I have often pondered, “What impact do democracy’s faults have on our financial markets?” My mind would scatter to and from various causes, effects and observations in a disorganized manner without a systematic methodology to permit a rational conclusion. George Bragues book, “Money, Markets and Democracy: Politically Skewed Financial Markets and How to Fix Them” solved that problem. The book touched on every subject it should have, and the author drew logical conclusions throughout the book and tied them together at the end within the context of current realities. I was captivated by skill of the author, who simplified complex concepts and led me on a methodical journey to convincing conclusions. It reminded me of the same respect I felt for the talents of Friedrich von Hayek and the enjoyment I received when I read “The Road to Serfdom”.
Dr. Bragues observations on the impact of central bank policy on portfolio manager investment strategies and the fallacy of “the great moderation” set the stage for an orderly destruction of the perceived wisdom of economic central planning. He proceeded to obliterate the perceived benefits and benevolence of a monetary system for the common good with the right mix of statistics, historical facts and colorful stories.
The footnoted statistics on economic performance under the gold standard and in deflationary periods was, to me, educational and would have frequently served me well in past discussions, had I been more familiar with those facts. More than a few of Dr. Bragues statements were profound for both their simplicity and irrefutability and they are introduced at the proper time to ensure the reader is reminded of the aim of an economic system. Complementing the statements were equally thoughtful questions regarding financial markets features that are broadly considered as indispensable. I would particularly encourage all readers to proceed through the thoughtful analysis on the clash between taxpayers and tax consumers which eventually leads to the question, “Why are bond markets are allowed to exist at all?”
I found myself laughing at Dr. Bragues accurate and enthralling portraits of the duplicity, brazenness and hypocrisy of individuals and institutions involved in several of the financial debacles we all observed. The anecdotes, whether they were about Nationally Recognized Statistical Organization’s, Fannie Mae, Goldman Sachs assisting Greece in lowering that countries official debt levels, the inevitable concentration of derivative risk, the progression of moral hazard, ECB transgressions or some aspect of government redistribution of taxpayer resources to investment banks , were both amusing and ominous. Further, each anecdote contributed to reinforcing Dr. Bragues inevitable conclusions.
Incidentally, the descriptions of the characteristics and developments in the stock, bond, derivative and currency markets, within the book, are 100% accurate and I have never read a better explanation of collateralized debt obligations than provided by this book. As a financial market professional intimately involved in these markets for about 30 years it I do not recall coming across such logical, insightful and original material.
“Money, Markets and Democracy: Politically Skewed Financial Markets and How to Fix Them” is a book I will be reading again and referencing often for entertainment and educational purposes. I would suggest this book could also be used as a textbook for an innovative and valuable university level course by any professor looking to challenge their students to question premises broadly considered sacrosanct.