It was the book I am interested in, good price arrived on time. No worrys.

As every schoolboy knows, there's nothing worse than a dull book, so (after painfully crawling through Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips, and before that the inane Rogue Economics: Capitalism's New Reality by Madame Napoleoni) when "The Trillion Dollar Meltdown" by Charles R. Morris arrived I had scant enthusiasm for reading yet another book about finance. I was about to throw it onto the pile, when I took a peek, and it was immediately apparent that this guy knows how to write in clear, plain and precise English . In the dismal science of finance, it's as though Charles R. Morris has kindly come into your room and turned on the light.

Not, though, that he makes the economy effortless to comprehend for those of us outside the temples of finance. Despite Morris's gift with words, even a well-crafted book about finance is as simple to absorb as one written about particle physics or string theory. Morris takes pains to decipher all the argot (except for Alt-A loans) in detail, and such abstruse terms as "tranching" (including the inverse tranch and the floating tranch) and "leveraging" are explained several times in case they escaped you the first time around. I would fain confess, however, that by the time he came to "synthetic credit-default swaps" and such passages as "In mid-October 2007 a midcredit 'A' swap on the ABX was trading at about 60, down from a par of 100," I was hanging onto the the side of the pool, struggling to keep my head above water.

Not that all that should deter you from tackling the book, because it is also tempered by humor in the form of Charles R. Morris's sardonic wit. He knows the subject of finance well enough to point out that the masters of the financial universe are not above chicanery and self-deception, and that " . . . advanced mathematics fostered the illusion that economics is a science."

It's amusing to note that almost all the negative reviews here are from the zealots of the Libertarian Synod and the cabal of the Objectiveists. Mr. Morris is a heretic in their glaring eyes because he posits the idea that there can be a balance between too much government regulation and too little. For the rest of us, however, Morris is remarkably evenhanded and nonpartisan in his assessments. I confess that, because I was living large during the Clinton administration, I thought highly of "Rubinomics," with its old-fashioned remedy of paying the debt. Morris, however, debunks all that. After reading this book, I watch the talking heads on PBS with new, somewhat jaded, eyes.

The book's major shortcoming is mentioned in other reviews. There's no escaping the fact that the book is, for all practical purposes, now a year old, and on page 105, we find the erroneous conjecture, "As the credit crunch works its way through banks and investment funds over the next year or so, there will be no soothing fountains of new dollars coming out of Washington. The days of a universal put to the Federal Reserve are over." No, there are no soothing fountains; instead the Federal Reserve and the Secretary of the Treasury have turned on a firehose of cash, and it's astounding that anyone would be surprised by this. What else would anyone expect? That's always been the government's sole answer to any problem.

But a far more serious issue is missing from this book, too. It seems unrealistic, to expect that the government, no matter how well-intentioned, can solve the all problems of mortgage default and evictions, credit card delinquencies, commercial mortgage securities, monoline insurers, credit default swaps and insolvent banks -- the entire army of ravenous debt-zombies marching at once-- but now that the great unraveling is in progress they must also face an even greater problem -- fear.

Everyone reading this has recently lost, or knows someone who has lost, a massive portion of his or her net worth. A friend of mine (retired, no job prospects) lost $15k in the last quarter alone. The City of Detroit Pension System lost $52 million when Lehman Brothers sank. (This is actually not my friend, but I'm too embarrassed to admit it's me.) Bankruptcies called for in the auto industries will relieve those companies of their fixed obligations for retirees, and many other companies are defaulting on their pensions, too. Unemployment is rising daily. In the midst of such catastrophic circumstances, can we realistically expect the housing market (or any other market) to rebound? Who, other than dope dealers laundering money, would be foolish enough to apply for a mortgage during times of deflation?

The information in this book is almost trivial in comparison to the general consensus of where we're headed, the name of which no one dares speak -- the forbidden D-word. Fear has gripped the markets, and quite sensibly so. Others here have criticized Mr. Morris for not proposing more solutions (his sole suggestion is to reinstate the old Glass-Steagall Act), but there may, in fact, be no solutions. Because of the multiplier effect of the derivatives, there isn't enough money in the galaxy to pay off all the debt.

Other alert critics here have noticed that this book doesn't end very well, and yes, it veers off the rails into a standard-newsweekly discussion of general (non-financial) social woes such as inequality, high tuition and health care (NOTE TO AUTHORS: REMAIN ON TOPIC), but those stories have been told more thoroughly elsewhere. (I pay $3200 annually for hospitalization insurance, extra for doctor's visits, yet I would never want to trade that for the "free" [ha-ha!] health system of Canada or the UK with their 18-month waits.) Future editions of the book should jettison these pages and in their place address the vital question of What Is to Be Done?

In the meantime, I've wisely prepared for the future by obtaining a large cardboard box (with blue plastic tarp) to live in, and I recommend Hans Fallada's 1932 book,What Now, Little Man? to all readers.

As every schoolboy knows, there's nothing worse than a dull book, so (after painfully crawling through Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips, and before that the inane Rogue Economics: Capitalism's New Reality by Madame Napoleoni) when "The Trillion Dollar Meltdown" by Charles R. Morris arrived I had scant enthusiasm for reading yet another book about finance. I was about to throw it onto the pile, when I took a peek, and it was immediately apparent that this guy knows how to write in clear, plain and precise English . In the dismal science of finance, it's as though Charles R. Morris has kindly come into your room and turned on the light.

Not, though, that he makes the economy effortless to comprehend for those of us outside the temples of finance. Despite Morris's gift with words, even a well-crafted book about finance is as simple to absorb as one written about particle physics or string theory. Morris takes pains to decipher all the argot (except for Alt-A loans) in detail, and such abstruse terms as "tranching" (including the inverse tranch and the floating tranch) and "leveraging" are explained several times in case they escaped you the first time around. I would fain confess, however, that by the time he came to "synthetic credit-default swaps" and such passages as "In mid-October 2007 a midcredit 'A' swap on the ABX was trading at about 60, down from a par of 100," I was hanging onto the the side of the pool, struggling to keep my head above water.

Not that all that should deter you from tackling the book, because it is also tempered by humor in the form of Charles R. Morris's sardonic wit. He knows the subject of finance well enough to point out that the masters of the financial universe are not above chicanery and self-deception, and that " . . . advanced mathematics fostered the illusion that economics is a science."

It's amusing to note that almost all the negative reviews here are from the zealots of the Libertarian Synod and the cabal of the Objectiveists. Mr. Morris is a heretic in their glaring eyes because he posits the idea that there can be a balance between too much government regulation and too little. For the rest of us, however, Morris is remarkably evenhanded and nonpartisan in his assessments. I confess that, because I was living large during the Clinton administration, I thought highly of "Rubinomics," with its old-fashioned remedy of paying the debt. Morris, however, debunks all that. After reading this book, I watch the talking heads on PBS with new, somewhat jaded, eyes.

