'Bad Money' by Kevin Phillips: A Terrific Primer on Today's Issues

The title, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, pretty much sums up the book’s thesis. This is actually Kevin Phillips’ third book on the subject matter, the first two being - American Theocracy and Wealth and Democracy. I haven’t read the first two of his books, but he freely admits in the introduction to Bad Money that the book is somewhat of a rehash of his first two books. In fact, he discusses almost not writing a third book until he realized that those topics he warned us of in his previous books were finally coming to fruition and that the 2008 election cycle might truly be a pivotal moment in American and world history.

Kevin Phillips has been warning of the dangers of the “financialization” of our economy, ineffectual politics, and over reliance on foreign debt and oil for years. In Bad Money, the reader is finally offered a glimpse of the consequences of “American Capitalism.” As a former historian and former Republican strategist, Kevin Phillips provides a unique perspective on the economic and political motivations of many of America’s foreign and domestic policies over the last century and demonstrates for the reader how it has shaped the society we live in today. From the beginnings of “financial mercantilism” and “dollar diplomacy” to our recent binge on debt and dangerous dependence on foreign oil, Phillips draws parallels between our “period of American triumphalism” and the rise of the British and Dutch empires which preceded ours. The observations are not inspiring. In Phillips’ eyes, wayward politics guided by a lack of foresight particularly with respect to energy policy and a reliance on excessive debt coupled with our societal deification of finance have left our nation vulnerable and on the precipice of fading relevance as the world’s economy matures around us and realigns away from us.

From the above description, it’d be easy to writeoff Bad Money as just another “sky is falling”, “doom and gloom” conspiracy theory. But, Kevin Phillips does not at all present his thesis in such a manner at all. Instead, he lays out easily verifiable facts and observations and goes to great lengths not to pontificate on could-have-beens or what-ifs. In fact, while ample guidance is given to the reader of the conclusions that are to be drawn, it is the reader who ultimately is given the choice of deciding. Is America already a superpower in decline? Or, can we right the wrongs of the past and forge ahead as a relevant and admired world power? What cannot be argued, is that mistakes have been made not just in the last 8 years, but over the course of the last century as our nation’s rise to wealth and comfort has lulled us into a state of satisfied hubris.

This book is a must read for anyone who wonders about all the media hoopla over OPEC nations discontinuing the denomination of oil in dollars or is confused about attention being paid to US Treasury issue bid-to-cover ratios. Bad Money provides a terrific primer of some of the most important political and economic issues facing our nation today. As responsible citizens, we should all be getting better informed on these topics and asking ourselves just how we can make a difference.

Political and social implications aside, this book also provides a great macroeconomic primer for investors. The topics of international trade, currency exchange, and peak oil are discussed in depth throughout the book and will ultimately shape much of the long term discussion in world markets over the next several decades. As an investor, improving clarity as it relates to these topics will go a long way to enlighten your investment decisions as you look for alternative asset classes and international diversification for your portfolio.

Comments

[Gregman2:]

Kevin Phillips was predicting our current financial fiasco 15 years ago. He was one of the visionaries. Go back and review his books. This latest is just part of a series...the guy's been right for a long time.

Sep 11 04:21 PM

[Pat C:]

This one is good. I think "The Trillion Dollar Meltdown" by Charles Morris is a little better. Both saw it coming.

Sep 11 06:50 PM

[rosey99:]

As historians go, Phillips is probably the most insightful and relevant to where we may be headed. While I can't say that I "enjoy" his work, his clear analysis is sobering to say the least. For that alone it is refreshing and valuable.

IMO if we are debating whether it is too late to do anything, we had better get started. As to why the current crop of republicans has no use for Mr. Phillips, read the book and then have a look at republican - or democratic, for that matter - policies, and the answer should become clear. He's a throwback to a different kind of politics entirely, and a scholar.

The author is correct, all three of the books he mentions (I've read 'em all) deal with essentially the same theme, and similar threads are woven into all of his work. As a history buff (or an obsessive?) I am looking forward to reading "The Cousin's Wars." IMO, there is no one more astute at identifying and analyzing political/historical trends in depth and detail alive today.

Sep 11 08:24 PM

[Leftfield:]

I once agreed with Tony Petroski that Kevin Phillips was merely a "house Republican," always happy to bash them first. But, having read one of his prescient books before the meltdown, I consider him a diligent, insightful reporter, honestly seeking the truth and educating himself on the subject. All very rare qualities these days.

