Review (Guest): ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism

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Yves Smith

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Why are we in such a financial mess today?  There are lots of proximate causes: over-leverage, global imbalances, bad financial technology that lead to widespread underestimation of risk.
But these are all symptoms. Until we isolate and tackle fundamental causes, we will fail to extirpate the disease.  ECONned is the first book to examine the unquestioned role of economists as policy-makers, and how they helped create an unmitigated economic disaster.

Here, Yves Smith looks at how economists in key policy positions put doctrine before hard evidence, ignoring the deteriorating conditions and rising dangers that eventually led them, and us, off the cliff and into financial meltdown.  Intelligently written for the layman, Smith takes us on a terrifying investigation of the financial realm over the last twenty-five years of misrepresentations, naive interpretations of economic conditions, rationalizations of bad outcomes, and rejection of clear signs of growing instability.

In eConned, author Yves Smith reveals:

–why the measures taken by the Obama Administration are mere palliatives and are unlikely to pave the way for a solid recovery

–how economists have come to play a profoundly anti-democratic role in policy

–how financial models and concepts that were discredited more than thirty years ago are still widely used by banks, regulators, and investors

–how management and employees of major financial firms looted them, enriching themselves and leaving the mess  to taxpayers

–how financial regulation enabled predatory behavior by Wall Street towards investors

–how economics has no theory of financial systems, yet economists fearlessly prescribe how to manage them

5.0 out of 5 stars Great ECON Blogger Now in Book Form, March 3, 2010

I have been a huge fan of author Yves Smith's Naked Capitalism blog for years now, and this book is a major triumph, putting in one place and fully developing the major themes that Smith has explored on her blog over the course of the recent financial crisis. While this might appear to be well-plowed territory, Smith tells it as an economics story that is really a story of a failed democracy. The linchpin of her work is the ascendant power of Wall Street over Main Street during the Greenspan era and now the Bernanke era. Complicit with politicians, financial regulators, and the revolving door of government service, the big Wall Street firms and banks have, according to Smith, seized the political process to serve their narrow, financial interests instead of those interests that serve a well-functioning polity. However, despite the seemingly inflammatory thesis, this book is no rant. Smith, an industry insider, is one of the smartest and expert observers of the flawed process that we now have, and the book is loaded with incisive explanations that pull it all together for the average reader in clear and at times thrilling language. In the broadest sense, this is a moral tract as much as an economics and political one. The moral outrage, while controlled and polite, is palpable on every page. In essence, this is a deeply informed book that does what economics and political tracts almost never do: it tugs at the heart as well as at the mind.

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