Results tagged “Book Reviews”

By Professor Jeffery Atik

Neil Irwin's The Alchemists delivers on its promise: the book is a central banker's view of the 2007/2008 Financial Crisis and the more recent (and related) Euro Crisis. Only the subtitle disappoints: The Alchemists isn't quite the story of the three central bankers depicted on its cover (Bernanke, Trichet and Mervyn King). Rather, The Alchemists offers a thorough treatment of Bernanke's crisis-plagued tenure at the Fed and insightful coverage of the ECB's Trichet - until Trichet morphs into Mario Draghi just in time for the worst of the Euro Crisis. Plus the odd bit of Bank of England's Mervyn King thrown in for comic relief. No doubt Irwin's project was inspired by Liaquat Ahamed's Lords of Finance, winner of the 2010 Pulitzer Prize, which treats four central bankers (their philosophies and their quirks) from the 1920s: the UK's Montague Norman, France's Emile Moreau, Germany's Hjalmar Schacht and the Fed's Benjamin Strong. Now these were central bankers: they dominated the monetary policies of their day.

Our contemporary central bankers lack some of the color of their predecessors (save Mervyn King, who is pretty darn colorful). Moreover, their field of action is much more circumscribed. They can be checked by other personalities within their respective institutions, by intimidating political leaders, and by uncooperative markets. These bankers do manage, at least in this account, to largely have their way in responding to the crises, through will and manipulation, and by playing on the palpable belief that no one else has any better idea of what to do.

By Professor Jeffery Atik

In this collection of essays, Arjun Appadurai links his role as leading globalization scholar to his practice as activist on behalf of the slum dwellers in his native city of Mumbai (or Bombay, the abandoned name Appadurai seems to prefer). Appadurai redeploys globalization theory (and more generally modernization theory, of which globalization is a part) as an ethical practice. He calls for cultivating the capacity to aspire among the world's poor -- an unabashedly cultural project with political and developmental implications. Appadurai argues that the poor must be enabled to aspire -- these aspirations will, in turn, define new and different trajectories from those promised by the passé globalist.

Globalization has failed in its predictions -- and so has failed as science. Globalization, it was thought, would lead to convergence and homogenization, more democracy and tolerance and less nationalism and violence. Yet the world we now see displays strong (and growing stronger) national states and continued developmental disparities. Those enabled by knowledge migrate; their home countries capture disappointing returns from their educational investments. New digital capacities have been harnessed by jealous ethnic groups to reinforce local identities; they can encourage aggression and conflict.

By Professor Jeffery Atik

Nassim Nicholas Taleb is back, and in his new book he asserts that his signature idea was not The Black Swan (that was so last book), but rather Antifragility. This second idea shares a viral quality with the first; like the Black Swan, once you catch the notion of antifragility, it's hard to get rid of it.

Antifragility is the characteristic of certain systems to grow stronger when stressed; it is the mirror concept to fragility (where stress destroys). Exercise stresses our muscles, and so renders us stronger. As Taleb insists, antifragility is not robustness -- robustness is merely resistance to stress. Stress improves the antifragile. And in a world where stresses cannot be avoided, it is better to be antifragile.

I admit to being a Taleb fan -- and not everyone is. Most all -- critics and admirers -- agree he is an engaging and imaginative thinker. But he does seem to go out of his way to be, shall we say, difficult. Antifragile is an odd book -- it is a collection of personal essays mixed with some rather formal decision theory. That said, the personal (and the fictional) do serve the argument.

By Professor Jeffery Atik

I have the odd habit, with academic writing, of first reading the notes and then returning to the central text. I like to see the foundation of a work. Would that I had read the notes to The Bankers' New Clothes first! For The Bankers' New Clothes is really two books which I had read in sequence (slave as I was to the Kindle's primitive formatting). The first book -- the primary text of 228 pages -- seemed simple-minded, sometimes shrill and often tedious. It argues for a significant increase in the amount of 'capital' (a specialized term in banking regulation) banks should maintain. The second book - the 107 pages of dense notes -- reveals a much more subtle, more flexible and more open understanding of the issues. This 'book' is more useful and persuasive. I recently heard co-author Anat Admati speak in Los Angeles. She described her surprise when first viewing the book as published, that it was so 'short' when the notes were stripped away and shuttled to the back of the book. It matters (Kindle take note) how books are presented; I would have had a better impression on my first read had these rich notes been on the page or gathered at the end of each chapter. And perhaps these authors will speak up the next time they write for the broader public.

