Synopses & Reviews
A Street economist's strategy for managing market madness
“A punchy and relevant book on our present distress that has, at its core, one very big and useful idea.“
“Heeding the lessons of the last few years, as documented in this book, may help both financiers and government policy makers find ways to reduce some future costs of capitalism without sacrificing all the potential rewards.”
The New York Times
“[Barbera] challenges the blind faith in free markets.”
“Barbera ... [is] one of the few commentators actually saying something interesting and innovative about the crisis.”
"The Cost of Capitalism is a must-read and a thoroughly enjoyable onefor those who want to understand the Crisis of 2008 and hammer out a new framework for decision making."
Jared L. Cohon, President, Carnegie Mellon University
"Readers who absorb the lessons of this book will be armed with more than mere technique; they will acquire an attitude that will make them better investors for the rest of their lives."
Paul DeRosa, Principal, Mt. Lucas Management Corp.
"The Cost of Capitalism translates the economic diagnoses and theories of my father, Hyman Minsky. It captures the vivacity of a post dinner conversation not coincidentally my father's favorite forum for elaborating, educating, and entertaining."
Diana Minsky, Art Historian, Bard College
"Lucid, intriguing, brilliant! Barbera combines the uncertainty and speculation of Keynes with Schumpeter's "Creative Destruction" and Hy Minsky's "Deflationary Destruction" into a tasty stew."
James R. Schlesinger, former Director, Central Intelligence Agency
"Long ago, Bob taught me that if you don't know Minsky, you don't know nothing. This work shows the path out of nothingness."
Paul A. McCulley, Chief Investment Officer, Pacific Investment Management Company
"Barbera's recommendations are profound in their simplicity. Let us hope Wall Street, Main Street, Washington, and academia embrace them."
Jack Rivkin, former Chief Investment Officer, Neuberger Berman
"This is truly an extraordinary book that should be of great interest to an extremely wide audience from Wall Street practitioners to economics and finance scholars."
Louis Maccini, Professor of Economics, Johns Hopkins University
From the panic of 1987 to the tech-bubble burst of 2000, the past two decades have witnessed a series of financial crises, each more disruptive than the last. Unfortunately, they all seem like dress rehearsal for today's debacle.
In hindsight, the precipitating factors responsible for each crisis seem clear, yet, in every case, mainstream economists and policy makers were caught off guard.
Why didn't they see it coming? What should they have known but didn't? And, most critically, how must they adjust their thinking going forward?
In the Cost of Capitalism, Robert Barbera provides compelling answers to all these questions. In the process, he offers the most cogent analysis yet of today's crisis and explains how to manage the ever present potential for mayhem intrinsic to free market economies without stunting innovation and growth.
At the core of Barbera's thinking are three assumptions: first, boom and bust cycles have been stoked since 1985 by finance, not inflation; second, Main Street stability paradoxically invites excessive risk taking on Wall Street; and last, these things set the stage for small setbacks to deliver cataclysmic consequences.
Barbera applauds current efforts to unabashedly infuse public money into the global economy. It's the only way, he says, to prevent another Great Depression. And, looking beyond the crisis of the moment, Barbera contends that mainstream thinkers need to form a new economic paradigm by embracing the insights of free market champions like Joseph Schumpeter and the cautionary wisdom of Hyman Minsky.
Financial market mayhem comes with the territory in a free market system. Nonetheless, innovators and their bankers still offer the world the best chance for a prosperous twenty-first century. Economists, policymakers, and investors must begin to redefine their understanding of free market capitalism. The Cost of Capitalism will set them on that course.
CNBC regular Robert J. Barbera offers a crystal clear explanation of the financial market crisis of 2008. .
While mainstream financial analysts are stringing together ad hoc explanations for the financial crisis. of 2008, a relatively small group of economists saw this coming. In The Cost of Capitalism, Robert J.. Barbera explains why.. .
Barbera makes the case that investors and policy-makers can reduce the risk of truly gruesome outcomes if they better plan. for the violent economic storms, which history confirms are always over the horizon.. .
Investors will learn how to gird themselves for the roller-coaster ride that is free market capitalism;. policy makers will find out how to plan for crises they know will occur at some point; and academic. economists will rethink their pursuit of ever more elaborate mathematical models that bear no. resemblance to the real world..
The message is simple: Stop pretending that people are always rational and that markets are always. efficientand be prepared for market mayhem..
CNBC regular Barbera offers a clear explanation of the financial market crisis of 2008. The author makes the case that investors and policy-makers can reduce the risk of poor outcomes if they plan for the violent economic storms, which history confirms are always over the horizon.
About the Author
Robert J. Barbera, Ph.D., is executive vice president and chief economist at ITG and an Economics Department Fellow at Johns Hopkins University. He has been a noted Wall Street economist for over 25 years. Before arriving on Wall Street, Barbera was a staff economist for Senator Paul Tsongas and an economist for the Congressional Budget Offi ce.
Table of Contents
1. The Market is the Message
2. How Much Risk Is Too Much Risk?
3. Hyman Minsky, A Lefty Who Had It Right
Section II: Asset Market Upheaval: The Cycle Driver for the Past 20 Years
4. Not Iraq and Tanks, Debt and Banks, the 1990 Recession
5: Tulips in Tokyo: The Asset Inflation/Deflation That Consigned Japan to a Lost Decade
6: The Asian Contagion: What Went Up Went Down, With a Vengeance!
7: The 2000 Recession, From Brave New World Boom to Wild Technology Share Price Bust
8: The Spectacular Slide For House Prices, Consumer Purchasing Power, the 2008 Recession
Section III: Concluding Observations
9: Mainstream Economics: A Slavish Devotion To Rational Market Theories
10: The Politics of Economics: Confusing Free Market Triumph with free market infallibility
11: The Punch Line: Embrace Capitalism but dont forget the seat belts and the air bags