The book's major shortcoming is mentioned in other reviews. There's no escaping the fact that the book is, for all practical purposes, now a year old, and on page 105, we find the erroneous conjecture, "As the credit crunch works its way through banks and investment funds over the next year or so, there will be no soothing fountains of new dollars coming out of Washington. The days of a universal put to the Federal Reserve are over." No, there are no soothing fountains; instead the Federal Reserve and the Secretary of the Treasury have turned on a firehose of cash, and it's astounding that anyone would be surprised by this. What else would anyone expect? That's always been the government's sole answer to any problem.

But a far more serious issue is missing from this book, too. It seems unrealistic, to expect that the government, no matter how well-intentioned, can solve the all problems of mortgage default and evictions, credit card delinquencies, commercial mortgage securities, monoline insurers, credit default swaps and insolvent banks -- the entire army of ravenous debt-zombies marching at once-- but now that the great unraveling is in progress they must also face an even greater problem -- fear.

Everyone reading this has recently lost, or knows someone who has lost, a massive portion of his or her net worth. A friend of mine (retired, no job prospects) lost $15k in the last quarter alone. The City of Detroit Pension System lost $52 million when Lehman Brothers sank. (This is actually not my friend, but I'm too embarrassed to admit it's me.) Bankruptcies called for in the auto industries will relieve those companies of their fixed obligations for retirees, and many other companies are defaulting on their pensions, too. Unemployment is rising daily. In the midst of such catastrophic circumstances, can we realistically expect the housing market (or any other market) to rebound? Who, other than dope dealers, would be foolish enough to apply for a mortgage during times of deflation?

The information in this book is almost trivial in comparison to the general consensus of where we're headed, the name of which no one dares speak -- the forbidden D-word. Fear has gripped the markets, and quite sensibly so. Others here have criticized Mr. Morris for not proposing more solutions (his sole suggestion is to reinstate the old Glass-Steagall Act), but there may, in fact, be no solutions. Because of the multiplier effect of the derivatives, there isn't enough money in the galaxy to pay off all the debt.

Other alert critics here have noticed that this book doesn't end very well, and yes, it veers off the rails into a standard-newsweekly discussion of general (non-financial) social woes such as inequality, high tuition and health care (NOTE TO AUTHORS: REMAIN ON TOPIC), but those stories have been told more thoroughly elsewhere. (I pay $3200 annually for hospitalization, extra for doctor's visits, yet I would never want to trade that for the "free" [ha-ha!] health system of Canada or the UK with their 18-month waits.) Future editions of the book should jettison these pages and in their place address the vital question of What Is to Be Done?

In the meantime, I've wisely prepared for the future by obtaining a large cardboard box (with blue plastic tarp) to live in, and I recommend Hans Fallada's 1932 book,What Now, Little Man? to all readers.

This book, published last year before the meltdown, predicted in great detail what was about to happen. Charles Morris not only saw a pattern of financial danger, he was able to predict where we were going. As this crisis hit in the last four months I have been desperate to try and understand what was happening and what was likely to happen next. Morris lays out in clear detail, in a manner that us non economists can easily understand the history of financial market manipulation over the last 4 decades.

This book is an easy read in that it is not long but it is full of specific examples and ties together the history of US economics with the global markets. Reading it may likely depress you in that Morris proves that free markets are not self correcting and that greed, and bliss over the status quo, and has led us to the brink of financial destruction.

For me it provided the background knowledge to now understand and put into perspective what comes over the news channels and to be able to chart a path out of this economy for my personal life and business. This is a must read book of the year.

I'm not an economist or even close to one but this book is written for the average reader to easily understand. If anyone wants to know how we got into the current financial collapse..read this book. The author knew what was going to happen months if not years before!

I don't know why I expected a better book to be written about the crisis we are still in, but I did.

I found this book to be superficial. It is a small book and it spread itself too thin and tried to comment on too much without any depth.

Friends and colleagues have been asking me repeatedly what is going on. This book helped me give reasonable answers, and I have recommended it to everyone who has asked. Mr. Morris speaks with the authority of an insider and conveys his knowledge in clear, direct language. Don't expect the juicy gossip and anecdotes that some other recent books on this topic have used to entice readers. This book is hard-nosed and business-like. And yet, still eminently readable.

I was trained as an economist and have sustained a reverence (religious tone intended) for free markets and deregulation for most of my professional career. As a professional economist, I have some quibbles with some of Mr. Morris's explanations. They feel oversimplified and supported more by conviction than by a subtle analysis of the facts at hand. That said, taken as a whole, his analysis is much more sophisticated than that which any economist could offer if he stayed within his own discipline's boundaries. Mr. Morris points out things that I would not even think to look for. And at the end of the day, common sense favors most of his broader explanations. He brings us the kind of book you always hope to write, in which the reader reacts in an a-ha! moment: of course he's right--how else could it be?! But few readers will have grasped how obvious the answers are before reading Mr. Morris's book. With great disappointment, I bow to his verdict that free markets have not policed themselves as I would have expected and that, as a result, increased regulatory oversight will be required, despite the risks it brings.

I am not saying that I endorse all his explanations. And the book sort of comes apart at the end, in a series of asides that have little to do with his core messages and his core concerns. But this book has helped me understand today's financial crisis far better than anything else I have encountered. As I read it a second time, I am getting still more. Each of us has to build his own understanding; Mr. Morris has made that immeasurably easier for me.

Don't leave home without it!

This is a wonderful book for organizing the unfolding train wreck that is the world economy in late 2008. The author explains what forces led to the situation, how financiers and mathematicians used computer modeling to create complex, world-spanning organizations that led to quick, juicy profits, and how the assumptions upon which these structures were based denied the liklihood of sufficient risk to destroy the whole structure. It is a quick read but heavy on acronyms. I found a second reading helped after I had gotten used to the language and jargon. I thought the book was exceptionally helpful for fleshing out the nightly news sound bites and clearly explaining what the bankers have really been up to.

I have a business degree, but even I get lost in a sea of economic theories and '50-cent words' when reading about the crisis. This book is in plain english and doesnt try to impress the reader with vocabulary. Easy to understand and a good read.

I just happened to pick up this book at the library, and now I can't put it down. It describes, in a succint and clear manner, exactly how we got into the current financial crisis. I'm recommending it to everyone I know.

