Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

'Paper Promises': Worth the Paper You Owe It to Yourself to Read This Lucid Explanation of Global Debt, 'Full of Arresting -- and Counterintuitive -- Insights'

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

'Paper Promises': Worth the Paper You Owe It to Yourself to Read This Lucid Explanation of Global Debt, 'Full of Arresting -- and Counterintuitive -- Insights'

Article excerpt

"PAPER PROMISES: DEBT, MONEY AND THE NEW WORLD ORDER"

By Philip Coggan.

PublicAffairs ($27.99)

"It would be surprising indeed," the economist John Kenneth Galbraith wrote more than 50 years ago, "if a society that is prepared to spend thousands of millions to persuade people of their wants were to fail to take the further step of financing those wants."

According to Philip Coggan, a columnist for The Economist, without some controls of capital, debt expands to gratify consumers and businesses; low interest rates stimulate speculation in equities and property; banks leverage money on hand so they can lend; and, inevitably, a crisis ensues.

In "Paper Promises," Mr. Coggan provides a lucid, learned and illuminating analysis of the role of debt.

He starts with the invention of money (named for the Roman deity Juno Moneta, the goddess of warning and advice) and proceeds to the 1971 collapse of the Bretton Woods agreement, which pegged currencies to the dollar (and, indirectly, to gold). We live in its volatile aftermath: Currency rates of exchange float freely (or are manipulated), countries run budget and trade deficits for decades, and speculative bubbles threaten the global economy.

Along with many other economists, Mr. Coggan considers Oct. 19, 1987, the defining moment of the bubble era. On Black Monday, the Dow fell by almost 23 percent and stock exchanges from London to Hong Kong followed suit. Led by Alan Greenspan, chairman of the U.S. Federal Reserve, central banks promised to prop up financial institutions imperiled by the plunge in prices.

This "Greenspan put" underwrote irrational exuberance. Over the next two decades, output in the United States quadrupled, assets (on paper, thanks in no small measure to housing prices) quintupled, debt rose sevenfold, and the savings rate dropped to 0.4 percent. The vigilantes, Mr. Coggan writes, "seem to have fallen asleep." Just about everyone seemed to be prospering, "rather like a turkey is fattened in the run-up" to Thanksgiving dinner. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.