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If your I.Q. Mr Smick's book is so full of obvious contradictions and disconnected propositions leading to illogical conclusions, that it is funny. The only things he omitted are cartoons to illustrate the ridiculous text. is above 50, you might want to skip this one unless you would like to see the kind of thinking that got us into the mess we're in. Also, you might want to Google the guys who recommend this book and the people he calls entrepreneurs.
Very informative book. Provided excellent insight into China and the possible pitfalls that every investor should consider. Also, the chapter on Japan was of significance especially given the parallels of their crisis and now ours. Hopefully, the US will not make the same mistakes, but after reading the book one realizes that the government and private sector actions and rhetoric are earily similar to the mistakes of Japan's lost decade.
financial service industry leadership. The U.S. Other short-term rates depend on credit spreads controlled by traders. Manufacturing profitability will plummet. They control the banking system as their political instrument. Another interesting Smick curve is his dire China outlook.
Smick concept is the demise of globalization. He sees a nefarious combination of contracting trade with rising trade imbalances.At the end, Smick summarizes that the most formidable curves we will have to deal with include: 1) growing fiscal imbalances due to social entitlements throughout the industrialized World;2) the Chinese excess capacity juggernaut that will cause deflation worldwide;3) class warfare leading to rising taxes against capital;4) lack of trust in the financial system that will lead to restriction on capital flows. He would forbid off-balance sheet vehicles so regulators could accurately measure banks' risk based capital. And, Fed has no control whatsoever on long term rates. The Leadership censors information that prevents innovation and keeps the economy stuck in low-cost manufacturing. To read more on this, I recommend Zakaria's The Post-American World.
Within the books I have read about financial crises, the authors develop one core analytical concept. The WTO's effectiveness is waning. However, if Smick had written his book four months later, he would be more positive. In such an ocean of money, the Federal Reserve controls only risk free short-term rates. Together those curves will weaken economic growth and increase market volatility.
and French farm subsidies have reached egregious levels. Smick sees evidence mercantilism is rising. Thus, banks are devoid of any credit management. Also, China one child policy has caused the population to age rapidly; that will lower economic growth.Smick's views on Japan are not encouraging because:1) society is aging rapidly;2) its culture that forbids risk taking;3) its excessive savings rate and weak domestic demand;4) Bad government policies that turned their asset bubbles in 1990 into two decades of economic stagnation;5) Japan is a fiscal basket case with a public Debt/GDP ratio of 170% meanwhile the U.S. The only way China can grow is through exports supported by an artificially low Chinese currency. Those have caused bubbles in real estate, stocks, and industrial production. Europe will muddle through in a slow growth, high unemployment, and protectionist mode.
Government trust in free trade and free capital flows is declining. Smick states globalization fuels trade and rising living standard. His Japanese contact, Tadasi Nakamae envisions a world plagued with overcapacity. The Leadership controls monetary policy and maintains rates that are way too low.
Asians will respond by increasingly closing their markets to foreigners. A Sarbanes-Oxley II could cause the demise of the U.S. China and all emerging market economies will exacerbate excess capacity. The Communist Party Leadership controls everything ineptly.
Treasury and Bernanke's unprecedented steps to shore up the economy and the financial system;b) Obama's upcoming cabinet of pragmatic centrists that will provide the leadership Smick wants;c) Obama's upcoming huge infrastructure fiscal stimulus.But, Smick fully deserves the credit of uncovering all the nasty curves we should be aware off beyond the housing crisis. Greenspan in "An Age of Turbulence" also stated this is because world capital markets have become so large. But, Smick warns globalization may wane because of: a) protectionist policies out of Washington; b) politics of class warfare with rising taxes on capital; c) upcoming over-regulation of the financial markets; andd) restriction on foreign investments. For Morris in the excellent The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash the concept is the over leveraged hedge funds supporting the securitized credit markets. Smick mentions that pension funds control $25 trillion, Japanese retail investors $11 trillion, OPEC $4 trillion, Asian central banks and their sovereign wealth funds $3 trillion, and hedge funds and private equity $3 trillion. For Shiller in The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It the concept is an improved economic information infrastructure. The U.S. If the Chinese let their currency float upward, it would cause millions of unemployed.
The Chinese have no social safety net. Thus, the Bank of Japan has no flexibility and has to keep rates low not to exacerbate their Budget Deficit. When those bubbles burst, it will have a devastating deflation impact on the World. with the broadest markets has been a huge beneficiary of globalization. The Doha round was a disaster. For Kindleberger in his outstanding Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics) the concept is the Hyman Mynski model explaining how the credit cycle exacerbates the business cycle.
However, Smick is concerned the upcoming regulations will over reach. So, they save everything resulting in plummeting consumer demand from 50% of GDP in 1992 to only 36% in 2006. The U.S. Securitization must become transparent to reestablish trust in financial innovation. And, how their demise may cause crashes in commercial real estate, credit cards, etc. The better alternative for them would be to stimulate domestic demand. The West environmental standards will result in protectionism against Asian products.
He would reform the credit rating agencies by eliminating conflict of interests (they are paid by the bond issuers they rate).
Smick is not anti-regulation.
He promotes better disclosure so traders can evaluate complex securities without relying on bond ratings.
In combination those policies would impair trade, capital flows, economic growth, innovation, and job creation.One of Smick's interesting "curve" is that Western Central Banks do not control much.
will have the headache of dealing with a huge pile of Chinese goods on the world markets.
Smick indicates China does that to protect its unproductive domestic companies that employ 97% of the people and account for only 45% of exports.
is under 40%.
Both, Japan and China have failed to do so.
That's because he would have liked the government policy responses so far, including:a) The U.S.
Overall I enjoy the many interesting discussions in the book on macro-economics, international finance and issues on public policy decision making. After I read through each chapter, although interesting, I had a sense of not knowing what exactly I just learnt. But the materials presented by the author often lack clear direction. You will find the author presents a large number of ideas without giving a clear conclusion or summary at the end of the chapters. May be this is the nature of macro-economic issues, which are often complex and the various factors affecting the outcomes can have different effects if observe / apply at different times. But I still think the author can do a better job of summarizing his ideas and present his materials in a more organized way.
I wouldn't know whether this book is good or not. The reader seemed adequate, if not terrific. But, 3 of the first 5 discs had flaws and skipped and sputtered and made whole sections incomprehensible. We had a car trip ruined.
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