Smart Money

January 12, 2015
As official national villain, Wall Street has recently been supplanted by other malefactors (such as the CIA, local police forces, and Ebola), yet the Great Recession has undeniably left finance with a tarnished reputation. Economist journalist Palmer hopes to burnish its image in this eloquent manifesto, highlighting current innovations in finance that promote social good. Wisely, Palmer begins by admitting Wall Street’s recent sins: namely, disastrously miscalculating the risks of subprime mortgages and triggering the global financial crisis of 2007–2008. Yet, as he observes, financial crises are nothing new, dating back to 33 C.E. Palmer argues that a world without finance (and thus without loans, credit, insurance, or investments) would be far worse. He points to how the Internet now allows individuals to bypass conventional financing, gives borrowers access to lower interest rates, and lets entrepreneurs obtain capital via crowdfunding. He also discusses social-impact bonds, wherein nonprofit organizations that, say, reduce recidivism pay off investors using the money saved by the government. Palmer responsibly notes the potential risks of such brave new innovations, spotlighting a not-so-novel innovation, catastrophe modeling for insurers, which could also be valuable, specifically for modeling risk in markets. This intelligent, balanced study of current innovations in finance does much to exorcise its recent demonization. Agent: Andrew Stuart, Stuart Agency.

February 15, 2015
Palmer, the head of data journalism at the Economist, disagrees with those who see innovations like derivatives as responsible for recent financial bubbles and crashes, and he argues that the world needs even more financial innovation.In a survey of monetary and financial history, the author examines the development of financial products. These include advances in peer-to-peer lending, which remove banks as middlemen in transactions that are made possible, in part, by mathematized search functions related to data mining. Palmer identifies companies across the world-e.g., Lending Club, Transfer Wise and Zest Finance-that are moving into areas where banks and other lenders provide either predatory or very little service to their customers. Nonleveraged methods of financing, providing cheaper short-term finance using nontraditional forms of collateral, are being developed for those qualified-e.g., student lending, payday loans, housing and retirement finance. Palmer traces these innovative methods to the tradition of financial mathematics begun as early as the 13th century with Leonardo Fibonacci. The author explores the respective pioneering contributions of both Fibonacci and 17th-century astronomer Edmond Halley. The former worked out how to calculate the " 'present value' of cash flows-that is, how much a future amount of money is worth today, given that money can earn interest in the meantime," and the latter helped develop the concepts of annuities and life tables for insurers. "The problem with financial innovation is not that products have original sin," writes Palmer, "but that the financial system is programmed to change these products in ways which make them more dangerous." As examples, he points to recent high-tech and mortgage bubbles. With state institutions apparently reaching their financial limits, the author sees plenty of room for expansion of innovations. An intriguing argument that can bear further study.

March 1, 2015

Many blame the Great Recession on financial innovations that have created an overly complex financial system, but not journalist Palmer (The Economist). In this book, which discusses some the history of finance as well as opportunities for the future, Palmer shows how innovation has always been a part of this industry, starting with the creation of money itself. The first part of the work details some of the ways financial innovation has gone wrong, such as through collateralized debt obligations (CDOs) and high frequency trading (HFT), while the second part shows how these changes can be a force for good instead of greed. Examples include social-impact bonds (SIBs), which allow private investors to fund social programs, and peer-to-peer lending, which takes big banks out of the equation for small loans and allows individuals to borrow from and lend to one another. VERDICT This book will satisfy the general reader and investor who wants to see the other side of the coin as it relates to financial innovation.--Elizabeth Nelson, McHenry Cty. Coll. Lib., Crystal Lake, IL

Copyright 2015 Library Journal, LLC Used with permission.

February 1, 2015
Palmer, former financial editor and current data executive, presents his views on financial innovation in two parts. First, he traces its history, from the earliest financial contracts in Mesopotamia in the fourth millennium BCE to Babylonia in the second millennium BCE, when the role of money and credit had developed, and continues the journey to 2008 and the Great Recession. Second, the author sets out to show the capacity of finance to do good, with efforts being made to resolve great social and economic problems. These include efforts to improve the drug-development processes for people now living longer as well as information on the downside of longevity; technology changes that directly connect on the Internet suppliers and consumers of financing; analysis of big data on how borrowers are screened and risks are assessed; and rethinking how finance operates to avoid its past failures. Urging bright young people to consider a career in finance, Palmer states, For all of its flaws, there is no more powerful problem-solving machine. (Reprinted with permission of Booklist, copyright 2015, American Library Association.)

March 1, 2015
Keen wants you to know that the Internet has not lived up to its early promise. Rather than fostering an environment of intellectual and social democracy, it has spawned a rule-by-mob culture, promoted narcissism and voyeurism, encouraged intolerance and exclusivity, created global monopolies, increased unemployment, and decimated whole industries. The author seems downright bitter about the way corporate behemoths like Google and Amazon promote themselves as uncompanies, as zippy alternatives to old-world corporations. Make no mistake, this is an angry book, but Keen tempers his invective with cold, hard facts (Amazon's contribution to the upheaval in the publishing and retail sectors, for example). Is this a balanced look at the benefits and drawbacks of the Internet? No. There are books that provide that, but this one is designed to give people who think of the Internet as a sort of democratic digital paradise a hard dose of reality (or one interpretation of reality). Sure to be condemned by some for its seemingly one-sided approach, the book nevertheless clearly stakes out a position in the ongoing debate over what the digital age has wrought.(Reprinted with permission of Booklist, copyright 2015, American Library Association.)