Admati and Hellwig are on a mission. They fervently believe that banks should be required to hold more capital than present rules require. And by more, they mean much much more. From current rules that require, depending of the measure, 3 to 7 percent of a bank's assets, to something on the order of 20 to 30 percent. They demonstrate that such higher levels of capital (think of this like the ratio of equity to the fair market value of a house) would significantly increase the robustness of the entire banking system, relieving the state from facing new rounds of bailouts. Moreover, as the leverage of bank's decrease, banks will be less likely to attract the risk-seeking buccaneers that have managed our great financial institutions into the ground.

By Professor Jeffery Atik

Napoleon Chagnon's title promises a visit to two dangerous tribes: the Yanomamö and the Anthropologists. He provides a disjointed treatment. The larger part of the book takes the form of memoir, a return by Chagnon to the people he studied over the greater part of his career. The later chapters address the academic scandal surrounding Chagnon's work - and his place within the evolving discipline. Chagnon defends himself here - but he does not 'scientifically' study his anthropologist accusers: their violence (as opposed to that of the Yanomamö) is not explained.

Chagnon made the Yanomamö famous: his monograph (subtitled "The Fierce People') was widely studied (it was a highlight of the undergraduate Cultural Anthropology course I took). And of course the Yanomamö made Chagnon famous.

Chagnon's work was always controversial. He presented the Yanomamö as among the world's few remaining "Stone Age" people, largely isolated in the regions dividing Venezuela and Brazil. From here they subsistence agriculture from ever shifting villages. The Yanomamö were hardly unaffected by encounters with the outside -- they grew plantains and other crops that had been introduced to South America and prefered modern tools (including the machete and shotgun). Chagnon depicted the Yanomamö as a violent society, characterized by treacherous killings, inter-village raids, and systematic abduction of females. The Yanomamö were not Rousseau's noble savages.

By Professor Jeffery Atik

Bull by the Horns is part defense of past action, part call-to-action. Sheila Bair served as chairman of the Federal Deposit Insurance Corporation, one of the chief federal bank regulators, from 2006 through 2011 -- and thus rode the entire wave of the Financial Crisis. By her own account, she clashed with officials of both the Bush and Obama Administrations (in important cases, these were the same individuals). And throughout these times she was the most prominent woman in United States financial regulation.

Bair becomes the FDIC in this story -- she absorbs its mission and makes it her own. The FDIC has a peculiar mission -- and it has never been the only law in banking. Bair believes in deposit insurance but not bailouts. Deposit insurance is paid to depositors in the event of bank failure; bailouts are payouts to shareholders, bondholders and management in the same circumstances. There is a distinction here -- but perhaps not as self-evident a one as Bair imagines. Both deposit insurance and bailouts (under the Too Big to Fail doctrine or otherwise) create moral hazard. Bair though sees banking policy through the FDIC lens -- depositors (up to the FDIC limits) are to be given continuous access to their funds in the event of failure; shareholders and bondholders are to be wiped out and -- at least in most cases -- bank management is to be fired. All very by the book. Which is to say, Bair wants the bank resolution system to work as it is promised to work -- which of course is not at all what happened following the Financial Crisis.

By Professor Jeffery Atik

Graeber's Debt: The First 5,000 Years is a grand intellectual project and a call for action. Graeber's book moves debt to the center of political discourse.

America is built on debt. Indeed, assuming our fair share of debt can be seen as an American duty. We obtain housing, education, transport and medical services through our use of credit -- and as such we spend most of our lives deeply indebted. The root of our notion of freedom (echoed, as Graeber points out, in religious imagery) is freedom from debt -- and if this is so, then by no means is America the land of the free.

Graeber's overview of 5,000 years of debt demonstrates that debt is not a neutral social instrument. Rather debt is first and foremost an institution allowing for the exercise of power. Debt is the foundation of hierarchy and hence much social structure.

Read my full-length review of David Graeber's Debt in the Los Angeles Review of Books.

Follow me on Twitter @jefferyatik

Reporting on the legal system without a law degree can be challenging. A team of Loyola Law School professors aimed to fix that by writing The Journalist's Guide to American Law. The book, published by Routledge and released on Monday, Dec. 10, serves as an essential reference for journalists whose coverage area includes the law. The authors are Professors John Nockleby, Laurie Levenson, Karl Manheim, Jay Dougherty, Dean Victor Gold, Allan Ides and Daniel Martin.

