Extreme Money

Extreme Money

By Satyajit Das

John Wiley & Sons (2011)

An interesting sub-title, “Masters of the Universe and the Cult of Risk.”

Just like “This Time is Different” the underlying theme of this book is again ‘debt’.  The only difference is here, debt is “financialized”.  This is Extreme Money.

It is interesting reading – a lot of quotes and anecdotes – making the concepts discussed in the book easy to understand.  “There’s hard money, there’s fiat money, and there’s debt. .....  In truth, money exists only in the mind.  It is a matter of trust.  With trust, comes the possibility of betrayal.”

The following illustration is used to explain what has happened:

“There is a box – the original real economy.  In the age of capital, a larger economy appeared, really two boxes stacked on top of each other – the real economy and the extreme money economy, with its excessive debt and speculation.  In the global financial crisis, the extreme money box disappeared, leaving only the smaller real economy once more."

The author’s proposed solution to the financial crisis: “The world has to reduce debt. ... Individuals have to save more and spend less.  Companies have to go back to real engineering.  Governments have to balance their books better. ... The world must live within its means.”

I think that this is a must read for anyone wanting to understand the current global financial situation.