Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.

Kevin Phillips. Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. New York: Viking, 2008.

Over the last several decades the United States has let itself luxuriate in finance at the expense of harvesting, manufacturing, or transporting things (in the early 1990s the financial sector--banks, broker-dealers, consumer finance, insurance, and mortgage finance--muscled past manufacturing to become the largest sector of the U.S. private economy). As a result America is dependent on other nations to supply it with physical products, including oil, which is sixty percent imported. The United States, which is the largest debtor state in the world, also depends on other nations and foreign investors to buy its treasury bills, which keeps the country solvent. All this dependence does not bode well for maintaining America's position as the world's leading economic power.

Kevin Phillips notes that since that late 1980s, Washington has given priority to activities that involve moving money around by providing bailouts when pivotal financial institutions, loans, or profit methodologies get in trouble; liquidity from the Federal Reserve to keep wealth escalation going; and benign regulation and lawmaking. A decade ago, the U.S. government also revised the Consumer Price Index (CPI) to understate inflation and overstate domestic growth. With housing prices and the stock market on the rise in the early years of the millennium, Americans binged-bought real estate and consumer goods on easy credit.

In 2008 the house of cards known as the American economy toppled with precipitous declines in the price of houses and stocks. Will foreigners keep investing in a country that does not make tangible items and has a currency that is now competing with the euro and the yen? Or will America go the way of Hapsburg Spain, the maritime Dutch Republic, and imperial Britain, as an economic titan that has passed its zenith? Only time will tell.

EDITOR: MARTIN H. LEVINSON, PHD

REVIEW BY MARTIN H. LEVINSON, PHD