Sep 12 10:14 AM

[TeresaE:]

Go to the store today and really SEE the people that inhabit our country.

Many are more concerned with what the stars are doing, and what knock-off designer they are wearing, than "big" issues. Those unimportant issues like food, shelter, banana republics and no options.

They have been trained to believe those in power are working for us, they have been trained to do the least possible, they have been trained to look at the left hand while the right hand steals from them.

I look around and see a nation of coddled, spoiled, self-centered, ill (mentally & physically) people that do not have the sense to come in out of the rain.

Most can't cook a meal that doesn't come from a box. Most can't sew a button back on or fix a squeaky door.

And, once the game the government is playing ends, they will be either blindly following and praying for food, or stealing from those of us that CAN survive without the modern world (though I would not like it one iota).

I have been asking myself for a number of years where does this end? What happens when the government and a handful of mega-nationals finally and completely eradicate the "too rich" middle class? What happens when the lack of our tax revenue (and consumer/debt dollars going to support the mega-nationals and their tax revenue) forces investors to stop investing?

Then, the government will have NO ability to get more credit AND the need is going to be the largest ever seen in the Western world.

Mass starvation in, what many still think, is the richest nation on earth.

Once I began to let that possibility sink in, I started looking around. And became despondent.

Go to the store, think what these people are going to look like starving and desperate.

Scared yet? If not, we should be.

Thanks for the heads up on the book.

Sep 12 12:24 PM

[roy piper:]

I read this book in the Spring. It is very, very sober and backed by the numbers. It is not a sky is falling book now but a sky has a really good chance to fall book. And the biggest threat is derivatives according to the author. It is a fantastic book.

Sep 12 12:25 PM

[Buckoux:]

"In Bad Money, the reader is finally offered a glimpse of the consequences of “American Capitalism.”

I don't think that the true culprit to our predicament is "American Capitalism", but American government and the ignorant morons who vote for the likes of the Bush's, Clinton's, Kennedy's, Kerry's, Daschel's and McCains. Need I go on?

Sep 12 12:35 PM

[optionsgirl:]

Thanks for taking the time to review this book. I can't wait to read it.

Sep 12 01:02 PM

[Leftfield:]

TeresaE, right on as usual. The American public appears detached increasingly from reality, I keep wondering how long it can go on. I can't read People magazine. Those are stars?
I'm sure you have had problems increase over the years finding employees who are worth their pay, even as that deteriorates relative to costs that have skyrocketed thanks to the work of government, lawyers and healthcare. Americans do not have a concept of value delivered for compensation received any more. This sense of entitlement has to hit reality fairly soon.

Sep 12 01:02 PM

[optionsgirl:]

Derivatives is a subject Buffet was very vocal and negative about, until he started to invest in companies that indulged in them and were backstopped by the government!


On Sep 12 12:25 PM roy piper wrote:

> I read this book in the Spring. It is very, very sober and backed
> by the numbers. It is not a sky is falling book now but a sky has
> a really good chance to fall book. And the biggest threat is derivatives
> according to the author. It is a fantastic book.

Sep 12 02:09 PM

[utilitus:]

On Sep 12 12:35 PM Buckoux wrote:

> "In Bad Money, the reader is finally offered a glimpse of the consequences
> of “American Capitalism.”
>
> I don't think that the true culprit to our predicament is "American
> Capitalism", but American government and the ignorant morons who
> vote for the likes of the Bush's, Clinton's, Kennedy's, Kerry's,
> Daschel's and McCains. Need I go on?

Yes, please do go on, to Reagan and Lyndon LaRouche. Same difference, same system, same ultimate result, with some small variation in how the loot is distributed. American/Ignorance/Dem... - a seamless web. Smart/Serious/Honest people like Kevin Philips transcend the category.

Sep 12 02:48 PM

[yblarrr:]

A little out dated. Pub. 2008 a lot has happened since then. May
be time for an update.

Sep 12 04:53 PM

[JCC:]

I read bad money about one year ago, and was very impressed. The book goes a lot into the the description of an almost natural evolution of capitalist economies, and as well comments significantly with lots of facts on various types of derivatives.

I agree that it is time for an update and will certainly purchase a followon.

