The author of this book – The End Of Alchemy: Money, Banking and the
Future of the Global Economy – is the
former Governor of the Bank of England,
Mervyn King. After reading this book, I can state that either I know more about
Global Markets and Economics than this person, this author; or that this book
is just meant as a blatant defence of the Central Banking System, more so the
Western Banking System. Frankly, the author looks at Western Banking in
isolation, which given the connectivity of Global Markets, is outright erroneous. Further, the
author has tried to mount a robust
explanation of the Crisis of the Economy, and yet has failed to confront the
many, many errors that have happened, as clearly documented in other Books,
some which have been Reviewed on my blog. What can I read into this, when someone so
clearly knowledgeable and brilliant, ignores such obvious things?
THE PLUSES
The initial part of the book starts well,
with the examination of the onset of Alchemy, the alchemy of Fiat Currency, and
the true impact of the breakdown of Bretton Woods and the move away from the
Gold Standard. It was frankly heartening
to read one of the foremost bankers of
our times confront this ticklish issue head-on; this is indeed a rarity. This
and a couple of other points earned it the 2 stars that I rate it; the last 30 –
40% of the book doesn’t even rate 0 stars. It is this part, this excellent
examination of a lesser known aspect of banking that makes this book a must
read.
To be fair, the author has brought to the
public notice a few significant contributions – for example, on pages 122-125, in the chapter on
Radical Uncertainty, he raises the difficulty in using current prevalent analytical
models to predict future trends, something which I myself have noted in my
field, Logistics & Demand Forecasting. The author’s pertinent application
of this reality to banking is absolutely top-notch. As another example, on Page 172-173, the author has confronted the
specter of controlling risk, of the need for being process-centric for banks.
Another example – on page 208, comes a frank admission from the author - “as
we learnt how inadequate our
understanding of the Economy and the financial system was”. Such gems
rescue this book.
THE MINUSES
For starters, this is a book for
westerners, written by a westerner, and on a western topic. This is exclusively
a Western / Developed Economy book only; and the author himself has implied
quite categorically – Page 291, economic
growth has fallen back across the developed world, inflation fell across
the industrialised world Page 318, Page344, Page 348 – interest rates close to 0, Page 350 – as an impartial protector of western interests; in fact on Page
361, the author questions the attempts of EMs to protect their industries –
with a blanket wand of liberalization being his recommendation! So, EMs should open
up just like that, without any reciprocal opening of The West? And, the combination of Free Trade and American
Power was a stabilizing Force- Pagge 350? Really? For which Markets & Nations?
While the pluses are distributed throughout
– as in a brilliant paragraph on Page 360; the fact remains that the arguments presented in the latter half
of the book do not make any sort of sense. I am sorry, I know he is a highly
adept expert, but there is no other way to phrase this – nonsense can only be
called nonsense, and utter nonsense at that. The solutions are half-baked, not
thought through, and error ridden. For example,
on Page 353, he argues with ending Veto power of the IMF biggies, and
reinforce its reforms, calling this a reform! This wont work, as we all are
aware of American arm-twisting dependent countries, ensuring voting in their
favour without using Veto.
On Page 361 he advocates Western countries
push liberalization in trade of services; this without taking into account the
EMs internal realities; you cannot just open up an Economy just coz Governor of
the Bank of England says so! And you further should not issue blanket
recommendations without a proper
analysis of both sides. On page 26 while assessing a sample reform plan, the
author implies that wide banks lending, financed by equity would eliminate alchemy
[my take – possible], removing risk of bank Worst of all, the reform plan he
proposes – ex Pg 360 – is Brilliant, but… hampered by a pro-west, one-sided
anaemic look and incomplete analysis of its import. Further,
its complete miss on all real-world and real economy factors – like crony
capitalism. Vested interests, demand and supply scenarios, comparative
competiveness on a national scale, available resources, PCI, Poverty, rampant illegalities,
inequality in real terms from an eastern POV, make this entire book a pie in a biased
western sky book.
CONCLUSION
I cannot call this book good by any stretch
of my imagination, let alone knowledge. Riddled with errors {from my POV}, focused
only on The West and protecting its interests, in an increasingly connected
world – this is not a good book. It has some significant pluses - its lucid explanation of Alchemy, the many
many brilliant insights spread throughout the book {Example : Pgs. 274 275 284
288 293 304 307 } – which makes it a must read. Yet, it misses way too much, is
wrong on too many points, and tells a one-sides, completely biased look at
reforming the system, without even acknowledging the real problems of the real
Economy. It comes across as a book
written by a theoretical western economist with no knowledge of the real economy, or of the
East. In conclusion – I agree with the
Chinese friend – who remarked about the western world’s management of the
Economy and banking – you havent quite got the hang of it yet. Well, even
today- the west hasn’t quite got the
hang of it.
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