If terms like CDOs, tranches, CDS, LIMBOR, and SIVs throw you for a loop, this is a great book to get up to speed. Charles R. Morris puts the credit crunch in its context in 169 succinct pages. He's a former banker and he doesn't waste your time. Sure, it could have been longer, but then it wouldn't be as easy to read. The scariest thing about this book is it was written BEFORE the panic we are witnessing, but it accurately predicted it. It took the rest of us a lot longer to see the impossible hole we had dug ourselves into. I'm sorry to say that by then, it was already too late.

Many authors and speakers will claim credit for being among the first to call the downturn. But, author Charles Morris is among the first to publish a book...and a quality book at that...on the meltdown. For that alone, I give him a 5 star rating.

The few critics of this book on Amazon suggest that he was exaggerating with his suggestion of a trillion dollar problem. With the benefit of the history of what has transpired in the ensuing six months since publication, Morris has proven that he was not exercising hyperbole. (In fact, I believe history will likely show that his trillion dollar number is conservative.)

Let there be no doubt, there will be better books eventually written on the meltdown. There will be books with more in-depth analysis. There will be books that delve more into the personalities that contributed to the problem. And there will be books that with the benefit of more history, offer even better suggested corrective actions. But, in a world where speed is so important, Morris has written and gotten to market a very worthwhile starting point for readers looking to understand the fundamentals of what is happening and why this all happened.

Because I believe this meltdown is one of the most important events of the last century, I highly recommend this quick read book as a starting point for understanding what is transpiring.

If you are buying any other books, or reading any other articles on the recent "credit crunch", you should seriously consider getting this book too. The writer is a lawyer, and in very precise plain clear language, describes how each of the new types of financial instrument, from "put" to "synthetic collateralized debt obligation", works, covering why people originally developed them, and how people have gone on to use and enhance them. It then covers all the risks that have developed as a result of their use in practice, and briefly covers the overall financial consequences, as far as people understand them. This includes talking about various regulatory failures that have contributed to the crisis.

He then makes an overall estimate of the kinds of losses that are likely. Although the real losses are looking even more serious now, several months later, he gives figures and estimates in his reasoning that enable you to get some kind of overall picture of the problems. His focus is almost entirely on the United States, but the financial instruments used elsewhere are the same, and the regulatory failures similar.

If you are reading other accounts of the developing crisis, this is a very good place to get the basic technical information on what everyone is talking about. Some books leap into explanations, with only very brief, and sometimes misunderstood, accounts of the financial instruments involved. Even if you disagree with some of Morris's points of view or conclusions, his clear account of how each financial instrument works is still very helpful.

Brilliant.
Superbly written.
Thorough.
Highly gifted writer. Amazingly clear and succint.
I don't know of any other book on this subject that even come close to this one.
Thank you Mr. Morris.

This book is cogent, highly readable, and (published early this year) very prescient. The only expositor of equal clarity on the debacle I have seen is Nouriel Roubini of NYU. Morris is a little light on policies to get us out of this mess, but that is probably asking too much for a book published well before the latest cataclysmic events.

Morris points out that the story begins as early as Jimmy Carter and the penchant for deregulation of the economy (e.g. airlines) which continued unabated through the next 25 years. Keynsian economics was never abandoned entirely but the use of monetary policy to restrain inflation and stimulate the economy when necessary became part of the "Washington consensus."

Morris reminds us of the warning signs of deregulation, especially in financial markets with the S&L crisis of the Eighties and the meltdown of a huge hedge fund, Long Term Capital Management in the Nineties. Even when rogue companies like Enron, WorldCom etc demonstrated the dangers of greed overcoming weak governmental oversight, there was no outcry for comprehensive overhaul of regulation. The execs of those companies were portrayed simply as bad apples who eventually did get the comeuppance, even if a lot of pain spread to shareholders and employees.

Nor did the dot.com bubble shake confidence in the unrestrained market as a vehicle for general prosperity. As long inflation stayed low, Greenspan did not concern himself with reining in "irrational exuberance" driving up stock prices. He did not view a bubble in asset prices as any sort of threat to the general economy, presumably because the pain of a bust would be limited to Wall Street and not spread very far into the real economy.

But when that bubble did burst at the beginning of the decade, it did create a threat of recession to be combated by the lowering of interest rates. That was possible because foreign trading partners were willing to buy Treasuries to park their trade surpluses. Globalization kept prices low and cheap money stimulus did not appear to incite inflation. What it did incite was an orgy of credit in the U.S. economy and ultimately around the world.

U.S. consumers had negative savings rates for years and the U.S. deficit could rise dramatically without apparent consequences. With cheap money, a parallel financial system to the regulated banking industry was created by a combination of unregulated hedge funds operating with very high leverage based on loans from large banks, big investment banks trading on their own accounts, and increasingly, insurance companies, sovereign wealth funds, and even the banks themselves using various techniques, trading on their own accounts to bolster returns above what could be earned through traditional investment grade debt.

How could extra yield be squeezed out? Only through higher risk lending. And that was primarily in the mortgage and other consumer debt markets. The subprime industry grew exponentially as a way to meet the demand for higher yielding assets by investors dissatisfied with the returns on real economic activity. These investors were so greedy that they were willing to invest in amazingly opaque debt instruments which probably only their creators really understood. It was a sophisticated Ponzi scheme in which almost all the players deluded themselves into believing in its viability. In the rush to make an easy extra point or two, huge institutions took unprecedented risks with almost mindless abandon in order to keep up with the herd of their brethren.

The downfall came because so many of the players were operating with the leverage made possible by cheap money which created the incentive of outsized gains that blinded them to the outsize risk of using borrowed money to essentially gamble. As well, using derivatives or "notional" investments that derive their value from the underlying "real" stocks or debt instruments in the economy, the scale of the financial betting can far exceed the values represented by the real economy. Morris cites the IMF in reporting that the total of global financial assets (which essentially are claims on GDP) grew from a ratio of about 1:1 in 1980 to 3.7:1 in 2005.

The notional value of derivatives refers not the derivative itself but he portfolio it is referencing. The enormous scale of financial assets and derivatives is a useful index of leverage, which is the flip side of volatility. The greater the leverage in the market, the greater the volatility as small changes in real value are magnified in financial portfolios. The derivatives have only a shallow market among investment banks, global banks, and credit hedge funds. This is an unstable tower of debt being sold back and forth by the players among themselves. This is the definition of a Ponzi game. It depends on the continued flow of cheap money so that bad bets can be covered and more bets made to recover in an overall rising market.

The U.S. financial system became so rife with bad debt and high-wire derivatives doubling down on such debt, that it had become increasingly unstable and vulnerable to the shock coming when mortgage default rates inevitably rose due to both the normal business cycle but especially the inherently unsound lending in the bubble of the housing market.

