Bad Money – Book Review

If it was not obvious when Kevin Phillips’ new work Bad Money was published in April, it should be obvious now: the U.S. economy – and thus much of the world’s economy – is in decline. The book pivots around events of August 2007, making me wish that Phillips had held off writing the book for another year – or his given option now, to wait another year and see how the system, the financial dynasties, play out over the first part of Barak Obama’s tenure as president.

Phillips’ main concerns are money and oil.
For the former, money, it is the size of private debt rising from $11 trillion to $48 trillion within two decades, promoted by a financial sector as “the largest sector of the U.S. private economy” at twenty-one per cent of the gross domestic product (GDP) that has overtaken the manufacturing sector, now only twelve per cent of the GDP. His description is not of risk but that “Bingeing on debt is reckless.” Added to these money problems are the changes in official statistics that occurred over the same time period that minimized downturns, underestimated inflation, and overstated growth.

Oil is the second main concern, albeit tied to the first, as the dollar is the de facto reserve global currency having at its base oil transactions priced in U.S. dollars. Factors considered by Phillips are U.S. peak oil (1971) and possible/probable current global peak oil occurring now or in the very near future (accompanied by more misleading statistics about “liquid equivalents” to the barrel of oil from other sources). The effects are twofold: first, the U.S. increasingly relies on imports of oil for its transportation, heating, and industrial activities (what few remain in the U.S.); and secondly, as oil resources dry up, the costs will increase significantly. Oil has become an “incipient strategic albatross.”

Oil and debt have combined to show what the U.S. “had ceased to do – produce enough of its own manufactures and oil – as well as what it had started to do: fantasize about military and financial imperialism….Few miscalculations have been so tragic.[italics in original]“

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