From the publisher:

How do you report on the latest sensational criminal trial or newest controversial legislation without a basic understanding of how the American legal system works? This easy-to-use guidebook offers an overview of American law that should be found on the desk of any journalism student or professional journalist. It provides an overview of major legal principles and issues in simple terms for journalists who cover any aspect of the legal system. The Guide can be used in two ways: first, as a sit-down read that gives an overview of American law; and second, as a reference that can be used every day under deadline pressure for a specific purpose. Every feature of the book is designed to serve both functions. Thus, the book's organization captures both the birds-eye view of a subject; and, alternatively, permits a quick review of a given section when the professional needs to understand a distinct concept. The areas covered range from professional concerns such as the First Amendment, cameras in the courtroom, Sunshine laws, and access to government documents to general legal matters such as the institutions of law and lawmaking function of the judiciary; core constitutional principles such as separation of powers and judicial review; and how courts function. The book is ideal for use in general newswriting and reporting courses, particularly those with a focus on legal or court reporting, and may also be used as a supplementary text in Media Law courses.

By Professor Jeffery Atik

Mark Pagel addresses the conundrum posed by variegated cultures. Culture -- what we have that monkey's don't (according to a witty formula quoted by Pagel) -- both unites us and divides us. In Wired for Culture, Pagel attempts an evolutionary account for the existence of cultures. His inquiries commence with the mad multiplicity of languages. Language is the prime instrument of cultural transmission and the strongest marker of cultural identity. Yet the intra-group facilitation of communication provided by distinct languages are foreclosed to outsiders. Our languages seal us off from one another.

Human adaptability to the widest range of niches offers only a partial explanation for the multitude of cultures. New Guinea sports more than 800 different languages within a very small territory -- here mutual unintelligibility seems to be the point. Language operates both to permit and prevent understanding; both these characteristics are necessary. The value of a closed system of communication has long been recognized. Tradesmen, criminals and academics use argot to separate themselves and to keep secrets.

Pagel makes an evolutionary case for the multiplicity of languages; language serves as an identifier of group membership. This is culture's darker role: defining group boundaries. Pagel sees language and other cultural institutions functioning to set limits for altruism. Humans are social -- but only to a degree. We are a species that engages in magnificent cooperation -- yet are capable of inflicting harm on a scale not found in any other species.

By Professor Jeffery Atik

I was entranced by the prospect of reading Annelise Riles' Collateral Knowledge, given my eclectic (some would say scattershot) interests. Riles delivers a sophisticated and insightful anthropological treatment of the management of various legal questions facing Japanese banks entering OTC swap transactions. Global finance, ethnography, tasty legal theory: what fun!

And yes, Riles pulls it off. She promises an "ant's-eye view" of these stories, consistent with traditional ethnographic method. While the original intended targets of her observation were Japanese bank regulators, she later realizes the 'back-office' personnel (including the lawyers overseeing the documentation of the transactions) were as central in the process of the law-making.

Riles examines two crucial points of tension in the swap practices of Japanese banks. The first is the utilization (under Japanese law) of the institution of collateral: the posting of property to secure repayment of a debt. The book's title, Collateral Knowledge, plays on this and other meanings of "collateral." All commercial lawyers understand how collateral should work: it should freely pass the pledged assets into the hands of the favored creditor in the event of a debtor's default. And so the mission of a bank lawyer (in this case, one dealing with a Japanese bank) is to assure his principals that these functional expectations are met. This is hardly a simple matter where (in an example given by Riles) the swap is between a Japanese bank and a UK bank, posted to their respective Cayman Island subsidiaries and involving Chinese and Singaporean currencies. The swap raises peculiar difficulties, as neither party knows ex ante whether it will be a net creditor or net debtor of the other -- and so both may need to post, maintain and adjust collateral supporting the transaction. The standard industry forms, drafted by British and American lawyers and routinely used by the Japanese banks, are "literally nonsensical" to the Japanese, according to Riles.

But the forms "work" -- in that they satisfy the lawyers, the banks and their regulators. The art of a back-office lawyer is completing the forms -- the invariable boilerplate, the prompted elections (such as which country's law should govern) and any special terms. Standardization is at work here -- but so too is the exercise of a lawyer's "aesthetic" sensibilities, knowing when the paper looks right. In fact legal certainty may not be a dominant consideration -- at least not in ordinary times. But Riles' fieldwork followed an earlier Japanese financial crisis that set off external anxieties about aspects of Japanese law.

