Thursday, November 10, 2011

My book "America on Strike" is very important in understanding business and management, the stock market and the State and Corporate Capitalistic system we live in. After reading "Devil Take the Hindmost" you might want to consider "America on Strike." Thanks. Click on book cover to the right on this page for more information.

Devil Take the Hindmost

By Edward Chancellor

Book Review

By Richard Edward Noble

This book makes it extremely clear that the stock market is a dangerous place. The author begins with the speculator and the ethics of speculation.

“Speculation is a divisive topic. Many politicians – several of them in Asia – warn that the global economy is being held hostage by speculators. In their opinion, the speculator is a parasitical figure, driven by greed and fear, who creates and thrives on financial crises … Western economists take a radically different line. They argue that speculation is fundamentally a benign force, essential to the proper functioning of the capitalist system.”

In the last paragraph of the book the author gives us his conclusion on this speculative debate.

“Speculation undermined the Bretton Woods system of fixed currencies and, more recently, it has destroyed the state managed capitalism of Japan and other Asian nations. As an anarchic force, speculation demands continuing government restrictions, but inevitably it will break and chains and run amok. The pendulum swings back and forth between economic liberty and constraint.”

That conclusion in my estimation gets a 10 on the Alan Greenspan scale of economic mumbo-jumbo. But it is standard fare from those versed in economics. After reading the book I actually understand what the author is trying to say in this self-contradictory statement. That’s a little scary, in itself.

But in truth I did not buy this book to get the author’s answers to anything. I bought it to get historical information on panics, bubbles and crises. I got a good deal of information. I’m satisfied.

I was actually looking for a book discussing U.S. panics beginning with colonial times and coming forward to the present. More than half this book discusses pre-colonial panics and countries other than the U.S. So I’m still in the market for something more specific and more detailed.

But what about investing in the stock market? What kinds of people have been involved in this enterprise? And how should an average person look at the stock market for his personal investments.

The answers for me, after reading this book are: Do not invest in the stock market. It is filled with crazies, manipulators and the clinically insane – not to mention outright gangsters and criminals. And an average person would be better off investing their life’s savings in their retarded son-in-law than giving their money to a stock broker.

The author takes his readers on a tour of the many famous speculative bubbles and manias of the past going back to the “Tulipomania” of 1630 and carrying us through the Japanese crisis of the 1980s. He even dabbles into present day derivatives and hedge funds. The book was published in 1999 so it predates the current fiasco. But this book makes it very clear that the historical information was there. Japan should have been an obvious example.

For Alan Greenspan to state before Congress that he couldn’t imagine that prominent bankers and brokers would act in such a “negligent” unprofessional manner is beyond naiveté. Alan was obviously joking. It is difficult to determine when Alan Greenspan is joking.

But Alan was not the criminal. He did nothing wrong. He did nothing right either. As J.K. Galbraith stated in many of his books, the Federal Reserve and its bosses did exactly what they should have done … nothing. If they let the bubble go until it collapsed they are blamed for the collapse. If they put on the brakes and tighten up the money in the middle of a “boom” they will be blamed from killing the growth and crippling the prosperity. For us here at home the big questions are where were the inspectors, the regulatory agencies and the Congress and the Senate with the proper rules? And even bigger question …Where was the moral conscience of all those thousands who participated in all the scamming and falsifying? We had more than an accident here. We had a moral and ethical calamity.

What this book makes clear is that what has happened has happened many times before –not on such a great a scale as today. This current speculative extravaganza was a major moral earthquake.

Galbraith said in his book Money, Whence it Came, Where it Went that the time between speculative insanities or panics is directly proportional to the time it takes for everyone to forget the last speculative bubble or panic.

Galbraith also had much the same confusing type answer as offered by Mr. Chancellor.
For the present, rules and regulations need to be put in place but as time goes on these rules or any rules will be undermined. There will then be another collapse and a new need for newer rules. Galbraith suggested a five year term for new rules and new regulators. Then all bureaus should be abolished and new ones established. In other words, the new rules must be kept ahead of the old rule breakers and manipulators. Keep changing the game.

This answer seems to indicate that the problem is endemic to the system. So we need a new system. But is that possible? And what will it be? And will it have other flaws equal to or worse than the present system?

Maybe the same system could be continued and we should concentrate on developing some better human beings.

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