The enormous growth and profitability of the financial industry gave it disproportionate political power and kept at bay the kind of regulation that could have mitigated the public risk created by the drive for excess private gain.

This book came out in early March '08, long before the financial collapse. Yet here is what he predicts: "In this book I lay out...the likely course of writedowns and defaults...It comes out to about $1 trillion. Scary as that number is, it assumes an orderly deleveraging. But...There will inevitably be margin calls, panicked selling..." (p xiii).

Yes, he is accurate. Very, terrifyingly accurate.

He is also a good writer, and he will walk you through the entire nasty process of how we got here and what we can do to get out. Even for those who hate finances will find this book clear and easy to read and understand.

What many reviewers have not mentioned is that, despite the serious subject, the author is a very entertaining writer.

For instance, on post-WWII industry in the US:

'Like flightless birds on a predator free island, American companies had no defenses when hungry and hard-eyed competitors finally came hunting from overseas'

The author also provides a very good description of the financial instruments that got us into thiscredit hell. I know have, at least, some idea of what a synthetic CDO is, or, hopefully, was.

A well researched and reasoned analysis of the current financial crisis. The author's assessment of the economic and political forces that have resulted in the current crisis are presented in an understandable and balanced manner. He exposes the complicated financial instruments created and the excessive risks taken within our financial markets in the name of greater returns and paints a dire picture of the consequences that the eventual unwinding of these assets may have. Finally, he provides a tempered approached for future regulation of our financial markets.

The author's insight and presentation style leave the reader with a sense that there is someone who acutally has a sense of what's going on and that these current problems may be correctable if reasonable men are allowed to prevail.

I no sooner finished reading this book than we all started living it. What we are watching unfold on Wall Street and in Washingtion D.C. is exactly what was fortold, in excruciating detail.

Around 6 months ago I read this book. Talk about timeliness!! it deserves many accolades, I will definately read anything else this author publishes!
Excellent read, intelligent, concise and understandable for all.

Buzz Aldrin once told me that the secret to success was to be in the right place at the right time. To that advice, I would add, that one must bring the right stuff to the table. The historian of this fluid and incisive analysis fulfills both criteria. Morris states that his intention is to tell the story of how we got there, "as briefy and crisply" as he can. He succeeds, brilliantly. The book seems to be the culminating work of a lifetime of preparation for solely this task - production of an unpretentious, eminently readable, accessible, closely argued and well-documented, to the chase, history of the cycles of financial markets over the past half century which have brought us to the point of possible national bankruptcy - a history of debt capitalism in its most perilous moment.
While the mechanics of banking have never held much interest for me, I found this read gripping and highly informative - at a time when we all need to become informed about the mess engulfing us.

If he knew this was coming when he wrote this book, where were our politicians...hoping it would happen after the November elections. Did anyone say its time for a revolution - run out the bastards, including both McCain and Obama? Although dense at times (I got tired of all the acronyms - CDOS, CLOS, blah), if you could concentrate long enough, you got a smiggen of what is going on - what it boils down to is too much lent on too little value, and then sold to stupid investment houses trying to make a quick book - unfortunately, we, you and me, got stuck holding the bag.

Morris is a great author and explains the intricacies of how we have arrived at our present position in very intimate detail. I am an Australian and after reading "The Trillion Dollar Meltdown I now have no doubt that we are about receive a very severe backlash from the greed of others. What I was looking for, however, was answers to the problem so that I can prepare myself and my family for the aftermath. I was disapointed that I did not find any in this book.

Couldn't have timed it better, Lehman Brothers sunk, Merill Lynch sold, AIG is on the brink of disaster - these are household names for many of us! Charles Morris offers a great primer on the current crisis, and the underlying causes. The book starts off well back, in the early 60's, and walks the reader through the economic downturns, recoveries, and their underlying causes - hinting at the fact that the current crisis is anything but a new occurrence.

The author also spends a good amount of time on the financial instruments that have been reinvented many times over in the last decade: CDOs, SIVs, etc. Instead of hiding behind a curtain of mathematical complexity, Charles Morris offers great explanations and the rationale (if you can call it that) that led us to the current crisis.

Last few chapters of the book are heavily infused with opinionated policy judgments, but other than that, this is certainly a very timely read.

The beginning was very informative but then becomes bogged down with financial verbage. Hard read for the amature.

Excellent book outlining the ebb and flow of financial crises. Lots of historical examples and very good summaries.

1. In June 2007, Two Bear Stearns hedge funds that invested primary in mortgage backed bonds announce they were in trouble meeting margin calls. The real estate bust was in progress and the high leverage funds were in trouble, value dropping from indices of 100 to 90. American sub-prime was global and blue chip financial companies admit big losses: Nomura, Royal Bank of Scottland, Lehman Bros, Credit Suise, Deutschebank, France BNP Paribas, IKB, and Caliber and Bank of England had to bail out North Rock..

2. In addition to the Consolidated Debt Obligations there existed a Structured Investment Vehicles (SIVs) financial structure, run within, but separated from the major money center banks. SIVs aer typically Cayman Island limited partnerships that collect bundles of bank loans or other securities. They are convenient for moving assets off bank's balance sheet and apparently have substantial holdings of commercial and residential mortgages and mortgage back securities. Banks chose to finance SIVs with inexpensive ABCP short-term maturities (money market fund) rather than maturity debt. Total asset backed commercial paper outstandings was about $1.2 trillion.

3. November 2007, SIV approached a state of chaos. Outstanding interbank commercial paper balances had dropped below $900 billion, with most of the fallout due to refusal to refinance SIVs, leaving banks potentially on the hook to supply more than $300 billion of risky and unexpected financing. At Citi, the lending to its own SIV was more than three times higher than its net new global consumer lending. Citi and other American banks with cooperation of the Treasury are working to organize a super-SIV to take $75 to $100 billion in SIV loans off their books.

4. Citigroup revealed it managed $400 billion in off-balance entries called long term SIVs loans. Almost all the SIV loads were financed by short-term paper. When the London money markets realized what the banks were doing, commercial paper sales came to a grinding halt. Bank shareholders discovered that SIVs weren't really off-balance sheet, since the banks had usually promised to take them back if they couldn't raise short-term financing.

5. October 2007, big banks and investment banks reported $20 billion in losses, $11 billion of it at Citi and Merrill, primarily in subprime-based CDOs with revised to $45 billion in losses. Citi received a $7.5 capital infusion from Abu Dhabi in the form of a convertible bond, a 11 percent interest coupon.