By Professor Jeffery Atik

So what would a Democrat central banker look like -- if there could be one? Resembling Paul Volcker, answers William Silber. That said, it is hard to recognize much in Volcker's policies marking him as a Democrat. Nixon did not trust him -- but that alone scarcely defines a Democrat. Volcker famously endorsed Barack Obama in the 2008 election -- but then so did Republican Colin Powell.

Silber adores Volcker -- which weakens Silber's ability to answer (or even ask) tough questions. It is clear that Silber believes Volcker saved the dollar -- and that he is a swell guy to boot. Pity poor Mrs. Volcker who spends an isolated life in a series of ratty apartments while her husband chases glory (in public service, mind you) rather than wealth. Neither Volcker nor Silber seem to realize what a lousy husband he was -- and Mrs. V. was too tactful to point this out.

The Silber account establishes Volcker's self-sacrifice -- and I suppose there's some foundation for it. Volcker spends many years as an underpaid public servant while having far more lucrative opportunities in the private sector. Yet one gets the sense that Volcker is simply more comfortable in the world of the Fed than he would ever have been in a bank. Generals are willingly generals -- there is something (glory? military music?) that draws them to their role. Their renunciation of wealth and a stable home-life only prove their ambition. While we should be grateful for their service, it is not clear that the generals are sacrificing anything. And so perhaps it is with Volcker.

By Professor Jeffery Atik

What a fun book this is! The Hour Between Dog and Wolf by John Coates mixes pop finance with pop science, sketching some surprising links between them. I will trust Coates to get the science right (he provides citations). His investigation of financial markets is largely anecdotal and so speculative, but all the same it yields tantalizing suggestions.

Coates is a former derivatives trader -- which gives him authority to describe the subjective experiences of winning and losing at a trading desk. He (somehow) becomes hooked on neuroscience research; he describes himself sneaking away from his Wall Street desk to mix with scientists at Rockefeller University. The book seeks to bring these two worlds together. Coates immerses himself in the activation of hormones: testosterone, cortisol and the like. It is these chemical agents that produce the profound effects on the humors of financial traders, and hence overall market behavior.

Coates attacks the mind/body dichotomy: a financial market trader reacts more like an athlete than an analyst in responding to the stimula communication through his screen. Coates employs emerging understandings of mind/body feedbacks to track the play of traders. The traders can react before they 'see', rely on 'gut feelings' and engage in mano-a-mano combats from which they emerge winners or losers. These are quintessentially physical experiences. The markets themselves may then be understood as projections of this human biology.

By Professor Jeffery Atik

Steve Coll's Private Empire provides oil spill-to-oil spill coverage of the recent history of Exxon-Mobil, and in that course brings us Bush/Cheney adventures, climate change deniers, armed conflicts in lost and forgotten places, and the rise (and fall) of Russian oligarchs. In this complex work, Exxon-Mobil appears misunderstood and misunderstanding.

Coll begins his story with the 1989 crash of the Exxon Valdez, the moment that seared Exxon in the public consciousness as an environmentally reckless brute, pandering to America's oil addiction at the cost of America's soul. Exxon reacts from this crisis in both positive and negative ways. It becomes obsessed with safety -- though the company's pursuit of safety is not to assure accident avoidance as much as it is a premise for increasing demands for precision and attention from its workforce. The safety culture Exxon creates becomes, in a menacing way, grounds for enforcing discipline, regimentation and uniformity-of-voice throughout the enterprise.

The second formative moment Coll relates is the 1993 removal of Exxon's headquarters from New York City (Exxon was the former Standard Oil of New Jersey) to Irving, Texas. Neither bi-coastals nor Texans would be surprised by the resultant shift in company worldview.

By Professor Jeffery Atik

If only Lytton Strachey had written this biography of Steve Jobs. He would have punctured Jobs, ridiculed his dirty feet and preachiness, his unshattered conviction of his own primacy. Not that Jobs wasn't a great figure: he certainly was. But there is something off-putting when a biographer lets his subject declare (and so establish) his own importance. The temptation in reviewing this biography is to assess the subject and not the book. And the subject is certainly compelling. Jobs' accomplishments are familiar, his eccentricities less so. And so there is sordid attraction exercised by his abandonments, his eating disorders, his cruelty.

