Review of Hall of Mirrors by Barry Eichengreen


Mr. Eichengreen sub-titles his book “The Great Depression, The Great Recession, and the Uses – and Misuses – of History”, and I believe he delivered in producing a book that discussed the depression, discussed the recession, dug deep into history, and sadly, misused so much of it.  The reality is that this 400-page book contains very little, if anything, that I agree with in terms of economic ideology and practical counsel related to the financial crisis of 2008 or the avoidance of a future crisis (even the one area we do agree on – that the Euro was a tragic mistake – comes from diabolically opposed places: His reasoning is that the Euro keeps countries from being able to print at will; mine is that the Euro begged for mal-investment and mal-behavior from day one). However, I will say that I have rarely enjoyed a book so filled with poor economic thinking.  Eichengreen is a Keynesian’s Keynesian, and writes as if the fundamental tenets of Keynesianism have not been brutally undermined over the last thirty years, but he writes without the same bombastic arrogance and confrontationalism that many modern Keynesians are known for (Krugman etc.).  He is gentlemanly, thorough, and frankly, wrote a pretty decent history book.  As for economic analysis, though, he stayed wed to severely flawed premises, and the conclusions came out as expected.

By way of example, and there are many, Eichengreen’s fundamental purpose in writing the book is to criticize policymakers post-2008 not for anything they did, per se, but for the fact that they didn’t listen to the lessons of history enough, and failed to accelerate hard enough with the needed policy prescriptions necessary to create adequate post-crisis recovery.  The prescriptions are the usual leftist bag of tricks: Greater fiscal spending from government, far greater bond purchases from a central bank, a disdain for balanced budgets, and more opportunity exploitation around low interest rates to stir up animal spirits.  There is no point in  writing a book to prescribe these policy solutions: They are vanilla modern Keynesian liberalism.  And there is no point in me writing a review to criticize his prescriptions: They are the topics at the crux of the modern economic disagreement.  However, what Eichengreen does is attempt to use the 1920’s and 1930’s as evidence that “if only policymakers had remembered …”.  Ironically, he does this in crediting Bernanke over one hundred times as the great historian of the depression (and he is certainly that), and commenting ad infinitum that Bernanke’s knowledge of the depression plagues is what enabled him to do A or promote B.  To Eichengreen, though, Bernanke ran into a battle of wills against other Fed governors who only knew the history of the 1970’s, and not the history of the 1930’s.  Bernanke also was stuck with a national climate that became budget-obsessed, as “many non-economists are prone to do”, and committed the fatal “pre-Keynesian fallacy of equating individual budgets with government finance”.

There was a moment in the book where I would say the entire tension between Eichengreen’s neo-Keynesian leftist world and the classical market school of thought hits the road.  He concedes that the Obama stimulus package of 2009 didn’t work, but comments that it worked in the 1930’s, so therefore MORE of the 2009 stimulus surely would have worked.  The idea that, maybe, just maybe, the failed stimulus of 2009 is evidence that he is getting the 1930’s wrong, instead of the 1930’s meaning that our side is getting the 2009’s wrong, never occurs to him.  But he walked right into that logical possibility himself!  I would suggest that his book is riddled with historical data, fascinating narratives, and well-thought-out analysis, but because the most serious parts of all three were uncritically assuming of his Keynesian ideology, readers were robbed of what could have been a fascinating economic investigation.

The one entire page out of nearly four hundred that he devoted to a discussion of Fannie and Freddie’s role in the financial crisis was a disappointing giveaway to a his conclusions being formed before his investigation began.  To Eichengreen, the hundreds of billions of dollars of real-life losses the American taxpayers have incurred at their hands, the role the extinction of their preferreds played one week before Lehman died, and the leverage ratios they took on (with implicit taxpayer support) that led to the government placing these bastard behemoths in receivership, were not strong evidence for their systemic significance.  It was shoddy coverage, and unbecoming a work of reasonably serious scholarship.

