Book Review: American Nightmare by Richard Lord

 
Before it was cool, Richard Lord's American Nightmare: Predatory Lending And The Foreclosure of the American Dream looked at the scourge of predatory home mortgages and lending programs aimed at fleecing the declining American lower middle class.

This is a slice of life book that examines the experiences of ordinary people in Lord's hometown of Pittsburgh in the 1990s. Each person needed a little money to live in retirement, start a business or pay medical expenses.

They ended with loans with impossible to pay off balances, opaque contracts that turned into something else, banks that turned a deaf ear, and ultimately lost their houses and went bankrupt.

There are two lessons here:

1) don't assume the financial system is safe or ethical. The country has recently stripped away of decades-worth of regulations designed to protect people. You can and will be taken to the cleaners and it's all legal.  

2) learn when to say no to money and loans. A lot of the people in this book really, really wanted a house or home improvements and let that cloud their judgement.

Book Review: Debt and Economic Renewal in the Ancient Near East

I've been thinking a lot about the implications of debt so I turned to financial history.

So I found this book Debt and Economic Renewal in the Ancient Near East. It's a collection of well-written essays about debt in (mostly) Mesopotamia. The ideas of credit, debt, and private ownership of land (obviously related to the first two ideas) were just getting started.

If you invent debt, then un-repayable debt will soon follow. Mesopotamia dealt with this problem with the concept of the debt jubilee - the forgiveness of debt by the king, usually the first act of the new king to engender goodwill.

But was it an altruistic gesture? We can never know, but scholars speculate that jubilee was more about keeping men available for army service instead of forever laboring on their debt.

The main heading for our books on debt is located here.  Features research on the history of debt and primary resources.

Regulatory Capture

Regulatory Capture is the idea that powerful interests co-opt the regulatory agencies assigned to police them. Instead of an adversarial relationship, a clubby friendship results.

The public gets stuck with uncompetitive practices written into law and reform turned into a byword for legalizing shady practices. Too often, the cycle is kept going by the promise of lucrative positions in private industry for the same government bureaucrats that are supposed to be on the public's team. 


There are two GREAT detailed summaries of this concept in these print resources (both are located in the reference section on the main floor):

Vol. 3 of Encyclopedia of Law and Economics

Vol 3 of  The New Palgrave Dictionary of Economics and Law 

Debt and Economic Growth: NBER Working Paper

Came across this fascinating working NBER paper from heavy hitters Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff entitled "Debt Overhangs: Past and Present."

The authors examine if high levels of debt impact economic growth. The answer is yes, making it hard to grow out of debt. You either take 20 years of stagnation to come out of the debt hole or there is a  cataclysmic event (probably related to the failure of the previous status quo) such as war or collapse that resets the system.

The authors use data from several advanced economics, tracking the amount of debt relative to GDP and how long subpar economic growth persisted.

By the way, we have the NBER database of working papers available here. Can't get it for free on the internet.

Consumer Credit and Debt: Current and Historical Data

Understanding credit and debt is the key to the modern economy.

So, here are some multi-year statistical series out there for you. Things like credit outstanding, amount used, and more.

(The following are .gov sites)

Consumer Credit and Payment Statistics (streamlined presentation of Fed data below)
Consumer Credit and Finance Company Data from the Fed
Personal Savings
Flow of Funds from the Fed Reserve (measures households)
Consumer Credit Out There

You can also search FRED, the data machine from the St. Louis Fed. A pre-done search for all results with "credit" is here.

And

Here is our collection of books, optimistically called consumer credit in our official library speak. Bankruptcy and Personal Finance are also good subject headings.

My Favorite Basic Company Financials Book

This has to be my favorite basic company financials book.

Using a hypothetical example of an apple sauce company, the authors take you step by step though a company's balance sheet, define terms like costs and expenses, show you the proper sequence of math you go through (like depreciation or sales), how different costs and earnings affect each other and where to enter each financial transaction.

Of course, you'll want to graduate to advanced financial statement books, but this is a great start.