When the Money Runs Out

April 29, 2013
HSBC economist King (Losing Control) argues that the West is doomed to suffer extended recessions, rising unemployment, and declining standards of living, with no end in sight. A fan of clunky metaphors—“the economic goose kept laying golden eggs,” he says, has become “menopausal”—King suggests that excessive lending has led to the rise of risky investments, causing debtor countries to default and creditor countries’ assets to vanish. According to King, in the end the entire international financial infrastructure is an illusion “involving a heavy dose of wish-fulfillment.” King’s forays through economic history mix long, highly technical passages with entertaining vignettes from U.S. lunar missions, the Israeli-Palestinian conflict, and Mary Poppins, but the conclusion is the same: we’re broke. King dismisses the economic lessons of past depressions as obsolete, based as they were on radically different fundamentals, but warns that the accompanying social ills are inevitably reappearing. His brief section on policy recommendations provides a set of disappointingly vague proposals for restoring trust and accountability in the Eurozone, which, relatively anodyne though they may be, are “near enough impossible” to implement in the current political climate.

May 15, 2013
A high-ranking economist employed by a major international bank expresses pessimism about the future of the economy in the United States and other traditionally powerful nations. King issued many of the same warnings in Losing Control: The Emerging Threats to Western Prosperity (2010). Here, the author updates and expands his argument based on his vantage point in London, where he is group chief economist and global head of economics and asset allocation research at the HSBC banking conglomerate. King does not blindly defend gigantic banks when discussing the recent world financial crisis, but he does suggest that there is plenty of blame to distribute among smaller banks and nonbanking institutions. He believes central banks must act as a regulator of individual banks, forcing policies favoring long-term stability over short-term profit. But a conundrum exists, he writes, since national banks cannot effectively regulate international banking practices. As a result, King calls for regulation that crosses national boundaries but is vague about how that might actually work. Banking consumers might have to pay some of the costs through fees on checking accounts and ATM use. The author moves beyond banks to examine how the increasing financial clout of nations such as China will lessen the power of the Western nations and quite likely lead to further economic chaos. Policymakers in Western nations, whether they believe in austerity as the solution to the global economic mess or in larger government stimulus programs, are failing to grasp the enormity of the overhaul needed. King worries about an "optimism bias" emanating from both the austerity and stimulus camps, which would prevent sweeping reform. A well-written book, mostly free of jargon, that is short on practical solutions and thus, profoundly pessimistic.

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June 15, 2013

HSBC chief economist King (Losing Control) presents a concise description of the West's current economic problems with warnings and suggestions for the future. While he asserts "when the money runs out" is "a turn of phrase, not the literal truth," he analyzes what may happen if the economy doesn't recover. He contends that the expected economic cycle is not the present problem but rather that there is a lack of trust and a deterioration in structural economic performance. He claims the current economic stagnation will predominate if people continue to have entitlement expectations governments may no longer be able to meet. As the gap between expectations and reality widens, the future dims. Though the emphasis is on the United States and the UK, King looks for similar scenarios not only in the West but worldwide, and examines the effectiveness of tried solutions. The author has tightly reasoned arguments regarding the unworkability of past solutions and suggestions for the steps that should be taken to ensure economic stability for future generations even to the extent of mandated austerity. VERDICT For those seeking answers for rebuilding the economy and who believe the current economic approach is the wrong one.--Bonnie Tollefson, Cleveland Bradley Cty. P.L., TN

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