Much debate lies ahead about the best deployment of capital in post-2008 American economics.  Monetary policy’s ability to numb damage in times of distress is a legitimate topic for debate, and one that I fear virtually no progress has been made in as seven years later we wait for the slightest step towards policy normalization.  That those of Eichengreen’s school of thought believe unlimited monetary and fiscal tools exist is not up for debate, though what hangover effects that reasoning entails should be.  For me, this book did little to advance that debate, but provided a great and honest look at one gentleman Keynesian’s views of the past, present, and future.

A Farewell to Mad Men

If Mad Men wasn’t the greatest show in the history of television (geez I loved The Sopranos and Breaking Bad), it certainly was the greatest “business” show in television history, but really that doesn’t come close to covering it. What Mad Men was can best be called an “era” show – capturing the very worst parts and very best parts of a certain era of American culture-history, and pretty much sparing us from everything in between. The series lasted eight years, made stars of some, resurrected others, and generally captivated its audience with its disturbing but nobly honest portrayal of the most unfortunate reality in our heroes: their virtues and vices are often impossible to separate.

Don Draper was a complex person, which is not to say he was likable or sympathetic. He was as selfish as humans can be, which did not make the scene in a early season where he basically brought Peggy back from the land of the lost any less meaningful. Sociopaths have hearts. And Don Draper was a sociopath, and he certainly had a heart. But Matthew Weiner didn’t tantalize us with Draper’s heart – it was his mind that crested the life he had. He was a genius, a creative genius, but also just a genius. Rarely was he ever not the smartest guy in the room throughout the eight years of Mad Men. And THAT is what tore the audience up – how someone that smart, could be that stupid.

The iconic portrayal of Madison Avenue life in midtown Manhattan was worth the price of admission for the entire show. It was a tapestry like I have never seen in any form of screen art. I am a sucker for 20th century New York aesthetics – an obsessive sucker. I have, on many occasions, taken 30 minutes to walk from the elevator to my hotel room door in the Park Avenue Towers of New York’s Waldorf Astoria Hotel where I have stayed over a hundred times, for the simple reason that photo by photo in the hallway I am distracted into stopping, and if not in a hurry, gazing. Mad Men was sixty minutes a week of beauty – pure, uncompromised fashion, decor, culture, and history. If there had been no narrative, no characters, and no plot, but there had still been that imagery, I would have kept watching.

But narrative and characters there were – in abundance.

The series ended Sunday night and bloggers and critics alike are out in full force with their take on the highly memorable ending. Don Draper did make that Coke commercial, and he didn’t make it as a result of having his soul fixed by two days of yoga. He was a deeply broken man and his smug hillside smile was the personal revelation that he is irreparable, but can hide in materialism and crass shallow marketing – successfully – forever. He was gifted in a sort of irreplaceable way, but his depravity held him down. I’m positive he made the commercial and positive he did it back at McCann-Erickson, still broken – just smarter. Weiner had no reason to make it a redemption story. He threw romantics a bone in the final episode with Pete, with Peggy, and even Roger. But Don was broken, and Don was brilliant. The ending gave us both, fully interwoven, in all their paradoxical luster.

The story of broken, brilliant men intrigues me because I am half of one of them. I am broken but redeemed, and when Hollywood (or real life) gives me a look at a broken man without redemption it gives me a look at the God who makes all things beautiful. From Madison Avenue to the grotesque life Don Draper grew up in (Dick Whitman for you literalists), God makes it all beautiful. Many broken men don’t find that redemption, but for those of us who have, it makes the shows actually capturing the reality of human depravity all the more powerful. And that redemption is a tapestry with which even the New York skyline cannot compete.

