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Your must-read article of the day (Vanity Fair)

Thursday, December 4, 2008, 10:55 PM

Over the past two days I have been working with Erik and Becca on developing the next layer of strategy and direction for the site, the Crash Course, and where all of this is going. 

We'll share this with everyone as soon as it is ready.

In the meantime, this is the intro to a long but brilliant article on the economic/financial crisis, by Niall Ferguson in Vanity Fair. This is a must read article.

Wall Street Lays Another Egg
This year we have lived through something more than a financial crisis. We have witnessed the death of a planet. Call it Planet Finance. Two years ago, in 2006, the measured economic output of the entire world was worth around $48.6 trillion. The total market capitalization of the world’s stock markets was $50.6 trillion, 4 percent larger. The total value of domestic and international bonds was $67.9 trillion, 40 percent larger. Planet Finance was beginning to dwarf Planet Earth.

Planet Finance seemed to spin faster, too. Every day $3.1 trillion changed hands on foreign-exchange markets. Every month $5.8 trillion changed hands on global stock markets. And all the time new financial life-forms were evolving. The total annual issuance of mortgage-backed securities, including fancy new “collateralized debt obligations” (C.D.O.’s), rose to more than $1 trillion. The volume of “derivatives”—contracts such as options and swaps—grew even faster, so that by the end of 2006 their notional value was just over $400 trillion. Before the 1980s, such things were virtually unknown. In the space of a few years their populations exploded. On Planet Finance, the securities outnumbered the people; the transactions outnumbered the relationships.

All the best,
Chris

 

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6 Comments

DavidC's picture
DavidC
Status: Silver Member (Offline)
Joined: Sep 29 2008
Posts: 243
Re: Your must read article of the day (Vanity Fair)

A excellent article Chris, and reiterating many of the points and comments you and contributors to the site have made.

Niall Ferguson has a superb series on UK's Channel 4 at the moment called 'The Ascent of Money'.

http://www.channel4.com/history/microsites/A/ascent-of-money/index.html

His other linked article from 'Wall Street Lays Another Egg' is also great reading;

http://www.vanityfair.com/politics/features/2006/10/empire200610

"In 2006, Chinese holdings of dollars reached 700 billion." from page 7 of 'WSLAE' - maybe that's where Hank and Ben got their original figure from -so, it wasn't plucked out of the air after all! :-)

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Your must-read article of the day (Vanity Fair)

I think there's a hockey stick in there somewhere......  Nuh, she'll be right, what was I thinking...?

Brandon's picture
Brandon
Status: Martenson Brigade Member (Offline)
Joined: Oct 6 2008
Posts: 144
Niall Ferguson - Gold Standard: A Cause of the Great Depression

I heard an interview with Mr. Ferguson on NPR. I enjoyed the conversation, and was intrigued by an assertion that the gold standard caused the Great Depression.

The comments I refer to are between 16:45 – 20:05 of the interview.

Direct Audio Link:

http://www.npr.org/templates/player/mediaPlayer.html?action=1&t=1&islist...

Link to Story with Audio Link:

http://www.npr.org/templates/story/story.php?storyId=9739538

In my research, I also came across this analysis:

http://austrianeconomists.typepad.com/weblog/2007/12/did-the-gold-st.html

greendoc's picture
greendoc
Status: Silver Member (Offline)
Joined: Sep 23 2008
Posts: 131
Re: Niall Ferguson - Gold Standard: A Cause of the Great ...

Hey thanks for that link for austrian school analysis LaFanze.  I, too, heard that interview with Ferguson on NPR and went back and listened to it again to make sure I understood him right.  I have not intensively studied 6,000 years of financial history as he has, but I was dismayed to hear him so flippantly assign blame for the Great Depression to the gold standard. I would love to hear more informed, intelliegent folk on this forum (than myself who knows next to squat on this topic) take his argument apart.  

 Like any catastrophic, turbulent event in a complicated system like economics the causes are multifactorial. 

 And I have been trying to convince my husband for years that Vanity Fair is not just a gossip rag, but actually has some great journalism inside. Maybe this will help sway him.  The Tina Fey cover shot won't help though.  

 

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Niall Ferguson - Gold Standard: A Cause of the Great ...

Not being an economist, I found the article informative. After sleeping on it, I came to the realisation that a large number of very frugal people in Asia have been working their butts off, probably in intolerable conditions for long hours so that their savings could support a smaller number of people excessively consuming in the Western world.

If I was them I would not be pleased with the current unpleasant economic situation and might even take it personally.

Don

___________________________________________________

Diversity our greatest strength, complacency our greatest weakness

jrf29's picture
jrf29
Status: Gold Member (Offline)
Joined: Apr 18 2008
Posts: 453
Re: Your must-read article of the day (Vanity Fair)

 

A great article.

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