Isaacson relishes his access to Jobs and produces a work Larry King would envy. Certainly Jobs' foibles are presented -- but simply because a biographer has a license to report 'warts and all' does not discharge his critical responsibility. Isaacson does not judge Jobs. At best, he reports -- in various fragments -- the partial judgments of Jobs' many friends, colleagues and acquaintances. Joan Baez is perhaps the most honest of all: she has little to say beyond a typifying story (Jobs is clueless) and leaves the impression that she meant more to Steve than Steve ever meant to her.

No doubt many readers of this book will search for easy recipes for replicating Jobs' phenomenal business achievements. Jobs seems to have had two running theories for Apple's success. The first account celebrates Apple's industrial design. The design story is complex -- and has deep psychological roots. Jobs learns from his father (a modest man he greatly admired) of the importance of finish, even for elements hidden from view. Design does not reflect the creator's integrity; it assures it. But design involves more than form following function -- the book is replete with stories of Jobs' rejecting engineers' design compromises that duly reflect functional concerns. The aesthetic trumps the functional in these stories (Isaacson gives no counterexamples), at times leading to stunning product, and at other times, to disappointment and delusion. In the affair known as "Antennagate," Jobs had insisted that a gorgeous steel rim surround the iPhone 4. Unfortunately, this compromised an essential function: the phone dropped calls at a higher rate. The technical solution adopted by many (and offered by Jobs) was an ugly case which, of course, masked the iPhone 4's design!

By Professor Jeffery Atik

In this unabashedly pop business book, Tom Doctoroff, head of the J. Walter Thompson advertising firm in China, tells us What Chinese Want. Yet the implicit question is complex: what do the Chinese want for themselves? For their children? For China? And to answer the question coherently involves considerable psychological framework. Doctoroff is an ad guy -- so the question that lies squarely within his expertise might be: what does the Chinese consumer want to consume? And this question he begins to answer. He is less certain -- and less convincing -- when applying the insights he draws from Chinese consumption habits to the more mysterious nature of Chinese culture, politics and foreign policy.

I suppose we can learn something meaningful about the Chinese from studying their patterns of material consumption -- even using the tools of an advertising executive. In some sense, Doctoroff's inquiry is an exercise in applied cultural anthropology -- though his ends are more instrumental than scientific. So which firms are doing well in China -- and what do their successful adaptations suggest?

Starbucks, Doctoroff tells us, has configured larger stores in China which serve as group meeting places. The Chinese consumer would not pay the equivalent for $4.00 for a cup of coffee for private consumption (this may reveal the inherent cross-elasticity of Starbucks coffee and ubiquitous hot tea). The consumer will do so, however, when observed by others; the Starbucks customer's extravagant expenditure for a latte is justified by a gain in social standing. And so by facilitating the prospect of mutual observation -- by providing large, welcoming meeting spaces -- Starbucks sells coffee in China.

By Professor Jeffery Atik

In the preface to A Capitalism for the People, Luigi Zingales recounts his departure from an Italian university for the wonderland of American academia. Here merit, neither contacts nor obsequious devotion to one's supervisor, is the key to success and Zingales' triumphs. He becomes an admired professor at the University of Chicago business school, a place he praises for its openness, its devotion to excellence and its rejection of status-based primacy (pity the poor dean, newly arrived from Stanford, who is devastated by the slashing comments of a junior colleague).

But the broader America he sees around him does not match -- in aim or reach -- what Zingales finds at Chicago. Zingales returns to the theme developed in his earlier writing: the United States is burdened with crony capitalism, the same social disease he sought to escape in emigrating from Italy. American business -- and American politics -- is dominated by corrupt elites who prefer protection and status quo to competition and innovation. Zingales introduces a neat distinction -- America remains pro-business, but it is no longer pro-market. And so Zingales seeks to reintroduce and reinvigorate competition in American economic and political life.

Zingales invites us to revive American populism -- and by this he intends the trust-busting populism of Theodore Roosevelt and not the proto-fascism of Huey Long nor the toxic nativism of the KKK. The focus is returning prosperity to the common American, and not further enriching Wall Street, Pharma, agriculture, government contractors, and the greater bulk of big business. Yet his populism is capitalist at heart. If the ties between government and business can be broken, new and vital businesses will thrive. Political life will improve as well, if the distortions and distractions introduced by lobbyists can be pruned back.

By Professor Jeffery Atik

Acemoglu and Robinson's Why Nations Fail is a thrilling read. It proposes answers to grand questions: Why are some nations rich? Why are others poor? Why are there such great disparities? Their theory is seductive -- yet it ultimately fails to give much guidance as to what can be done.