Angelina Jolie and Louie Zamperini – A Broken Story

I have rarely looked forward to a movie release more than I did Angelina Jolie’s Unbroken. Zamperini is a hero, a national treasure, and happens to share two things near and dear to my heart: A faith in the one, true God, and the fight on spirit that is the heart of Troy (yes, in that order). He was from the same city I was born in (Torrance, California). The story of an Olympic medal winning track star who became a World War II fighter pilot who survived 47 days stranded on a lifeboat at sea before being taken as a prisoner-of-war by the Japanese army and ultimately freed is a pretty remarkable story. Angelina sort of told that part (let’s give her 20 minutes for narrative and two hours for blood lust torture porn). She got about 5-10 minutes in of his childhood and family life. And then the movie ended. Having spent 75 minutes more than she needed to on Japanese torture, she had to roll the credits. She managed to skip over 70 years of his life, like the years where he dived into abusive alcoholism, severe PTSD, and then went to a Billy Graham crusade, accepted the Lord, went back the next night, and devoted the next 65+ years of his life to a sober service to God. Louie believed in good and evil, and he spent his life seeking the former.

Jolie was given the blessing of making a movie based on a phenomenal book, about a phenomenal person. Jolie doesn’t believe Louie’s faith is relevant to this story, so she broke it out of the movie. She stuck to her dumbed-down Hollywood vomit about generic love, peace, and harmony rooted in the goodness of man blah blah blah. It was ideologically childish, creatively irresponsible, and cinematically insulting. She broke the story of a man who couldn’t be broken, and in the transcendental truths of life found redemption. If you can’t make a movie about THAT, you shouldn’t be making movies.

All the Presidents Bankers

The far left, wild conspiracy crowd, Occupy Wall Street folks (the three of them remaining), and those who find Elizabeth Warren intelligent all should have a new best friend in Nomi Prins, whose new book, All the President’s Bankers, has put ink to page on the strangest narrative of the 20th century one will find anywhere: That rather than being a remarkable century of technological advances, growth of market capitalism, improvement in quality of human life, and expansion of overall wealth, the 20th century was actually one insidious global conspiracy between elite bankers (just a small cabal of them, mind you), and various powerful politicos (mainly Presidents). In fairness, the extreme leftist, Prins, is not so much launching a partisan attack as an ideological one. She is unable to hide the fact that she loathes free markets as much as she does powerful banking, and the book is a 425-page collection of conspiracy theories, wild accusations, and drama-laced inferences. She provides good historical anecdotes at times, and should be commended for various moments of intelligent critique (she lambasts the new Dodd-Frank, but mostly for the wrong reasons; she is ruthless to Robert Rubin; etc.). But the book does little to live up to the inexplicable hype that was initially given it.

One gets the impression reading her work that she does not so much possess a flawed economic worldview as she does fail to possess one at all. Her refusal to touch the greatest example of public-private malfeasance in human history (Fannie-Freddie) is quite telling: Prins is not concerned with government power run amok (indeed, she wants MORE government power over seemingly everything); and she certainly is not worried about monetary policy run amok (though she begrudges what she believes to be Greenspan, Bernanke, and Geithner’s contact with the banking community leadership, she doesn’t offer a word of indictment for the easy monetary policy of Greenspan’s 2000-2006 monetary policy); NO, what Prins begrudges is not big government or a big Fed, but rather big banks. And how does one prosecute a case against big banks when the legitimate arguments against them would take careful argumentation, logic, and critical analysis? Why, by poisoning the entire thing, of course, with inflammatory rhetoric and class warfare.

The idea that big banks do systemic damage when they lend money out (vs. borrowers doing systemic damage when they do not pay it back) is a popular enough idea that I can forgive Prins for repeating it on nearly every page of the book. Sometimes her logic runs away from her, and she says some things I am sure her editors regret. The major mistakes Prins makes are not uncommon enough to warrant any further consternation than her entire class of Warren-ites deserve. She painfully begrudges the idea that the top 1% have seen their wealth grow 98% over the last two decades while the bottom 20% have “only” seen their wealth grow 21%, a begrudgement that I assure you she did not run past those who have seen their wealth grow 21%. But besides random head nods to the income inequality fad, the real point of Prins book is to suggest that we have a permanent and insidious partnership in the deepest levels of American society between American banking and American government, and that it must stop.