6. Derivatives are futures, forwards, options, and swaps. Derivatives reduce risk for one party. Derivatives hedge against the future, invest small now for the option to buying later. Derivatives are contracts based on or derived from some underlying asset, reference rate (interest rates or exchange rates), or indexes

7. Derivatives can be based on assets such as commodities, bonds, interest rates, exchange rates, stock market index, and consumer price index. Derivatives allow investors to make massive money by leveraging on small movements in price. In derivatives someone losses money while someone gains money, a supposed zero sum game.

8. One very popular derivate was the Credit Default Swap (CDS). If I am a fund manager with a risky subprime mortgage portfolio that I'd like to get off my books. I could try to sell it, but it would be easier to enter into a credit default swap (CDS) on the ABX. In Oct 2007, a midcredit "A" swap was trading at 60, down from a par of 100, down 40 cents on the dollar. What does it cost? I pay the counterparty $4 million to take the risk for the $10 million CDO portfolio. The result is I've crystallized my worries into a single payment, taken a $4 million hit, and no longer have subprime exposure.

9. Hedge fund raise cash by selling equity in the form of partnership shares. For every $1 invested from its partnership equity, HF invest $4 borrowed from its banks, equity investments are leverage 5:1. HF buys $100 million in first-loss bonds, underpinning a $2 billion CDO, 20:1 leveraging. The $100 million is financed with $20 million in equity and $80 billion from the bank. HF partners are leveraged 5X20=100:1. A loss of 1 percent on the CDO wipes out all HF partner equity. A potential loss of $20 million per percent drop.

9. Portfolios covered by default credit default swaps contracts ballooned from about $1 trillion in 2001 to about $45 million in mid-2007. CDS are private deals arranged for a fee by broker-dealer banks.

10. Banks are on the hook to make good losses on some $18.2 trillion of portfolios, while credit hedge funds have guaranteed some $14.5 trillion. Most funds can not survive even a 1 percent to 2 percent payoff demand on their default swap guarantees. Banks and investment banks carry large swathes of risky loans and investments because they have default insurance. Poor design, these companies do not carry bad debt reserves against the possibility of failure.

11. Additionally, at risk was the larger $43 trillion CDS insurance market for which Bear Stearn insured $13.4 trillion and the $150 trillion bond market and the $500 trillion derivatives market.

12. A hard landing predicted in 2009. $350 billion in subprime and other risky residential mortgages will be reset, many at punishing rates. Defaults will rise sharply. Two million people could loss their homes. House prices will continue to fall, 10 - 30 percent. Many consumers will be stuck in upside-down mortgages. The $9 trillions in home equity withdrawn is no long sustainable. Dollar decline will make commodity prices higher. US oil exports will rise and pass through dollar decline. A decline in credit availability will feed into the downward momentum.

13. Hardlanding started in 2008 and economic losses are expected to continue with more defaults and writedowns. The writedowns are a measure of the yield for holding such risky instruments. The billions in writedowns will negatively impact the economy. The Super-SIV structure floated by Citgroup and the Treasury looks like a blatant attempt to defer writedowns. Widespread collateral damage in hedge funds will trigger forced selling from margin accounts. Rolling bond downgrades will require divestures by pension funds and insurance companies that find themselves in violation of rules holding investment grade paper.

14. With notional derivative values in the $500 trillion range, rapid swings of $5 trillion to $10 trillion in derivative values are altogether plausible and could inflict enormous damage.

This is a well-written and well-research account of the present financial crisis and it's fun to read as well. The analysis is first class and provides the reader with new insights.

This book was printed with the intention of providing timely information to the general public. If you take that into consideration this book is indispensable. It provides a good background to the current crisis and the author presents information on some of the inner workings of our financial system that I was totally in the dark about. Overall, a quick and great read, order it sooner than later as the information will not do you any good in 6 months.

I kept waiting for a conclusion. 5 cds of "why", but no opinion as to resolution. Also, too technical for those in "banking" but not in "investment banking". Big difference. Securitization discussion became boring, especially when it ended with no real ending. I know it is too soon to know the outcome, but expected some sort of educated opinion of the future.

Obtaining a clear cut viewpoint of the unfolded events that brought our current credit crunch can be a daunting task. With many media biased presentations painted with a broad brush, finding the right sources from which to extract the relevant details can be tricky.

Fortunately, Charles Morris lays down a seemiingly fluid account, although a little bumpy at times, of the major events and financial structures that are now causing the U.S. Government to slap away the free market "invisible hand" with great force. As with the many other current books outlaying the roots of the subprime scandals, credit crunches, and the real-estate bubble, this volume takes a convenient chronological approach that is quite easy to follow. So often as he did with his "Money, Greed, and Risk", he links many of the recent debacles with events from the past to great effect. We come to understand towards the end of the volume that clearly, history does repeat itself in the sense that too much of a good thing can wreak havoc later. Here, the good thing is cheap credit in the form of subprime loans and their ensuing credit derivative structures, and the havoc being the government needing to intervene... while low and middle class tax payers cover the tab. (If you read Johnstons "Perfectly Legal" you'll see why upper class and the super rich need not apply).

Although a much easier read than his previous "Money, Greed, and Risk", this slim volume does still demand a keen and sharp understanding of credit derivative jargon. I found myself continuously referring to fixed income texts to remind myself of the origins of some of these structured financial products fabricated by teams of greedy "quantitative phynancial engineers". Morris gives a good account for most of these strucures such as a (1) Credit Default Swap- a credit derivative aimed at hedging against mortgage default and (2) a collection of of Credit Default Swaps divided into tranches according to risk and (3) SIVs - a sleak structure to hide future write-offs.

Although I've read only one book better at explaining the reasons of the subprime crisis and credit cruch (see "Confessions of a Subprime Lender"), this one is definitely worth your opportunity cost.

This book can be summed up with the words of the late great singer, Jim Morrison, "This is the end...beautiful friend...this is the end...my only friend....the end of our elaborate plans....the end of everything that stands....the end"

I enjoyed the first few chapters where Morris does a good job of detailing the history leading up to the credit crisis; however the last couple of chapters, a waste of paper are Morris' amateurish critique of free markets, Milton Friedman and the band of U Chicago economists, Reaganomics and capitalism in general.

Morris pins the greatest blame on Greenspan and the fed (i.e. a federal agency) yet his solution is to give more power to the government to regulate Wall Street - he doesn't offer an explanation of why we should believe that if one government agency caused the problem, another would be able to fix it.

I suppose when I saw George Soros acknowledged as a contributor, I should have put the book down.

excellent. Very readable and enlightening. Perhaps a little too technical in places for an ordinary reader like myself.

This book looks at the roots of the current Credit crisis, starting in 1980s with full embracing of Free Markets and Deregulation. It explains everything in the context of the two periods, pre-1980s era when Govt regulation was prevalent and post-1980s era of Deregulated and Open Markets.