The key to prosperity, in the authors' view, can be found in a nation's political and economic institutions. The operative distinction is whether these institutions are extractive or inclusive. The most successful countries will have inclusive political and economic institutions; the most desperate will be afflicted with extractive institutions. Prescriptions seem tantalizingly accessible at first: simply replace extractive institutions with inclusive ones. But this is not so easy, Acemoglu and Robinson caution.

Labeling the 'bad' institutions extractive (as opposed to the more symmetrical 'exclusive') is a nice turn of phrase. Economists use the term extractive to describe economies that exploit endowments of valued natural resources, such as oil, gold or Mr. Kurtz's ivory, that are literally extracted. But the authors intend to characterize the relationship between the elites and the masses; elites 'extract' power and wealth from human resources through oppressive political and economic institutions.

By Professor Jeffery Atik

In What Money Can't Buy, Michael Sandel decries the emergence of markets that displace older norms, "commodifying" earlier forms of social organization that better correspond to our (or Sandel's) ethical intuitions. Sandel is bothered by fast track lanes, priority boarding, sales of organs or surrogate mothering services, paying for grades, and what he describes as the "skyboxification" of American society. While there remain some things money cannot buy, many things can be bought today that in prior times were allocated using non-market norms.

Sandel views with alarm the increasing hegemony of markets -- where markets are the go-to policy prescription for every social want. If we wish to boost the performance of inner-city school children, we should pay them for academic achievement -- according to a market-line of thinking. There's a cost, argues Sandel, to the application of market notions to novel domains, as markets operate (through "incentives," a neologism that Sandel mocks) to displace other values, such as inculcating a love of learning, devoting oneself to one's children and savoring a sense of community. Markets intrude on moral domains and limit the scope for moral discourse -- and this loss is under-appreciated.

All true enough -- but in at least some cases non-market values have displaced markets. For much of its history, the draft had market features. One could buy one's way out of Lincoln's draft -- or find a replacement to serve. And during most of the Vietnam era, the wealthy could avoid the draft by remaining in school. The draft, of course, has been suspended for several decades, but it is hard to imagine its return in any form with buy-outs. There may be other examples where the relevant institutional shift is away from markets: it was much easier to buy one's way into an Ivy League school a generation ago than it is now (Sandel concedes that even now it may be possible for some to do so).

By Professor Jeffery Atik

As its subtitle suggests, Philip Coggan's book examines the relationship between debt and money and its implications for the 21st century economy. Coggan takes us through familiar territory (the nature of money) and familiar debates (Keynesianism vs. monetaristm), yet offers a novel framing that make this book a valuable read.

Coggan has an unusual view of the fundamental divide in political economy. Rather than seeing class struggle everywhere, Coggan treats the conflict between creditors and debtors as the central fracture motivating politics, though he notes that -- all things being equal -- creditors tend to be wealthier (and fewer in number) than debtors.

In speaking of debt, Coggan slides (perhaps too easily) between private and public debt. The debt that interests Coggan is the burgeoning debt that tends toward default (as opposed to the under-remarked debt that is extinguished by repayment in the ordinary course). This is the persisting debt that in usual times is rolled over upon each maturation. He writes of unsustainable debt -- again, both private and public -- that will of necessity lead to some degree of default. In the case of public debt, the default scenarios include -- importantly -- devaluation, a course open to most states to reset the exchange value of the money in which a debt is expressed and thus unilaterally reduce the value of the debt (as expressed in some other value, such as gold or a harder currency).

For most states, there is a limit to this strategy. Devaluation has consequences. It may throttle domestic expectations, igniting inflation. And devaluation -- in a global society -- has consequences, distributing at least some of the lost value to other countries (by readjusting the terms of trade) as well as to the disappointed creditors. Devaluation will also make future borrowing more difficult.

But -- of late -- there appeared the possibility for at least one country to escape the devaluation trap. The United States has enjoyed an extraordinary privilege, in that its currency seemed to be highly valued notwithstanding its horrific trade deficits. This reflects its historical (though waning) primacy in world economic affairs. What matters now is the role of this particular national money as place for storage of value: China (as do Japan and others) continues to re-funnel its vast export earnings into dollar-denominated obligations of the U.S. Treasury, thus keeping prevailing U.S. interest rates low. Exchange values may reveal more about capital flows than trade balances, Coggan argues.