Kevin Mellyn - Broken Markets: A Users Guide to the Post-Finance Economy

BROKEN MARKETS

A USERS GUIDE TO THE POST-FINANCE ECONOMY

Kevin Mellyn

Broken Markets: A User's Guide to the Post-Finance Economy

Copyright 2012 by Kevin Mellyn

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ISBN-13 (pbk): 978-1-4302-4221-5

ISBN-13 (electronic): 978-1-4302-4222-2

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To John Edward Mellyn, Sr.
(4/23/19141/16/2011)
DFC 1944

Contents

Foreword

For those of us who still find the reading of books a useful tool in understanding how the world around us worksor doesnt workthe last five years have provided a nearly overwhelming deluge of postmortems on the financial market meltdown that gripped the planet in 2007 and continues in slightly muted fashion to this very day. If you wanted to, you could still be reading them, dawn until dusk, day after day, in search of answers. Nothing gets writers more excited than a crisis, after all.

While they come in many different flavors, the majority of those books share a simple yet frustratingly elusive goal: finding the answer to that most human of questions, Whose fault was this? While a focused anger at fat cat bankers still runs at a low boil in 2012, the fact of the matter is that there is more than enough blame to go around, with culprits that range from greedy Wall Streeters to ineffective regulators, (arguably) well-intentioned politicians, clueless central bankers, crony capitalism, and, yes, even a reckless and covetous body public. All the Devils Are Here, by Bethany McLean and Joe Nocera (Portfolio, 2010), does a fine job at parsing the diffuse responsibility for the crisis, if you can call it that.

A handful of books look in another direction and focus on those who emerged from the chaos as winnersas unpalatable as such an exercise may seem in the midst of such collective loss. I contributed my own effort to that smaller pile with Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase (Simon & Schuster, 2010), as did Greg Zuckerman of the Wall Street Journal, with The Greatest Trade Ever (Crown Business, 2009), about John Paulsons stupendously profitable (and perfectly timed) short trade against the housing bubble. Along with a few self-congratulatory prognosticators who I shall leave unnamed, this smaller cohort sought the answer to the secondary question of Who saw this coming?

A third category aimed for what we in the business call tick-tock storytellingthese authors chronicled as best they could just who was doing what, where, and when as the whole house of cards fell in on itself. Too Big to Fail, by Andrew Ross Sorkin of the New York Times (Viking Adult, 2009), sucked most of the air out of the room on that count; the book was a celebrated success that culminated in HBOs movie by the same name. Im no expert on the subject, but I am comfortable with my unscientific conclusion that the 2011 movie is quite likely the most watched financial-markets thriller ever to grace the small screen.

Whats been missing from the still-growing list of books is the kind of effort that eschews the narrative temptations of either villainy or heroism, and makes a sober attempt to step back and ask the more basic questions of whether this thing was ever really avoidable at all, regardless of which actors got marquee billing for what roles. The answers to those questionsHow did this happen? and Why did this happen?may not sell as well at the box office or on Amazon.com, but they are arguably the most important ones we should be seeking if we hope to avoid playing out yet another act in Karl Marxs perennially and maddeningly correct dictum that history appears first as tragedy and then returns as farce.

But such a book isnt missing anymore. It has come in the form of Kevin Mellyns Broken Markets, a book thats achieved the remarkable accomplishment of being both refreshingly dispassionate and highly readable. I first read it while lying on the beach in the Bahamas, if you can believe that, and not only did it not ruin my vacation, but it allowed me to claim that Id actually been working on more than my tan while I was there.

Kevin Mellyn is not your typical business writer.

For starters, hes not even a writer by trade. Or at least he wasnt until recently. Hes spent the majority of his professional career as a management consultant and an international banker. And from that, we all benefit. His deep understanding of just how banking systems workand have worked for centuriesencompasses both the small (e.g., payment systems) and the so big as to be nearly ungraspable (e.g., the philosophy of financial repression).

If he came to writing late in the game, though, hes certainly brought with him an arsenal that should strike fear in the heart of anyone working on the topic he sets his sights on next. First and foremost in that arsenal is an utterly obvious love of history. Whether hes riffing on the differences between Bonaparte and his namesake nephew, quoting British marching songs from the American Revolutionary War, or reminding us of the simple yet profound observations of Victorian banker and journalist Walter Bagehot, Mellyns span of context far exceeds practically every other attempt to put the events of our time in the longer (yet still quite relevant) historical continuum.

Hes also brought with him a remarkable restraint of pen, especially considering that this is a man whose opinions come with such force and clarity that it is an ill-advised conversation partner who tries to take him on when the topic is one hes passionate about. Take, for example, political philosophy. Mellyn espouses a certain Victorian liberalism, a bias for personal liberty and the rule of law, and a wholesome fear of power. Thats not to say he doesnt know a few of those powerful people himself. (The fact that the man belongs to clubs in Boston, New York, and London should serve as proof beyond a reasonable doubt.)