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WHAT THEY DON'T UNDERSTAND THEY TRASH.

Kevin Phillips has made a pretty good living predicting doom, collapse, and despair, and he hasn't written about global warming. Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism continues the theme. I'm tempted to leave Book Review No. 40 to Robert Solow, a much better macroeconomist and probably a better chessplayer than I. He probably received payment from The New Republic for his efforts, and I do this stuff for fun.

I will note, briefly, that Mr Phillips draws parallels between the U.S. and other global powers that went into decline. (Where Amy Chua focuses on culture, Kevin Phillips focuses on finance.) Yes, other leading powers were displaced by upstarts, and no, the United States holds no exemption. But the self-inflicted decline is more likely to be from content-free education and beer and circuses than from hedge funds. Yes, debt implies the risk of default. Debt also implies the creation of productive assets with gains from higher living standards servicing the debt. Yes, there can be rational expectations hyperinflations, or asset bubbles. That we can describe the problem means we can understand it and learn to avoid it. And where risk is present, the division of that risk into smaller pieces has the potential to expose each investor to less risk of loss.

And yes, oil is an exhaustible resource, with the next energy technology not yet invented.

Thus, yes, there are challenges. The ominous signs, however, are not necessarily the signs Mr Phillips sees.

(Cross-posted to Cold Spring Shops.)

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