December 30, 2007
Review Corner
A couple of good books.
Nanny State: How Food Fascists, Teetotaling Do-Gooders, Priggish Moralists, and other Boneheaded Bureaucrats are Turning America into a Nation of Children by David Harsanyi: the title says it all.
Harsanyi collects a diverse crew. They cover a wide political spectrum, but each wants to impede your freedom. From the "No Running!" sign on the kids' playground, to trans-fat bans, he gives a consistent voice for freedom and personal responsibility. I don't think much of the information will be new to ThreeSourcers, although I was interested in the "scope creep" of Mothers Against Drunk Driving, and new, zero-tolerance laws that criminalize driving with any measurable blood alcohol content.
One senses Haranyi is preaching to the choir. Still it is amusing, well paced, and chock full of outrageous examples. I give it four stars.
New Monetarism by David Roche and Bob McKee.
I purchased this based on a WSJ Editorial Roche wrote a few weeks ago. It made a lot of sense to me and I wanted to read more. ThreeSources friend Perry Eidlebus pronounced it "a steaming pile of bull." I'd like to buy Perry, and perhaps the Everyday Economist, a copy for a late Christmas present. As proof of disinflation, the book was $10.50 when I bought it, but it is now available for $9.61. It is a small, 80 page paperback -- about as long as an article in City Journal.
But he speaks to something I have long believed and argued on this blog. The existence of "disinflation" and the creation of money supra-central-banks. The diagram on the front speaks to a continuing argument 'round these parts. The bottom of the "liquidity pyramid" is money created by central banks, the next level shows the multiplier of fractional reserve banking, then money created by securitized debt, and lastly the multiplier of derivatives. Though a quick read, it is well documented.
Roche and McKee give voice (and documentation) to the Kudlow-Laffer school, but the authors do not share their sunny optimism. Their concepts of disinflation and their expanded view of liquidity comport, but Roche and McKee expect a cataclysmic bubble burst because so much of this liquidity is based on risk appetite, and that a small correction could bring the entire structure down.
I hate to take all their cheery predictions without the bad, but I think that they discount the fundamental point of derivatives, namely, getting risk into the hands of those that can best accept it. Roche and McKee advise (and let me be clear, this book is positioned more toward investment advice than economics) you to go long volatility. I wonder if they are ignoring the effect of instruments that would allow you to do so.
Interesting. Quick read, Three-and-a-half. Email me an address if you want me send you a copy.