Recently, I completed reading Alan Greenspan's book "Age of Turbulence". It is interesting to see how this book from Greenspan's book, since Greenspan is a strong cheerleader for Unregulated Free Markets. This book takes a more balanced look, acknowledging that Free Market principles contributed to the economic booms of 1980s and 1990s while asserting now the pendulum has swung too far and it is time to have more regulation for financial markets.

Most of the book is interesting to read, except at some points where author goes into nitty-gritty details of things like Mortgage Backed Securities and Collateralized Debt Obligations. But, they are important for understanding the current Credit Crisis. One thing that makes this book more authentic and balanced may be, Author doesn't seem to come from any particular ideology like conservative or liberal.

One important take away after reading this book is, the current Credit crisis is much broader and deeper in its impact than any of the previous crises like 1987 Stock market crash or 1994 Savings and Loan crisis or 1998 Long term Capitol crisis. It is kind of scarier to see the depth of the current problem.

The author paints a very broad picture in leading us into the main focus of the book, which is the credit crunch resulting largely from the subprime mortgage mess. The sketches of previous bubbles leading up to this bubble give helpful background and strengthen the notion that this debacle is part of an ongoing trend dating back to the 80s. There is precedent for the current troubles in the 1987 market crash, the LTCM hedge fund failure, and the demise of GE's Kidder Peabody in 1994.

A number of ingredients have gone into the mix of these ever arising bubbles. Since the advent of computer trading, investment banks and hedge funds have been able to develop more and more complex financial instruments that have made them more and more enthusiastic about taking on risk. They are aided by the fact that they can essentially work in dark corners behind the scenes with no regulators poking around. Success leads to the prospect that even fatter returns are within reach if they keep leveraging their positions. The fuel that keeps the fires burning is easy money and burgeoning asset values; and it all works well until home prices stop going up or the Fed decides to raise interest rates. Then we have a crash.

The book gives the reader a glimpse into what goes on in the dealmaking recesses of the investment banking world. We learn, for instance, that a Credit Default Swap is a credit derivative that is supposed to hedge against mortgage defaulting and that synthetic CDOs are arrays of Credit Default Swaps with different tranches divided according to risk; and that SIVs are a means the banks use to hide the stuff from their books.

The macroeconomic viewpoint of this book is far too sketchy to enable anything but a scattershot casting of blame. The author would have done better to have maintained more of a focus on the excesses of unregulated finance and the problems of remedy. The recent fallout, which has so far included the government rescue of Bear Stearns - an abandonment of free market principles, leads to the obvious conclusion that sensible regulation is necessary. Nevertheless, there seem to be many in influential positions who prefer to look the other way and parrot that any regulation is bad regulation.

The book provides an excellent analysis of the current US inspired credit crisis that is threatening the financial system. The problem boils down to an unwinding of an enormous credit bubble, built up over the last twenty five years, and a corrupt, overly leveraged, wall street establishment that is able the pocket gains and socialize losses. The problem is not necessarily one with the free market (in the real sense), but rather one with the current neo-corporatist model (aka Chicago school monetarism, or soft fascism) where in effect the most powerful and wealthy interests in a country gain control of the state regulatory and legislative agencies and use them as a battering ram to further their own private interests at public expense. Of course the public is usually too distracted and dumbed down to ever figure out what is going on until after their bank accounts are empty, they're hopelessly in debt, and their children are being packed off to fight the latest war for "freedom and democracy".

It seems that this same neo-corporatist model is to some extent also at work in the pharmaceutical, media, and military industrial complexes as well. It creates a type of "tapeworm economy", or ponzi scheme, that eventually caves in on itself.

I was very much impressed by Charles R. Morris's "The Coming Global Boom" in the early 1990's, so this book was quite a disappointment. "The Trillion Dollar Meltdown" is an example of the phase Charles Kindleberger describes in his "Panics, Manias, and Crashes" as "looking for the scapegoats." Here the principal scapegoats are Milton Friedman and Alan Greenspan. Morris both decries and predicts the demise of Friedman's free market "ideology" and Reagan's idea that government is part of the problem and not the solution.

Morris sets up his argument by describing how liberalism and fiscal Keynesianism lost credibility by the end of the 1970's with what has been described as stagflation. Fiscal stimulus no longer stimulated an economy mired in so much debt. Morris then describes how Paul Volker implemented Friedman's Monetarism policy , but according to Morris, it worked because Volker didn't believe in the ideology. Volker just wanted to demonstrate to the world he was serious about inflation.

While I think Morris brilliantly critiqued the Liberalism of the 1970's, I disagree with his argument that it went away. Reagan promised to abolish the Energy and Education Departments and that went nowhere. Republicans talked about "government as the problem" but then expanded most government programs. The liberal interest groups that proliferated in the 1970's turned their attention to the Federal Courts and achieved many of their goals there. Interest group Liberalism didn't go away in the 1980's. It's agenda was still advanced merely by changing venues.

My point is that big government never died, Morris's claims notwithstanding. Nor did financial regulation end with the repeal of Glass-Steagall Act. In the aftermath of the Dot.com boom-bust, the Sarbanes Oxley Act---which Morris doesn't mention---put heavy restrictions on new stock issuances. So, the money went where the regulations aren't. As it usually does.

I would also say that in dealing with the current crisis, Fed Chairman Bernacke is not using the Milton Friedman approach of letting the "fire burn itself out." Instead, Bernacke is using the Walter Bagehot strategy of finding the lender of last resort to bail out the ailing institutions.

Now, I agree with Morris that many of these `investments" he describes are scams.
I think variable rate mortgages are a bad idea because most people who agree to one have no idea that they are placing a bet on what the Fed will do over the life of the loan. They are signing up for what could be a rather bumpy ride.

I also agree with Morris's criticisms of Sallie Mae and the student loan mess, but I would point out that the colleges themselves are considerably to blame for these problems. Many colleges have accumulated vast trust funds while doing little to help their students. It sometimes seems to me that a college education has become like home ownership: having one is better than not having one but too many bucks have been chasing too little bang for some time now.

I think the institution that is most profoundly in need of reform in America is the United States Congress. When the Republicans forgot what they had been elected to do, they were turned out of office. But, when the Democrats returned to power, I saw that many faces of the Committee Chairs were the same as those who were turned out of power in 1994. Do you think they learned anything in the interim? I don't.