What must stop, of course, is a government that is large enough and powerful enough that any kind of government doll and trough and Christmas tree even could exist … A credit-driven society where debt bubbles are allowed to form and then banks are blamed for their fallout (vs. the borrowers) is problematic on many levels. I see much wrong in the present system, as does Prins, but I see virtually nothing that Prins is suggesting serving as thoughtful solutions.

A financial system free of moral hazard is a possibility in our modern society. No free marketeer ought to desire a system where anyone is relieved of risk (or reward). An appreciation for what this type of system would mean to Main Street, and to the interest rate market, is a fundamental prerequisite to improving the present system. The glut of liquidity defining our modern financial system is a boon to big banks, and I for one would love to see the power that liquidity grants to financial institutions diminished. But until someone wants to address the source of that liquidity: A federal reserve tasked with financing a big government run amok, thoughtful writers like Prins and I will have to agree to disagree.

Double Down a Fascinating Inside Look at an Embarrassing Election

I was hesitant to take on the 475-page behemoth from Halperin and Heilemann when it arrived. I had pretty much left the misery of the 2012 campaign (and subsequent election results) in the past, and the degree of backlog I am suffering from right now in my reading list was not motivating me to take on this work (the book right before this was Geithner’s 550-page Stress Test and the one right after this is Prin’s 425-page All the President’s Bankers, which I should finish today). But I took on Double Down, and am glad I did. A few items worth noting by way of review …

The book is well-written, and frankly quite good at avoiding partisan biases and cheap shots. There was nothing from the authors that really got under my skin in reading the book. They were fair to Gov. Romney, objective in their treatment of Pres. Obama, and frankly, quite gifted at taking an 18-month campaign and making it interesting. The book’s sequence was quite compelling – going from Obama’s first several years in office as a precursor to why his re-election campaign was going to be so challenging – to the post-2008 preparations of Mitt Romney’s second attempt at the Presidency, to the circus clown disaster that was our Republican primary, and then through the entire Obama vs. Romney saga of the fall. It was thorough. It was well-written. And, for this conservative Republican who cares so deeply for his country, it was depressingly painful.

The reality of the 2012 election is that Obama was irresistibly beatable according to any political metric one looked at. His rank hypocrisy on the use of PAC money, the extraordinary skill and discipline of him and his team in prosecuting a campaign, his ability to raise money, the embedded benefits of incumbency, and his virtually 100% market share of a key voting bloc (African Americans), all started the race off with some significant hurdles to overcome for a would-be challenger; BUT, he was unpopular, the economy was not good, the charm and aura of all his BS promises had long since blown away, and independents had turned on him. Obama was beatable, and my reading of Double Down reinforced for me how unforgivable it is that this opportunity was missed by the Republican Party.

The biggest think that stuck out to me in reading the book was how painfully obvious it was very early on to so many in the higher chambers of Republican leadership that Mitt Romney was just simply not going to win this election … It would appear that the skeptics of a Romney candidacy were validated through their whole sequence of thoughts (all of which track my own, as I documented from 2009 on) … (A) That if Romney were elected, he’d be a fine and capable leader and likely govern the country quite well, with a managerial skill more than an ideological one, but with a “fix-it” corporate boardroom approach to much of our economic woes, which frankly may have been exactly what the country needed; but, (B) The country would have a very hard time connecting with someone as awkward as Romney personally and more importantly, as filthy freaking rich as Romney; that (C) He would be prone to gaffe after gaffe after gaffe, not because he was undisciplined, but because the types of things he was saying were totally intuitive and natural; and (D) At the end of the day Romney would not be a compelling enough reason to vote Obama out given conservative opposition to Romney’s own health plan and independent distrust of Romney’s alleged lack of empathy for them … I think this is exactly how the entire thing did play out.