My recommendation is to to read this book and put into perspective with all that has occurred in the last year. As a matter of fact, I think that I will read it again.


On Sep 12 04:53 PM yblarrr wrote:

> A little out dated. Pub. 2008 a lot has happened since then. May
>
> be time for an update.

Sep 12 05:12 PM

[Living4Divi...:]

I read tour comment.and agrees with many of your points, and then I go to your comment " Printing money has always led to hyperinflation! "

This is not true. It really depends on HOW MUCH money is printed. The US govt has printed money (unbacked, excess money) nearly every year since we became fiat. They have prined money and let the money supply grow by a small percentage every year ( say appx 2 - 8 %) without any undue effects.

In order to cause hyperinflation, a government has to try really really hard and has to print lots and lots of money.

While high inflation is probably coming, the pre-conditions for hyper inflation have not occurred in this country.

On Sep 11 12:28 PM Bjarne Jensen wrote:

> The Federal Reserve has already begun filling the void by buying Treasuries directly; otherwise known as “printing money”. Printing money has always led to hyperinflation!

Sep 12 06:25 PM

[Living4Divi...:]

I read Bad Money - it is a great read. Phillips is dead on.

Sep 12 06:26 PM

[MarvinMBA:]

Printing money is absolutely nessasary to keep the economy functioning. You have only to print what is needed and that is the percentage increase in GNP is what percent of the money supply requires printing.

Sep 12 09:16 PM

[bottoms-up:]

"Bad Money"? How's about a book called "No Money"? That would seem closer to the reality of the situation.

Sep 13 09:10 AM

[Paul H. M.:]

While I agree that changes need to be made, I think we'll need major climate change to experience "mass starvation". We still produce a massive surplus of food as I write this (and many nations rely on us for food, so we would cut them off first before starving ourselves).

And while our general population would benefit from being more aware, they are no different than every generation. Never has their been a society in which the majority of the population is deeply rooted in political change, unless the government is literally torturing and starving its people (so far, I've been neither tortured nor starved, I don't know about you).

Call me a blind optimist, but when I look "under the hood" of this nation, I still see daily advances in sciences: energy, farming, waste management, and many other areas are light-years ahead of where we were just decades ago.

I like what the other of this book has to say. But those that think we'll see massive starvation in our lifetimes might be ignoring the fact that we've made more scientific progress in the last 30 years than the 3000 years preceding that.

Sep 13 10:54 AM

[Laurence Hunt:]

Reply to Gregman2: Greenspan took office in 1987. It's been a financial fiasco for 22 years, and counting. If Phillips has been predicting it for 15 years, then if anything he was 7 years late....

Gregman2: "Kevin Phillips was predicting our current financial fiasco 15 years ago. He was one of the visionaries. Go back and review his books. This latest is just part of a series...the guy's been right for a long time."

Sep 13 11:44 PM

[TeresaE:]

Suffering through Michigan's long drawn out "recession" (truly already the Depression 2.0), one thing has really shocked me.

When I hit the job market in the mid 80s, things really sucked in Michigan. So my husband and I made a route and went to "visit" employers nearly every day and over and over. We were kicked out of many businesses and told "we said we will call you." We didn't care and kept going back. Amazingly, with little experience and "spotty" histories, we both landed jobs within a couple months of starting.

In my shop, which is in a large industrial area with dozens of buildings/ businesses (though many fewer now) we have never gotten more than a dozen people coming in to search for work. In SIX years.

The ONLY person who kept coming back was a gentleman from Africa. We couldn't hire him for more than casual work but we convinced my husband's brother to hire him.

The majority are so lazy that they don't even know where to start looking once the internet fails in their search.

As to employees hired, it just makes me cry to see how low our standards have fallen in a couple decades.

On Sep 12 01:02 PM Leftfield wrote:

> TeresaE, right on as usual. The American public appears detached
> increasingly from reality, I keep wondering how long it can go on.
> I can't read People magazine. Those are stars?
> I'm sure you have had problems increase over the years finding employees
> who are worth their pay, even as that deteriorates relative to costs
> that have skyrocketed thanks to the work of government, lawyers and
> healthcare. Americans do not have a concept of value delivered for
> compensation received any more. This sense of entitlement has to
> hit reality fairly soon.

Sep 15 01:49 AM