It’s the Economy…So Don’t be Stupid
A book review of “13 Bankers” and “White House Burning” by Simon Johnson, James Kwak
“13 Bankers” is my source for what froze the world financial system in 2008. The authors begin at the beginning: the formation of finance in 18th century United States. The thread of history makes for fascinating context; history really does repeat itself for those who ignore its lessons. Just because it’s “boring banking” doesn’t mean it’s boring history. It’s the sense of root cause, going back to Jefferson and Hamilton that gives “Twelve Bankers” it’s dynamics and sense of motion; where did the crash come from, where is it now, where might we be headed because of it.
Yes, there are CDOs, MBSs, and tranches to wade through. If you read very carefully you can make some sense of these, at least as much as professional investors, who didn’t understand them either. However, that aspect of the text can be easily skimmed, with a takeaway that the actual buyers and sellers were just as confused.
You’re going to like this book if you appreciate an invasive and analytical study of recent history. If you only read one non-fiction, current events book a year, “13 Bankers” is the one to pick up.
“White House Burning” is a more immediate work on politics, which attempts to untangle something very specific: the national debt. While this topic might seem a myopic focus for a work of political economics, the authors make a salient case that the national debt is what we should be talking about.
Key points are motivated by drawing on the 2 century financial history of the United States and the British Empire it was born from. In a word: money wins wars. The parallel with the past 15, perhaps 55, years of American history should be clear. “Guns or butter”, “No new taxes”…pick whatever rhetoric from whichever decade you choose.
However, if war related debt were the sole focus of the book, it wouldn’t merit much more than an extended op-ed or blog post treatment. What is surprising about “White House Burning” is the turn it takes into political philosophy: what is our vision of the role government? Given different visions, what should government provide for and require of its citizens? How should that government operate to accomplish such?
By citing the very real “aging of the citizenry” in present day America and connecting it to our fiscal future via social insurance programs, Social Security, Medicare and their ilk, the reader is forced to think seriously about the country’s financial big picture. We all know governments don’t operate with the same financial rules of a household, but just what are the consequences of a government going in the red, or in the black, and how do taxes fit in to the short and long term cause and affect of it all?
These are weighty and politically charged questions — in any age, it appears — and no less so in ours. “White House Burning” does as good a job as I can imagine unraveling the facts from the fiction using language an inquisitive citizen can understand.
While this books remains reasonably even handed up to the final chapter, the authors conclude by making their own case for the roles and purposes of government. To their credit, they are very clear in text where they have moved from analysis to “educated opinion.” Further, they provide a reading list on the philosophical basis for their views.
Don’t let opinions and political leaning dissuade you from reading this book. There is no better exposition of important, hard decisions we in the United States must make in the next 10 years. What the authors do succeed at is convincing the reader that, “Stay the course” will not do: we must get off our legislative logjam-on-autopilot, one way or another.