “slightly Luddite” and “largely misguided.”

Bit Tyrants: The Political Economy of Silicon Valley
By Rob Larson
Summary via publisher (Haymarket Books)
If the stories they tell about themselves are to be believed, all of the tech giants—Apple, Google, Microsoft, Facebook, and Amazon—were built from the ground up through hard work, a few good ideas, and the entrepreneurial daring to seize an opportunity when it presented itself. With searing wit and blistering commentary Bit Tyrants provides an urgent corrective to this froth of board room marketing copy that is so often passed off as analysis. For fans of corporate fairy-tales there are no shortage of official histories that celebrate the innovative genius of Steve Jobs, liberal commentators who fall over themselves to laude Bill Gates’s selfless philanthropy, or politicians who will tell us to listen to Mark Zuckerberg for advice on how to protect our democracy from foreign influence.

Golden Gates: Fighting for Housing in America
By Conor Dougherty
Review via San Francisco Chronicle
There’s an epochal feel to “Golden Gates.” Oakland-based New York Times economics reporter Dougherty captures his native Bay Area — wracked by growing pains, in generational flux — at an inflection point. The crucible for much of this strife: housing — Millennials want more of it, affordably; boomer pooh-bahs (who’ve finally met their demographic match) want to restrict supply for fear growth will defile their cherished home; the working poor want to hold onto theirs as rents are bid up; and thousands more, living rough, just want shelter tonight.

Financial Derivatives: A Blessing or a Curse?
By Simon Grima and Eleftherios I. Thalassinos
Summary via publisher (Emerald)
Should we fear financial derivatives, or embrace them? Finance experts Simon Grima and Eleftherios I. Thalassinos explore what financial derivatives are, and whether the investment world should consider them useful tools, or a complete waste of time and money.