Political Cortex: Brain Food for the Body Politic

"Bad Money" is described as a book about "reckless policies, failed politics and the global crisis of American capitalism"

This 219-page book is published by Viking and costs $25.95.

This book blasts the economic lunacy that allowed U.S. currency under ex-Federal Reserve chief Alan Greenspan to descend to the lowest interest rate in over 40 years.

Greenspan's watch over the U.S. economy was tragic.  Stock market stability was almost non-existent.  High tech stocks were on a runaway as skyrocketing prices kept rising, soaring up, up and away.  Greenspan did make the suggestion that investors in these runaway high tech stocks should look at the profits of the companies as well as the soaring stock prices.

Then the inevitable happened.  The high tech stock spree was over and the "follow the sheep" investment boom was over with huge losses resulting for numerous investors.  Now that the stock market high tech money game had ended, a few excellent money making strategies were left.

Outsourcing jobs for some of the biggest U.S. corporations to China and India was one option.  Bothersome labor laws in the U.S. crimped profits.  Laws pertaining to unemployment insurance, pension plans, and health care and safety laws could be conveniently ignored.

Demolishing U.S. currency prompted speculators to calculate that with interest at a 40-year low, they could use real estate like a new option of the stock market.  With a reported U.S. population growth of $100 million in the last 40 years, homes were needed.

When bankers' loan policies were not carefully controlled by U.S. federal law, almost anyone who could rent could buy a home.  Ads read, "Why rent when you can afford to buy?"

This strategy proved a cruel hoax.  Unethical bank loan officers were given bonuses for negotiating sub-standard loans.  Interest only loans represent 30 percent of California bank loans.  

When the interest only time period lapsed and the sub-prime mortgage holders had to begin paying on their principles, the mortgage collapse naturally happened, but big banks, aided by Wall Street, had a scheme to sell these worthless mortgages to banks all over the world.

They bundled them up, selling them, not as mortgage failures, but as mortgage securities.  The word securities tricked bankers world wide, who bought these worthless pieces of paper as presumed legitimate investments.  

Participating banks world wide now have sustained losses estimated between $300 and $400 billion.

Gewen zeroes in on some major Phillips points in "Bad Money":

"By 2007 indebtedness was three times the size of the gross domestic product, a ratio that surpassed the record set in the years of the Great Depression.  From 2001 to 2007 alone, domestic financial debt grew to $14.5 trillion from $8.5 trillion, and home mortgage debt ballooned to almost $10 trillion from $4.9 trillion, an increase of 102 percent.  A crisis in the mortgage market in August 2007 has brought the party to an end.  Since then we have been living in a twilight zone of what a security analyst quoted in the book calls `one of the slowest-moving train wrecks we've seen.'"