Ford Library Blog

Schumpeter, Joseph A. Can capitalism survive? : creative destruction and the future of the global economy. Harper Perennial, 2009.

A role of economists is to provide economic analysis of recessions such as the current one created by the financial crisis and provide strategies for restoring economic growth and prosperity.

Leading up to the current recession, The Federal Reserve lowered interest rates to make housing more affordable, and Fannie Mae and Freddie Mac developed a federal program enabling people to qualify for homes that ordinarily would not.

Subsequently, people purchased homes they could not afford and some lost their jobs due to the recession. Wall Street banks invested too heavily in risky loans rather than diversifying, accumulating toxic assets leading to tremendous losses.

Hayek goes as far to say that central banking destabilizes the economy. In the recent recession, government intervention led to inflation, over building, a housing bubble, and then economic indicators became unrealistic.

In addition to the destabilized housing market, the financial crisis had a ripple effect on travel, retail, the automobile and oil industries, and led to significant number of lost jobs.

Can Capitalism Survive? is excerpted from Joseph Schumpeter’s 1942 classic Capitalism, Socialism, and Democracy. This is where he proposed business cycles are caused by technological innovation, referred to as creative destruction. In Capitalist economies, markets eliminate obsolete technologies and utilize innovations to create new avenues for economic growth. (more…)

Kiernan, Matthew J. Investing in a sustainable world : why GREEN is the new color of money on Wall Street. Wiley, 2009.

Krosinsky, Cary and Nick Robins, eds. Sustainable investing : the art of long-term performance. Earthscan, 2008.

Traditionally, ethical and socially responsible investing has been driven by personal values. While this approach has been successful in some sectors in the U.S. and the U.K., the mainstream institutional marketplace has been out of reach. But now, research by Innovest Strategic Value Advisors shows that companies with superior positioning on sustainability issues achieved superior financial returns. Two new books discuss how both Wall Street and Main Street are now interested in investing in ethical, social and green companies to attain long term financial performance.

In Investing in a Sustainable World, Innovest founder and CEO Matthew J. Kiernan makes the business case for integrating environmental and social considerations into investment decisions. He presents conceptual and practical tools to help investors realize environmental, social and financial objectives at the same time. (more…)

The end of the Bernie Madoff story has yet to be written, but books are already rolling off the presses, including five books in the month of August alone.

Here is a list of titles just purchased by the Ford Library last week.

• Betrayal: The life and lies of Bernie Madoff
  by Andrew Kirtzman
  Written like a novel, this book is the most readable of the lot, and gives readers an inside look at Madoff, his family and the investors.
• Too Good to be True: The rise and fall of Bernie Madoff
  by Erin Arvedlund
  A well researched book by an investigative journalist, who first warned investors about Madoff in Barrons in 2001, providing the clear explanations about how hedge funds and Madoff’s scam worked.
• Madoff with the Money
  by Jerry Oppenheimer
  A portrait of Madoff as a flawed man, as revealed through anecdotes from his family, friends and business associates.
• Catastrophe: The story of Bernard L. Madoff, the man who swindled the world
  by Deborah and Gerald Strober
  One of the first books about Madoff,  published by two historians in March 2009, is a chronicle of the weeks immediately before and after Madoff’s arrest.
• Bernard Madoff: Masterminding a billion dollar fraud
  by Filiquarian Publishing, LLC
  A summary of news articles about the Madoff scandal.

Tip: If any of these books are currently checked out, you can recall them by clicking the “Get this Title” text in the catalog record when you follow the links above. More about recalls …

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
All rights reserved.

The Director’s Picks

Fuqua School Dean Blair Sheppard asked Ford Library Director, Meg Trauner to select 5 recent business books that should “be on his nightstand”.

Click the titles below for information on location and availability.

• The Post American World by Fareed Zakaria
  - Optimistic view of a world no longer dominated by the U.S.
  - Also available as an audiobook.
• What Would Google Do? by Jeff Jarvis
  - Control is out. Connection is in.
  - Also available as an audiobook.
  - Read the full review.
• How We Decide by Jonah Lehrer
  - Based on new research in neuroscience.
  - Read the full review.
• Imagining India: the idea of a renewed nation by Nandan Nilekani
  - Cultural intelligence on how India operates.
• Fool’s Gold: How the bold dream of a small tribe at J.P. Morgan was corrupted by Wall Street greed and unleashed a catastrophe by Gillian Tett
  - Gripping narrative and education on derivatives.
  - Read the full review.

Tett, Gillian. Food’s Gold: How the bold dream of a small tribe at J.P.Morgan was corrupted by Wall Street greed and unleashed a catastrophe. Free Press, 2009.

In 2003, Warren Buffet described derivatives as “financial weapons of mass destruction.” He was later proved to be a prophet. Yet a decade earlier, when credit derivatives were first conceived, they appeared to be a win-win for the financial world, freeing up capital, diversifying risk and increasing profits.

