Table of Contents
Praise for Bad Money
Kevin Phillips new book, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, would be sobering enough if it were the first wed ever heard from him. When you take into account how often hes been right in the past, this fourteenth volume in his continuing commentary on the American condition becomes positively alarming.
Tim Rutten, Los Angeles Times
Bad Money is a short book by a practiced artist who specializes in identifying the defining trends of American life. Here Kevin Phillips takes on financial practice in the age of Robert Rubin, Henry Paulson, and the global rule of Goldman Sachs. Its not meant to be pretty and it isnt.... This is an important book. It ranges with stunning clarity over terrain that most political writing, including that of the most prominent voice of the American left, simply ignores.
James K. Galbraith, The Texas Observer
At a time when the Cassandras of finances are looking like realists, there is no gloomier prophet than Kevin Phillips. The author of thirteen previous books, including at least one classic, The Emerging Republican Majority, Mr. Phillips sees a perfect economic storm coming.... His warnings have to be taken seriously.
Barry Gewen, The New York Times
A financial policy horror story... Kevin Phillips, right so often before, castigates both parties for bad times.
The Philadelphia Inquirer
Comes now Kevin Phillips, mighty sage of the political economy, that gray area spanning elections, growth and geography, to condemn the financial services industry. With a recession at the gates, Phillipss previous record as Republican strategist turned skeptic gives Bad Money the gravity sure to guide the conversation about what is to be done.
Ross Kerber, The Boston Globe
A pretty grim portrait of the financial services sector and its present role in the American economy.
Tom Acitelli, The New York Observer
His book provides a primer in economics, details but not dull, accessible to the uninitiated and useful to the already well-informed.... His brief against the risky gambits of the venal center in American politics and finance is provocative, and perhaps prescient.
Glenn Altschuler, Pittsburgh Post-Gazette
This book represents a terrific start on understanding the interplay between past policy, current risk, energy and investments. Without such clear-eyed explanation and thinking, its hard to see how were going to move ahead and find solutions in the hard times that seem inevitable.
Susan Gardner, The Daily Kos
PENGUIN BOOKS
BAD MONEY
Kevin Phillips has been a political and economic commentator for more than three decades. A former White House strategist, he has been a regular contributor to the Los Angeles Times and National Public Radio and has written for Harpers and Time. He is the author of fourteen books, including the New York Times bestsellers American Theocracy and American Dynasty. He lives in Litchfield County, Connecticut.
To William Russell Phillips,
our new grandson
BAD MONEY
Greshams Law... a general law or principle concerning the circulation of money... [named] after Sir Thomas Gresham, who clearly perceived its truth three centuries ago. This law, briefly expressed, is that bad money drives out good money, but that good money cannot drive out bad money.
W. S. Jevons, nineteenth-century economist
In a global free market, there is a variation on Greshams Law: bad capitalism tends to drive out good.
Professor John Gray, False Dawn, 1998
Preface to the Revised Edition
After the Fall: The Inexcusable Failure of American Finance
Just how well Barack Obamas presidency can address the most severe U.S. financial crisis since the 1930s may not be clear for much of his term. Economic convulsions of a great, once-a-century magnitude do not take hold or let go easily. Nor are they easy to fathom. Disagreement about the causes or avoidability of the 1930s depression still smolders among historians and economists.
The politics of coping also remain uncertain. The election of 2008 was marred by a predictable, yet symptomatic, unwillingness in both major parties to pose troubling overviews or lay out painful economic policy choices for the voting public. Both Republicans and Democrats had contributed to the quarter century onrush of debt and deregulation, albeit the Republicans more so. During the pre-election stock market convulsions that roiled both Washington and Wall Street, panic was more often in evidence than cool analysis of the mega-problems unfolding.
A few pundits even joked that by 2012, the side that had lost the presidency would be grateful for being out of power so that they didnt have to bear responsibility over four difficult years. Reasons for pessimism certainly abound. This editions new pagesin this front section, a refocus on the financial malpractice and complicitous politics behind the crisis and, at the end, a global look aheadcannot predict any clear outcome. But some of the autumn 2008 panic seemed unnecessary, tied to Washingtons fear-mongering in enacting the early October bailout and mismanaging its implementation.
As 2008 ended, the NBC/Wall Street Journal poll found a lopsided 71 percent majority of Americans disapproving the job being done by the federal government in handling the financial crisis. This harsh judgment was upheld by evidence, to which we will return, that the September- October credit paralysisthe notion of the nations credit system being at deaths doorwas exaggerated in order to scare the public and Congress into passing a program that would focus on assisting, even subsidizing, several dozen of the largest U.S. financial institutions.
The hardcover edition of this book was published in mid-April 2008, and though it reached the New York Times nonfiction and business bestseller lists, relatively little of its contents have been discussed or publicized by the politicians or by the gatekeepers of the major national media. My analyses and the warnings that accompanied them were, in a word, unwelcome. They were deemed overly pessimistic. For that reason, first-time readers will find information that is still mostly ignoredand is still revelatory. At the same time, more than a quarter of this post-election book is newa much enlarged and updated preface, plus a twenty-page afterword that sets out the U.S. domestic political and global financial implications for 2009-2012.
Though I stand by my argument, this new edition has a somewhat recast message. Once only a prediction, the grim news is now a reality. I can now update my thesis for recent events, snowballing momentum, trend confirmations, new data, fuddled Washington policy reactions, and surprise reversals during the last four months of 2008. The greatest policy gamble lay in cosseting, intead of severely disciplining, the wayward element among the largest U.S. financial institutions, and abetting an even greater concentration of economic power. To facilitate brevity and avoid repetition, some citations refer the reader to the main 2007 text for relevant explanations, detailed charts, and historical backdrop. The focus is still that summarized in
