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

Book Description

"I would sleep better if I knew that Bernanke, Geithner, Bachus, Sen. Tim Johnson, Obama and Romney all kept dog-eared copies of Kevin Mellyn's Broken Markets on their nightstands. . . . Mellyn's work is a fascinating, important, and eminently good read and should inform the debate on overhauling the U.S. and global financial regulatory systems and sustainable macro fiscal and monetary policy."

--Eric Grover, in his review of Broken Markets in The American Banker

Broken Markets allows the intelligent non-specialist to understand and navigate the ongoing worldwide aftermath of the 2008 financial market meltdown. The key theme of the book is how the leading financial institutions and the political leadership of the U.S. and European Union have failed us and set the stage for continued market turmoil. It explains what this means for investors, borrowers, society in general, and the financial-services industry. Former banker Kevin Mellyn focuses on providing readers with clear and simple explanations of the forces at work and the potential consequences for their future prosperity.

As this book makes clear, what's coming is a world in which high structural unemployment and flat or declining real income is likely—not to mention a diminished retirement financial safety net. The book therefore provides actionable information for protecting wealth and making prudent investment decisions in an economy that is nothing like the one that has sustained us for decades.

As a forward-looking narrative about rapidly changing events and volatile markets and politics, Broken Markets will provide no single prediction about the future but rather describe alternative scenarios and provide the reader with signposts to watch out for in deciding which reality is actually unfolding. Unlike most books written by journalists on global finance, the scenarios and signposts described will be largely based on the lessons of financial and political history rather than breaking news. This book:

  • Tells you in plain language how today's financial system threatens your livelihood and wealth

  • Tells you why and how governments worldwide, with some notable exceptions, are taking actions likely to make things worse instead of better

  • Explains how the leading financial institutions lost their way during the bubble years and how they can find the path back to prosperity and value to society

  • Tells you what life will be like in a "post-finance" economy and how you can protect your wealth

What you'll learn

After reading Broken Markets, you will:

  • Understand how governments and financial leaders made poor decisions and the consequences in both the short and long term

  • "Connect the dots" between seemingly unconnected market developments

  • Understand how global finance really influences your livelihood

  • Evaluate professional investment advice critically

  • Make an independent, informed evaluation of competing economic and political policies

  • Develop a long-term financial game plan for a "post-finance" world

  • Impress your friends and family with your financial savvy

Who this book is for

Broken Markets is for people who have savings and investments, watch the business news, read the Wall Street Journal or Financial Times at least occasionally, and just want to make sense of the post-2008 crisis world while taking steps to protect their hard-won wealth. It is not intended for financial professionals, though it will strike a chord there. Mostly it is for the sensible, educated man and woman looking for straight talk and clarity. It is also a good choice for students and young people just starting their careers since it teaches them things their teachers (and often their employers) never told them. Above all, it is a good choice for anyone who likes to be informed, provoked into re-examining beliefs and assumptions, and entertained by sharp-edged writing.

Table of Contents

  1. Title Page
  2. Dedication
  3. Contents
  4. Foreword
  5. About the Author
  6. Acknowledgments
  7. Introduction
  8. Chapter 1. The Rise and Fall of the Finance-Driven Economy
    1. What Karl Can Teach Us
    2. The Current Movie
    3. The Magic and Poison of Financial Leverage
    4. The Great Moderation
    5. The Great Panic: Cause and Effect
    6. The Agony of the Household Sector
    7. Corporate America Chugs Ahead
    8. The End of Employment
    9. No Safe Havens
  9. Chapter 2. Banking, Regulation, and Financial Crises
    1. The Postwar Financial Order Undone
    2. The Basel Process Is Born
    3. The Birth of Consumer Banking
    4. Safe As Houses
    5. Risky Business
    6. The Triumph of the Market
    7. How Government Policy and Central Banks Shaped the Market Meltdown
    8. The Classic Cure for Financial Panics
    9. Why Things Might Get Worse
    10. The Lessons of the Great Depression Unlearned
    11. Three Years On: Why So Little Has Changed
    12. Political Missteps
    13. Legal Missteps
    14. Dodd-Frank
    15. Basel III
    16. The End of the Euro
  10. Chapter 3. The Economic Consequences of Financial Regulation
    1. Distortion of Bank P & Ls and Balance Sheets
    2. Supervision vs. Rule Making
    3. The Shell Game
    4. Restriction of Financial Access
    5. Consumer Protection vs. Access
    6. The End of Product Differentiation
    7. Unbanking the Banked
    8. Hurting the Savers and Investors
  11. Chapter 4. Life After Finance
    1. Is Government Spending Like Household Spending?
    2. The Birth of the Credit-Driven Economy
    3. How to Keep Interest Rates Low
    4. Financial Repression Made Simple
    5. The Political Direction of Credit and Investment
    6. The Point: Power
    7. Taking Risk out of a Risky Business
    8. Death Knell for Consumer Credit
  12. Chapter 5. Global Whirlwinds
    1. Global Trade Is Not a Zero-Sum Game
    2. Why China and the United States Are Joined at the Hip
    3. Why Austerity Can Be Worse Than Debt
    4. Why a European Banking Crisis Threatens America
    5. The Global Money Pump
    6. Technology vs. Friction
    7. The Clearing and Settlement Bottleneck
    8. The War Against Settlement Risk
    9. Why Finance Might Move to Asia
    10. Why the United States Is Losing Clout but Remains Indispensable
    11. Why There Is No Alternative
    12. Why the System Needs a Hegemon
  13. Chapter 6. The Consumer in the World After Finance
    1. The Money of the Mind
    2. Structural Unemployment: Insiders and Outsiders
    3. The New Reality
    4. Innovation and Education Will Save America
    5. The New Class
    6. Seeking Shelter
    7. A Little Advice
  14. Chapter 7. Reconstructing Finance
    1. Earning It
    2. Restoration of Values and Reputation
  15. Index