Leverage: How Cheap Money Will Destroy the World Reviews
October 13, 2011 
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Category: Debt Kindle Books
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October 13, 2011 1 Comment
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If Thou A Borrower or Lender Wilt Be…,
Karl Denninger, the profane and eloquent author of the Market Ticker blog, has distilled his high-quality Internet ranting into a simple, intelligible diagnosis of the state of our economy and, to some extent, our polity. For those familiar with Denninger’s blog, you will notice a concerted effort to make an argument that is as inoffensive as possible. It is mostly free of the global warming skepticism and religiosity that likely would dismay the typical American leftist; those on the right will enjoys his condemnations of class warfare and illegal immigration.
The book itself is an indictment of the abusive borrowing and lending by banks, governments, corporations, and consumers over the last three decades; while this borrowing has driven an illusory prosperity, it will be the eventual cause of a moderately or horribly painful reckoning. The first half of the book discusses key concepts of compound interest and the debt circle, which you probably should have learned in school, and then explained how these basic principles have been intentionally or unintentionally ignored. The most cogent argument Denninger makes is that lending must always be backed with tangible assets equivalent to the value of the loan or else charge interest rates sufficient to compensate the risk bondholders and stockholders take when they provide necessary additional capital to back the loan. The message is clear: lenders keep trying to sell money they don’t have.
The second half of the book takes an important turn. Noting that most books of this type advise how to avoid the catastrophe, Denninger makes a clear and haunting point. There are no shelters. There are no safe havens. The best shelter against catastrophe is to restore honest lending and a sustainable economy and polity in the United States (or wherever your native land may be). The rest of the book discusses a variety of solutions (some borrowed from others with attribution) to make the United States into that kind of nation, touching on tax policy, trade policy, and energy, among other topics.
The work’s weakness lies in Denninger’s frequent claim that there is a need for “national conversation and debate” on issue X or Y. The debates Denninger mandates are incredibly difficult, ranging from overhauls of all state and Federal laws, potential Constitutional changes to give Congress additional enumerated powers, to decisions of how indigent people in need of critical care are going to receive or pay for it. Is the civil society that has proven capable of ignoring three decades of gross mismanagement in Congress and boardroom capable of implementing prudent reform in a time of catastrophic economic crisis? Denninger provides no reason to think so, unless he and his enthusiastic forum denizens start running for office. Some readers also might question Denninger’s Whiggishness about technology.
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