This is the story of a small group of young employees at J.P.Morgan investment bank, who discovered the latent power of derivatives, products which initially seemed so promising, but later evolving into cyber-world instruments that even the financiers struggled to understand.

Fool’s Gold is a lively narrative that reports behind the scenes about the workings of an elite company and its bankers. The story also describes the complicated financial instruments and shows how they combined with greed and stupidity to create a global financial disaster.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
All rights reserved.

Woods, Thomas E., Jr. Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. Regnery, 2009.

What happened to the economy and what are the necessary steps restore it are complex questions. Amazingly, Thomas Woods’ has the ability to answer these questions in simple laymen’s terms. He begins with the big picture of how the economy works and then provides the two main philosophies of regulating the economy. Only reading the newspapers and watching CNN, will lead you to believe that the diagnosis is greedy Wall Street employees and real estate financers, and the treatment is an artificial stimulus. This is the Keynesian school’s perspective which believes in the marriage of economics and politics.

According to Woods, this is incorrect on both accounts, and we are currently on the wrong course. Woods is the anti-Paul Krugman and from the Austrian school of economics which advocates the separation of money and state. (more…)

Lowenstein, Roger. While America aged : how pension debts ruined General Motors, stopped the NYC subways, bankrupted San Diego, and loom as the next financial crisis. Penguin Press, 2008.

My sister is a salaried engineer for a company that was spun off from General Motors. She emailed recently:

Yesterday a man in sales with 25 years, and a reputation of being a very hard worker, was “let go.” The rumor is there will be 52 more salaried people let go between now and the end of next week. Interestingly, we found out that they just hired 11 salaried people. People hired after 1995 do not get the same retirement benefits as those of us hired before 1995. They are firing people who have been here a long time and replacing them with hirees with fewer retirement benefits.”

Using three case studies, this new book in the Ford Library discusses the pension crisis that is looming over American industry. Author Roger Lowenstein begins in Detroit in the 1940’s, where the UAW bargained for pensions in labor contracts. General Motors complied because promises for future benefits did not incur costs in the present. Pension and health care costs for retirees would not come due until many years in the future. Over time, the union’s success brought the company to the brink of bankruptcy as the number of retirees grew, the benefits grew and those promises came due.

Lowenstein also discusses two other cases, transport workers in New York City, whose union led a strike in 2005 that brought the city to a standstill, and the pension crisis in San Diego, sparked by city officials who doled out benefits to city workers but declined to impose higher taxes. The final chapter in the book suggests changes in the ways corporations, unions and the government manage benefits, paying for them in the present, instead of charging them to a future generation.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business. All rights reserved.

Last night PBS aired a Frontline documentary on the cascade of financial catastrophe that begin with the rumors of Bear Stearns’ imminent failure and ended the passage of the $700 billion bailout plan. Producer/director Michael Kirk says, “How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown“.

In addition to hosting the entire documentary for free on its web site, PBS also has additional interviews with Alan Greenberg, Paul Krugman, Sheila Bair, Martin Feldstein, and others.

When markets collide : investment strategies for the age of global economic change by Mohamed A. El-Erian. McGraw-Hill, 2008.

This book is about the fundamental changes that are occurring in global economic and financial systems. Existing financial infrastructures and systems are under pressure. Economic power is shifting from mature to emerging financial markets. Global growth is now influenced by former debtor nations that are building unforeseen wealth and facing unusual challenges. For investors, the transformation in the global economy has significant consequences.

Author El-Erian, CIO of PIMCO and former CEO of Harvard Management Company presents a diagnosis of the present financial turmoil and offers explicit investment advice to readers on how to exploit new opportunities and minimize exposure to changing patterns of risk.

El-Erian sees four trends: 1) Realignment in global growth 2) Return of inflation 3) Structured finance has diminished the barriers to entry 4) The transfer of wealth. He recommends that firms retool risk management and pay more attention to the middle and back-office activities that are less glamorous. He recommends that investors invest more internationally and less in the US.

This lucid explanation of the credit crisis won the 2008 Financial Times and the Goldman Sachs Business Book of the Year awards.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business. All rights reserved.

Morris, Charles R. The trillion dollar meltdown : easy money, high rollers, and the great credit crash. Public Affairs, 2008.

Almost daily the Wall Street Journal reports on the deepening credit crisis. Today, the front page includes a depressing story about bad loans, excessive risk taking and the need for large capital infusions. A year ago, consumer spending was strong, the market for investment grade credit was growing and the S&P 500 jumped 9% in three months. What happened?

According to financial writer, investment banker and lawyer Charles P. Morris, we are experiencing the result of a reckless financial environment — twenty five years of free and unregulated financial markets. In the Trillion Dollar Meltdown, Morris provides a brief history of financial markets beginning with the Reagan era. He also discusses financial instruments, why they were developed and how they now contribute to the problem of leverage in our economy — instruments such as CMOs, CSOs and SIVs.
(more…)