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Very few of the ever-growing number of books about the recent and current world financial crisis try to identify the ultimate causes of this astounding implosion of the longest, strongest and most widespread economic boom in history. Any such analysis by officials became impractical because it became mired in the uneven exchange of allegations between the politicians and the private financial sector. The political class locked arms from across the spectrum to blame private sector "greed". With the exception of a few media outlets, such as the Wall Street Journal, this theme was taken up by the press. And this version of events has been amplified by the Obama administration's effort to claim and to execute a mandate to take the country much more sharply to the left than the public wishes or would abide. Any disposition to exchange fire with the politicians has been stifled by Attorney General Eric Holder's practice of steadily thinning the ranks of the private sector's blame game debating team by indicting a swath of businessmen.

In fact, it was a joint government-industry effort. It could not have occurred without the legislative and regulatory coercion and monetary policy encouragement of the federal government. In the US, despite its unabashed capitalism, the business community is politically inept. There are no Agnellis (Fiat), Dassaults (Dassault Aviation) or Herrhausens (Deutsche Bank) to influence the government. There are many businessmen who are closely involved in industries that dominate congressional districts and largely fund the careers of these congressmen. These legislators are reliable supporters of the interests of such benefactors. Most congressmen are in what amount to rotten boroughs of about 700,000 people, 7.5 times the population of the average British parliamentary constituency. About 300 of the congressional districts almost never change party. Once arrived at the Capitol, the congressmen form alliances with other legislators to support each other's initiatives for their local interests. This is a permutation of democracy, but is far from what the authors of the Constitution had in mind, or early admiring visitors such as de Tocqueville found.

The country largely despises the New York financial community for its intermittent reckless blundering. The only businessman with any standing in the country is Warren Buffett, who before he lost $25 billion on paper in October and November 2008 (most of which he has since recouped), had been demanding that his taxes be increased to help disadvantaged people. He has worn thin his status as America's avuncular aphorist, but has deservedly retained his prestige as an investor and as a financial epigrammatist. But he has only occasionally carried the standard for the private sector in the counter-accusations over the financial debacle. 

The other great financiers skulk around like nerds or emasculated chameleons, claiming to be philanthropists and collectors and to having only a passing interest in the pursuit of lucre. Only the brave, the buccaneers and the showmen — Ken Langone, Kirk Kerkorian, Carl Icahn, Nelson Peltz and Donald Trump, for example — admit to being capitalists at all. 

System failure: Barack Obama lays out his plan to sort out the financial mess (Getty Images)

I was asked to read and comment on three books about the economic crisis: Vicky Ward's The Devil's Casino (about the failure of Lehman Brothers); Kate Kelly's Street Fighters (about the demise of Bear Sterns); and Michael Lewis's The Big Short (about the clever inventors of some of the more explosive financial instruments and techniques that were used to profit from it). 

The first two are works of journalism based on oral recollections and contemporary media accounts with whatever memos, text messages and other primary material were available. No such work can comfortably be taken as authoritative, but they are diligently assembled, well written and portray vividly the human characters behind the impersonal drama. Lewis's book is more ambitious, as it effectively claims to identify the sorcerers who saw the opportunity, aggravated the problems and helped to bring on the deluge, which they then exploited by a comprehensive programme of short sales. None of these books seeks to identify the larger ailments of the political and financial systems that led to these vulnerabilties. But they are all worthwhile, interesting and engaging reads as far as they go.

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August 7th, 2010
1:08 PM
Since the production costs of poetry are close to zero, the two figures would be almost identical.

Tim Worstall
July 29th, 2010
1:07 PM
"But if Paraguay decreed that everyone in the country write a poem and sell it to someone else for $100 ten times a day for a year, Paraguay would have the fifth largest GNP in the world and per capita income of an astronomical $300,000 per year. This would be a mirage." Err, no. That's turnover. GNP measures value added, not turnover.

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