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These two works are about The Market, one from the dean of the Rotman School of Management at U.of T., who is trying to end the "bubbles and crashes" through repair ; the other is from the author of The Big Short, who first told us about just how the absence of regulation allowed it all to happen ...along with a good deal of larceny.
Boomerang's chapters are: Wall street on the tundra; And they invented math; Ireland's original sin; The secret lives of Germans, and Too fat to fly. One is apparently about to learn how "a brilliant Monk who has figured out how to game Greek capitalism to save his failing monastery; a cod fisherman who, with three days' training becaomes a currency trader for an Icelandic bank...' and more.
Michael Lewis's Boomerang is sort of an eye-opening travelogue, visiting people in some of the most financially devastated economies (Iceland, Greece, Ireland) and Germany. And Texas,where a new billionaire, who became wealthy by investing in the failure of the world economy, and now the rebound of failure. The "boomerang" effect of the crisis that is returning to challenge all those countriesa and more, even since the book's publication this year.
It's a who's who of bankers, speculators and government officials who had no idea - unlike the sharp Texan - of what was afoot. The reader is informed that the Greek banks ran into difficulty not because of the ABC Paper of the sub-prime loans - they avoided those - but through monstrously large loans to a Greek government that may not have even intended to repay. Suddenly, the average government employee was seen earning three times more than workers in the private sector, and the national railroad was paying its workers four times what it was bringing in, annually.
Lewis was a Wall Street bond salesman until he published a sort of memoir,Liar's Poker in 1989, and most notably since, The Big Short and The Blind Side. He's entertaining and writes with the insight of the insider, commenting on the political reaction inside these countries to what has taken place in their markets, banks and citizens'lives. He never quite comes to grips with a psychological explanation for the madness of an Iceland that allowed itself to amass debts equalling some 850 per cent of its GDP.
In Greece,he was told, their refusal to pay their taxes "is only one of many Greek sins. 'Their labour market isn't changing as it needs to.' I ask him for an example. 'They had very clearly as a tradition a thirteenth or fourteenth monthly salary,' he says instantly. 'Due to developments in the last ten years, a similar (civil service) job in Germany pays fifty-five thousand euros. In Greece it is seventy thousand,' To get around pay restraints in the calendar year, the Greek government simply paid employees for months that didn't exist."
The author of Fixing the Game, Roger L.Martin, dean of the Rotman School of Management at U. of T., comes at the problem of "bubbles and crashes" arguing that it can be fixed, and we can return to the normalcy of pre-1976 - a most auspicious date for the author, who has just been named one of the world's top 10 management school leaders.
In that year, a paper appeared in financial circles arguing that the investor must become central in market expectations, an idea that caught on and has made millionaires of company executives in their pursuit of market gains in the value of the stocks in which they're paid, in "options". It has also led to two market meltdowns, and widespread recession - affecting everyone - and the jailing of only a few. Not nearly as many as should have been jailed, in the mind of this reader.
We have to return to giving "real value" to market offerings of firms, their products, rather than just trying to maximize the value of the firm to shareholders, says Martin."We" have to end the circus (my term) of all those individuals and consortiums and advisors and charlatans,running from one listing to the other, depending on the expected value , the "expectations market" with its trading of stocks, options, and really, really complex derivatives.
Martin, a product of Mennonite farm country, with a touch of rural Ontario in his voice, lays out "five positive steps" that are needed "to fix American capitalism, to fix the game and get real again."
Like Mark Carney, Bank of Canada governor, Roger L. Martin told a CBC audience earlier this month that the Occupiers are correct in complaining of economic events affecting their lives in recent years. It has spurred me on to again take up his book and see what he recommends, how can we in fact achieve stability and - gosh would it ever be nice - even begin designing firms for a sustainable future. (He will have to be more wide-ranging in his concerns than he has been up to my point of reading, however, For me, the 1970's were significant for more than an event, a paper published, in 1976. And I must see if he finds fault at all in the wide-ranging investment offerings available in a Globalized world. Right now, that's the only place for "real gains" they say, the "developing world," with its superior growth dependent on starvation wages and environmental destruction that almost matches even our own wiping-out of the cod fishery and the Tar Patch horror show in sheer,exploitive energy.