I was very much impressed by Charles R. Morris's "The Coming Global Boom" in the early 1990's, so this book was quite a disappointment. "The Trillion Dollar Meltdown" is an example of the phase Charles Kindleberger describes in his "Panics, Manias, and Crashes" as "looking for the scapegoats." Here the principal scapegoats are Milton Friedman and Alan Greenspan. Morris both decries and predicts the demise of Friedman's free market "ideology" and Reagan's idea that government is part of the problem and not the solution.

Morris sets up his argument by describing how liberalism and fiscal Keynesianism lost credibility by the end of the 1970's with what has been described as stagflation. Fiscal stimulus no longer stimulated an economy mired in so much debt. Morris then describes how Paul Volker implemented Friedman's Monetarism policy , but according to Morris, it worked because Volker didn't believe in the ideology. Volker just wanted to demonstrate to the world he was serious about inflation.

While I think Morris brilliantly critiqued the Liberalism of the 1970's, I disagree with his argument that it went away. Reagan promised to abolish the Energy and Education Department and that went nowhere. Republicans talked about "government as the problem" but then expanded most government programs. The liberal interest groups that proliferated in the 1970's turned their attention to the Federal Courts and achieved many of their goals there. Interest group Liberalism didn't go away in the 1980's. It's agenda was merely delayed and slightly discounted.

Then, Morris describes a trip to California in which he drives down Route 1 along the ocean rather than US 101 and writes this on pg 159:

"...I had never driven it before and was amazed by its beauty---the unspoiled dunes, the long beaches, the gorgeous mix of turquoises and earth tones. Then as the scene rolled on, mile after mile, I had cognitive dissonance. `What's going on?! Where are the Arby's, the motels, the condos, the strip malls?" Then it dawned on me "Oh, there used to be a government here."

"California, in fact, for the first couple of decades after WWII, under both Republican and Democratic leadership---Earl Warren, Goodwin Knight, and Edmund "Pat" Brown---set a new standard for high-quality local government....."

I would propose a counter California image to this idyllic picture. In 1994, the Santa Monica Freeway collapsed during the Northridge earthquake in a vital section between Crenshaw Blvd and Overland Avenue. The failure to restore quickly this vital highway in the middle of Los Angeles would have profoundly bad economic consequences. Yet, only one portion of one artery in the state master plan for highways in the Los Angeles area had been built since 1970. All the rest were tied up in courts with NIMBY suits, enviromental suits, affirmative action suits--- by all of the usual liberal interest groups---using the courts to block these efforts. The legislature had to pass emergency legislation to block any court action against the project and for the first time in memory, a highway project was done on time and under budget.

My point is that big government never died contrary to what Morris claims. I would further predict that any "rebirth" of big government would be short lived. Americans don't need Milton Friedman's writings to despise government. Whenever they renew their driver's license, board a plane, get called for jury duty, and so on, they have to deal with the fecklessness, incompetence, and plain old sassing of government employees.

I would also say that in dealing with the current crisis, Fed Chairman Bernacke is not using the Milton Friedman approach of letting the "fire burn itself out." Instead, Bernacke is using Walter Bagehot strategy of finding the lender of last resort to bail out the ailing institutions.

One note on the student loan mess he mentions. The problem not only lies with the laws but with the private colleges that are charging their students astronomical tuition fees while sitting on multi billion dollar endowments. This, for an education in many fields that is not up to the standards of a generation ago.

Now, I agree that many of these `investments" described by Morris amount to casino gambling and should be treated accordingly. I would also agree that more regulation of financial institutions is in order. Adjustable rate mortgages should not be permitted and credit card issuance rules should be tightened. But remember, the institution that is most profoundly in need of reform in America is the United States Congress. When the Democrats returned to power, I saw many of the same faces as Committee Chairs as were turned out of power in 1994. Do you think they learned anything in the interim? I don't.

I was impressed with the volume of information in the book. But as someone not well-versed in study of economics, I found the book difficult to read at time (Morris doesn't like to explain economic terms or explain basic economic concepts). Also, his arrogant, "I told you attitude" detracted from the book... as if he knew all along that the meltdown would happen when it's apparent to me that he speaks with the benefit of hindsight. And I get it, I get it... Volcker is a saint and Greenspan is the devil. That's really what I got out of the book.

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash is an incredible read for those who know little about the current international situation. It's a great book for those who know little about the great credit crisis yet can be quite challenging if you haven't taken a course in finance; sounds like an oxymoron. The jargon in the book is sophisticated, advanced, and not meant for the unenlightened reader. Charles R. Morris provides an informative, in depth explanation of the current situation, nationally as well as internationally. The Trillion Dollar Meltdown is broken down into rough sections, which explain how the International economy slowly fell into this credit mess, and explains how investment instruments are used as well as mistreated. The Trillion Dollar Meltdown provides a simple yet in depth overview of the complex and elaborate bond between the major players in this trillion (and rising) dollar credit market involving insurers, traders, credit rating agencies, banks, and housing agencies. A fascinating part of this story involves credit baron Morris describing likely scenarios of how this great credit crisis might unwind. After reading this story, its seems somewhat unrealistic to get out of this mess the credit industry has dug is in so deeply. Morris also discusses the dire market situations in the 80's and 90's and calls for more lucidity and honor in our current market and makes a several strong arguments for a shift in our social priorities to better address issues of education and health care. In the six months or so since the book was written the credit crisis has slowly dug it self deeper and deeper into a hole that our economy cannot even comprehend its final depth. When this book was written, the credit industry had lost a mere one trillion. Today, professionals predict we are close to three. This book is well worth the read and I would defiantly recommend it to anyone studying finance or in business school. If not, don't forget to bring a dictionary along.

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash

This is a very timely book, written in simple, direct and easy to understand language about the Credit Crisis that now threatens the financial stability of this country and the world. Morris shows that a worst-case consequence of revised risk assessment could result in write-downs totaling one trillion dollars.

Leverage in the Financial World means working with borrowed money. In the case of 4:1 leverage, you would put up $100 of your own money, borrow $400, and buy $500 of something: stocks, bonds, soybean futures, etc. When the market goes up, you earn a profit 5 times as fast as if you only played with your own money. When the market goes down, your $400 debt is still there. The lender may require you to sell some of your stuff to raise your own money enough to maintain the 4:1 ratio. If everybody's selling, the price you can get for your stuff goes down and you have to sell more.

In the stock market, it's called margin. The 1929 crash was caused by reckless margins, which are now carefully regulated to prevent a recurrence. Since then, other financial instruments and practices have grown up which are NOT regulated, and which may result in leverages as high as 100:1. Couple that with loose and predatory lending practices and you get a crisis. The subprime crunch is only the tip of the ice berg.

