The World Is Curved: Hidden Dangers to the Global Economy

by David M. Smick

Book Overview

David Smick keeps a low profile, but experts consider him one of the most insightful financial market strategists in the world. For more than two decades, he has conferred with central bankers (such... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 1591842182
• ISBN13: 9781591842187
• Release Date: September 2008
• Publisher: Portfolio
• Length: 320 Pages
• Weight: 1.20 lbs.
• Dimensions: 1.1" x 6.7" x 8.9"
• Age Range: 18 years and up
• Grade Range: Postsecondary and higher

Customer Reviews

The World is Curved: Hidden Dangers to the Global Economy

This is bar none the finest financial book I've read! It's an outstanding well written education on today's (global) financial condition. It's rare you find a book of this calibar from a person who walks the talk. Although it's not a pretty picture, Mr. Smick has a gifted way to bring well documented facts,truth, and a sense of power to the reader without invoking fear and hopelessness. One outstanding work that can be understood by the college student to the Chairman of the Board!

Offers Tremendous Insight to Today's Economic Challenges

David Smick's excellent book offers an insider's view of our current financial calamity mixed with a healthy dose of economic theory. This combination makes for a book that is both a page turner and instructive. Specifically, Mr. Smick makes several key points. These points are especially relevant given the current political tides we are experiencing in the United States: First and foremost, he makes a very cogent and compelling argument for the importance of free trade. As opposed to more academic arguments for free trade such as those found in a macroeconomics textbook replete with supply and demand graphs, his case is made from first hand experience as an advisor to large hedge funds and proprietary trading departments of major financial institutions. Especially refreshing is his lack of bias toward one political party. Though having a belief system some might see as conservative, he credits the Clinton administration with doing an outstanding job of promoting free trade and positioning America as a country friendly to business in the modern international arena. (In fact, Mr. Smick argues persuasively that Bill Clinton was even more of a free-trader than Ronald Reagan, and that the U.S. political community, if it rejects free trade and the free market, is at risk of creating a global financial disaster.) In a time of great stress in the U.S. economy, which has led to unprecedented Government intervention, the free trade message and pro-capitalistic message is especially important and urgent. But it is Mr. Smick's real world experince that drives all this home. He fills his book with many first hand accounts of dealing with those in the inner circles, such as Alan Greenspan and Japan's Finance Minister Hashimoto. Here is an example: He discusses how hedge fund managers earnings, which have been ridiculously prodigious, are taxed as capital gains rather than ordinary income. This amounts to a big tax break for already highly compensated individuals and sounds patently outrageous. But Mr. Smick then points out that were this tax law changed, in the flat global environment we live in, the hedge funds could with little more than a flick of a switch relocate overseas. And then the U.S. would get zero tax revenue and lose out completely. Second, he emphasizes the importance of maintaining an environment in which the US is friendly to entreprenurial capital. He cautions against over-regulation of the financial markets, and argues that America's past success has stemmed precisely from Wall Street's cowboy like approach to risk and fast reactions to market developments. Regarding taxation, he emphasizes that during a period of fiscal imbalance, it is easy to resort to class welfare and raise taxes on the wealthy. He takes Warren Buffett to task for supporting massive task hikes conveniently after Mr. Buffett has accumulated his fortune. The danger of class warfare is that everyone loses as the US becomes less competitive as a plac

Insightful

Very informative book. Provided excellent insight into China and the possible pitfalls that every investor should consider. Also, the chapter on Japan was of significance especially given the parallels of their crisis and now ours. Hopefully, the US will not make the same mistakes, but after reading the book one realizes that the government and private sector actions and rhetoric are earily similar to the mistakes of Japan's lost decade.

A Blockbuster of a book that everyone should read

This extremely well-written book describes the current financial problems of globalization. It is easy to follow, easy to understand, and eliminates jargon. It's a great example of communication out of the Frank Lutz 'words that work' school. The problems of globalization, as the book described' are critical as a major period of entrepreneurial prosperity may be coming to an end. The availability of `oceans of money' started with a liberalized program in the USA during the early 1980's and later elsewhere with the rejuvenation of pension funds and other financial instruments. Capitalization/reserve requirements of banks were reduced, capital gains taxes were cut and a variety of new investment vehicles freed up large sources of capital. Smaller businesses were funded as the need to invest capital continued to grow and consequently, new wealth, new jobs and prosperity resulted. Moreover, many countries established sovereign funds that needed to be invested too. Rapid machine computation facilitated an explosion of capital transfer and global investment. Because the USA was perceived as the safest haven with the highest level of global transparency, it benefited from these changes. Moreover, the USA with labor market flexibility, higher education, a benign political environment, innovative strategies and quality of corporate management is considered the prime country in which global funds invest. However, the USA is not an island, but is interconnected and therefore subject to global economic events. But is it fading? The downside was securitization, a process of spreading out investment into multiple income streams to reduce risks. Securitization also involves arcane practices that are difficult for most policy makers, bankers and financial institutions to fully understand. In the process are no longer tied to the risk of the borrower, making capital easier to lend. Even riskier is the overlay of lack of transparency in many countries, including China. Eventually, underpriced and hidden risk will lead to major market corrections, as we have seen recently. Moreover, global forces and lower international trade barriers have diminished the role of government to influence their own economies. We now see increasing political risk in the USA that may kill the goose that laid the golden egg. The rising tendency of anti-global trade pacts, envy, class warfare, and populism, are placing the US at economic risk. American politicians, according to Smick, have only one option and that is to make the American economy the most attractive destination for global investment on a LONG-TERM basis. The wild card in all of this is China and I cannot detail the intricacies in Smick's chapter. China's approach includes widespread investment for strategic advantage, and a lack of transparency. Also it is involved in widespread commodity stockpiling. There, foreign investment is controlled. Chinese banking does not understand credit risks and are viewed ins

Continues where "Flat" left off (and rebuts it)

Smick uses a fascinating series of facts and stories to paint a picture of the world-to-be that is frightening, enlightening, awe-inspiring and hopeful (for the person that knows how to exploit the opporunities). I haven't read a book that changed my world view this much since How to Measure Anything: Finding the Value of "Intangibles" in Business by Doug Hubbard (which Smick could probably have used on a couple of points in his book). Smick takes, I think, a more realistic view of the world than Friedman's The World Is Flat 3.0: A Brief History of the Twenty-first Century. Where Friedman optimistically sees a move toward an equalibrium of an "even playing field" between all of the world's economic participants, Smick sees something less even - and not entirely in the favor of the developed West. Smick sees market uncertainties, the mortgage crisis, and consumer debt as evidence of a trend toward increasing uncertainties. China is the new economic giant, but lends itself to much less predictability than the relatively solid advances of the western world in the last quarter century. I have to wonder if Smick makes the "narrative fallacy" as explained in Taleb's The Black Swan: The Impact of the Highly Improbable or his earlier Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Still, Smick seems to make a convincing case, even if at times anecdotal. Smick discusses the possibility of a Chinese financial bubble alongside the details of US monetary policy. Utterly unnerving and engaging, it will should eclipse "Flat" as the "must read" for long-term thinkers.