Now, it is VERY important for me to point out: I am not aware of anyone who believes that, once the GOP field got set, there was a candidate up there (in the 2011-2012 context we were in) who had a prayer of beating President Obama OTHER THAN Mitt Romney. If they do, they are wrong. I will be the first to say that amongst that group of Saturday Night Live characters, Romney was the nominee who had to happen, though I say that partially because of Gov. Perry’s inexplicably poor showing, most unfortunate back surgery and subsequent medication reality, and his total lack of national strategy and campaign formation. On paper, Perry was formidable; in 2012, he was among the worst of the candidates. Romney was the horse the GOP had to ride on, and no criticism of his likelihood to win the election will ever change the fact that in that putrid field of candidates, he was the best we had.

But therein lies the rub: the election was really over at that time. History can never capture adequately how much damage the Republican primary did to Mitt Romney. He got caught in ridiculous gaffe after ridiculous gaffe (“I’ll be you $10,000 that …”; “corporations are just people”; “my wife LOVES American cars – she has a bunch of Cadillacs”); etc. etc. etc. I wince just typing it all. But gaffes asides, the “I don’t worry about the 47% one” not actually mattering until September of 2012 though uttered much earlier, the primary forced Romney to play small ball for months and months with people he should not have been on stage with. Did our party seriously ever entertain the idea of “9-9-9″ as a real economic policy from a pizza company CEO who no one bothered to check had a closet full of sexual harassment cases against him? Does anyone honestly think that a Congressman who took millions of dollars from Fannie Mae as a lobbyist after leaving the Congress in an ethics scandal and then moving on to his third wife after an adult lifetime full of affairs was going to become President (no matter how sharp and awesome his debate eviscerations of poor media morons was)? The book is most interesting in laying out the strengths of Rick Santorum vs. his not-ready-for-primetime candidacy. On one hand, with virtually no resources and no infrastructure, he won a bunch of states and made the primary last months longer than it needed to; on the other hand, he refused to let up from showing the country exactly why he was never going to be electing President even when he was picking up steam. I can actually criticize the Bachman, Cain, Perry, Gingrich, Santorum cabal all I want, all of whom I have met and all of whom I have some positive things to say about when we are not discussing their Presidential prospects, but the truth is this says something about why Gov. Romney was never going to win as well: The American people were doing everything they could possibly do to avoid nominating Romney. They tried on every single dress in the closet, some of which were NOT flattering, before finally wearing outfit Romney to the dance. A compelling and attractive candidate who the party could rally around in a meaningful way would not have lingered at 25-30% support throughout the primary. I agree he was our best shot, but this was the worst field in my lifetime, and that tells you so much of the story of 2012.

The book added value in filling in for me what a complete creep and reprehensible human being Jon Huntsman is. I also do not feel that I had a thorough enough understanding of how much damage Donald Trump was doing to the party and to Romney with his constant antics, and I now in hindsight agree with Mike Murphy that had Romney called out Trump in a “Sister Souljah” moment, it may have been good for his campaign. The book also gave me a better look at the facade of a person Barack Obama is, but the masterful campaigner he is, totally disinterested in governing, but obsessed with winning. It would be impressive if it were not so disillusioning.

I have to save my article about the 2016 race for another time and space. It will come down to our candidate, and it will be a long-shot. Gaffes will happen. The media will be unfair. But what can not happen ever again is for the media to be right. I am glad I read Double Down, painful as it may have been, and hope the knowledge of the past – the lesson of this immediate history – can be fully absorbed by the party of Lincoln. The progressive agenda is failing this country. But whether we conservatives like it or not, leadership will be required to re-assert a voice in the national agenda. Reading this book may give those on our side a renewed understanding of what we need to do better. History is on our side.