In simple and readable language, Charles Morris walks you through the complexities of derivatives, hedge funds, investment banks, commercial banks, insuring and rating agencies and bundled securities like CDO's. He shows how practices that began as wise and good led to escalating risks as higher profits were pursued. Computer manipulation of new mathematical formulas led to bundling of securities in a way that was intended to minimize risk, but in fact made them very vulnerable to leverage. The bundling also made it very difficult for the rating agencies like Moody's and S&P to assess their risk.

The marketplace now seems to assess many of these securities as riskier than the agencies do. Loss of confidence in Bear Stearns led to the equivalent of "a run on the bank". When Bear tried to sell some of the securities they owned in order to raise the "your money" piece of their holdings, they found no one wanted to buy them. A rescue by the Federal Government and a big bank stopped the panic from spreading to other investment bankers. The rating agencies are now reassessing these new type of securities, and have lowered some ratings from AAA to Junk. Morris shows that a worst-case consequence of revised risk assessment could result in write-downs totaling one trillion dollars.

There are three books that shed light on today's worldwide financial crisis. Second and third are Morris and Soros (2008), the first and most basic is the one that I reviewed last year: Eichengreen's `Globalizing Capital'. The review can be found on the econophysics web page or on amazon.de.

Eichengreen presents the history of the Dollar from the gold standard until convertibility was cancelled in 1971, and from then from the early years of deregulation through 1995. Specific details of recent financial history under deregulation, which we date from 1971, are also usefully provided in Lewis' `Liars Poker' and Dunbar's `Inventing Money'. We can date the use of the Dollar as international default reserve currency since 1945, while the inflation of the worldwide credit bubble dates exactly from 1971. Morris discusses the necessary background history in summarized form, with appropriate emphasis on the onset of deregulation (1971) to the present era of worldwide financial instability.

Morris begins with the Reagan era of easy credit, lowered taxes for the wealthy, and big budget busting, and the systematic deletion of financial rules that had been set up under FDR as a result of the depression (Eichengreen correctly presents the Great Depression as a liquidity crisis that could have been avoided, we've had no depression since that time because central banks have provided adequate liquidity in financial crises--this will not likely be possible in the future due to the enormity of unregulated 'shadow banking'). Morris notes that the exercise of judgment in policy making was dropped when politicians shared the illusion of academic economists that, under the marriage of (neo-classical) economics with high-powered math, economics had become a science. Lucas' famous laissez faire policy critique represents the epitome of that illusion. The Chicago School of Economic ideology is rightly blamed by Morris for the present unstable fruits of deregulation and the corresponding loss of manufacturing capacity in the U.S.

Morris descusses various synthetic option products for the reader, especially collateralized mortgage obligations (CMOs), created in 1983 in era of the collapse of savings & loans in the U.S. as a result of splitting mortgages into derivatives (see also Lewis). CDOs, credit default swaps, and other derivatives that were useful in expanding the bubble are also described. One is the SIV (structured investment vehicle), which has been extremely useful in getting credit created by mortgages off the balance sheets of banks. The money supply is discussed by neither Morris nor Soros, but the Dollar M2 is roughly $7 trillion, M3 is about twice that. M2 describes all money (credit is counted as money) under the control of the U.S. Federal Reserve Bank. M3 includes `Eurodollars', money outside the U.S. that's used to create credit in, say, China, under the multiplier rules of Chinese banks. M3 includes all 'on balance sheet' Dollars in the world. To understand where we stand, the reader must know about 'shadow banking', also mentioned by Morris with SIVs as the prime vehicle for that form of uncontrolled money creation. Shadow banking, so far as I've managed to understand it, includes credit that is at least triple the amount of M3. This means that the U.S. is in a worse position financially than in the 19th century before the Federal Government outlawed currency printing by commercial banks. In a word, and as Morris argues convincingly, financial regulations are absolutely necessary, the free market/free trade binge is over, the Dollar cannot be salvaged under current economic and political policy. I read on the web that total Dollar mortgages are on the order of magnitude of M2-M3, meaning that mortgages are largely an unregulated form of money creation today (due to derivatives and shadow banking). The world was quite different before the Reagan-Thatcher-Friedman ideology took hold only a short 27 years ago.

While I think Kevin Phillips BAD MONEY is a very important book and well worth reading, Morris' THE TRILLION DOLLAR MELTDOW is, in some important respects, even better. Both are well qualified observers. Phillips as a brilliant, fiercely independent "tell it like it is" author of popular political and economics texts, and Morris, internationally respected ex-banker and financial analyst

The thesis of MELTDOWN is simple. The same "free market" philosophy that effected the economic recovery and expansion of the U.S. in the 1980s and early 1990's, has now brought the U.S. economy and American society almost to ruin. In other words, the economic pendulum has swung too far in one (free market) direction and there now needs to be a return to the other direction to bring things back into balance.

The "socialization of risk", in which big money was made by the sale and trading of bogus investment instruments that had to inevitably crash, at which point the "risk" or huge losses were simply handed off to taxpayers.

U.S. health care, once the envy of the world, under "free market medicine" remains the most expensive medical care in the world while one of the lowest ranked in safety and efficacy, and a single improvement that would improve the quality of U.S. medical care, and which is already in place in nearly every other industrial society, - computerization of medical records - has not been started here.

Morris talks about the free marketers' campaign to abolish social security by false and misleading information about what is really a very small actuarial problem that can be solved quite easily. (Phillips, to his credit, describes in detail how Greenspan and company quietly replaced the pre-1990 CPI, on which social security COLAs are based, with a bogus CPI that understates the true inflation rate by half. Wait until America's millions of retirees realize that they have been short changed billions of dollars!)

While both Phillips and Morris correctly point out how the student loan program has enriched lenders while impoverishing students, neither also identifies the role of the colleges and universities in "pimping" for this program. As Marty Nemko, careers columnist and author of the original, COOL CAREERS FOR DUMMIES, says "The problem is that the colleges and their lobbyists manipulate legislators into increasing govt-funded financial aid, which merely allows the colleges to raise their prices more i.e. the taxpayers are lining the colleges' pockets while providing the student borrowers with a TERRIBLE education."

Both Phillips and Morris however, agree with Warren Buffett (whom both frequently quote), that we are now in the early stage of a long and severe economic downturn and interestingly, although both theses books were published in late 2007, each contains a forecast of things to come (Morris' forecast is much more detailed) that when read today is not only nearly 100% accurate but which, when it is not, it is because they have actually understated the severity of the problem. For example, his "worst scenario" for housing is a 30% decline, which has already been passed by, and with no "bottom" in sight for the collapse of housing prices.

Anyone who has a serious interest in both the future of the American economy, and the improvement of American society, will enjoy this book and the crisp often witty manner in which it describes the rise and fall of "free market economics" in the U.