Has somebody sent a copy of this book to Gordon Brown and Alastair Darling yet? Well it’s probably too late anyway. The Credit Crunch by Graham Turner is as devastating a critique of Government created asset bubbles as you’ll read and is, unlike our own Government, ahead of the curve on the Credit Crunch. As Turner avers - if you think it’s bad now (and the book runs right up to spring 2008) , you ain’t seen nothing yet.

The thesis is this. The Thatcher and Reagan (and after) economies of the UK and US have seen the driving down of wages, sometimes in real terms, certainly as a share of the national pie. Much of this has been achieved by the crushing of union power and of the confidence of workers to ask, Oliver like, for more. A further downward pressure on wage demands has come with governments’ encouragement of globalisation, removing trade barriers to allow our companies to invest offshore, to tap a vast pool of cheap labour in China, India and beyond. Our consumer goods have been getting cheaper for years, and I type this review of the Credit Crunch by Graham Turner sitting in a pair of Primark shorts costing £6 and T-shirt costing £2.50 Just one scrap of evidence that a) I’m a cheapskate and b) western Europe is enjoying an extraordinary driving down in the cost of certain products.

And if Joe Public isn’t distracted enough by the cheap flood of goods offsetting the fact he hasn’t had a pay rise in years, then the government can create the illusion of wealth, by releasing the credit restrictions that prevailed for most of the 20th century and allowing people to tap the equity in their homes - turning their domicile into a giant hole in the wall. How can it go wrong?

Welcome to 2008 and the Credit Crunch, the other side of which is not just one, but a series of asset bubbles, artificially expanded by cheap credit. Worse, the unsustainable UK and US housing markets, a giddy spiral of credit which had to stop somewhere, are just two of the most obvious. Our investment outflows to offshore producers have fuelled credit bubbles there too - a froth of overinvestment and over production. From an oversupply of new build apartments in Manchester look abroad to what that credit release has also fuelled - a rash of unsaleable homes on the Costas, of garment factories in Korea, of parts suppliers in Romania, even of nightclubs and hotels in the new holiday resorts of Estonia. Go round the developing world in fact, and you see sick balance sheets disguised by vast credit inflows. Graham Turner’s Credit Crunch tours the globe revealing the candyfloss economies built by a decade of cheap credit.

Great until the party stops, and here Turner elegantly unpicks the myth of decoupling. How CAN the developing countries be decoupled from our sick economies when their trade is so dependent on ours. As our bubble bursts, argues Turner, we’ll stop spending on imports and the sickliness of those countries’ balance sheets will become clear … you’ll start to hear pops around the globe. The answer? To cut interest rates and cut them quick - and here he uses the baleful example of 1990s Japan to demonstrate the folly of tardiness, of after the curve interest rate cuts of a quarter per cent at a time. If we don’t act now, he argues, our economies will become entrenched in the ‘debt deflation’ which has gripped Japan for a generation, of money piling up in the banks and nobody spending. His description of the Japanese government’s desperate and fruitless attempts to inject liquidity into their economy makes painful reading. And we used to fear inflation? Turner wryly points out that the US Fed and the UK Treasury are still fighting yesterday’s war … it’s deflation we should really be fearing. The Credit Crunch by Graham Turner is essential reading for anyone trying to grasp what’s really gone wrong with economy.

Tags: credit crunch, global liquidity crisis, deflation

The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis
by Graham Turner
Paperback: 224 pages
Publisher: Pluto Press (20 Jun 2008)
ISBN-10: 0745328105
ISBN-13: 978-0745328102
£14.99

STOP PRESS: An exclusive offer to Walletwatcher readers. To receive 20% off the RRP of the book go to www.plutobooks.com and enter code PLUCRUNCH. Happy reading.

Popular books about economics and the ‘new paradigm’ offered by the web are coming thick and fast these days, and Wikinomics has proved a huge hit with people from the old economy trying to understand the new economy. You’re likely to find it on bookshelves (mine at any rate) alongside The Wisdom of Crowds, The Tipping Point, Freakonomics and covered with dust now, the venerable ‘Being Digital’ by Nicholas Negroponte.

Wikinomics’ thesis is this - that the old company, if not dead, is rotting fishlike from the head. Because new companies, new organisations, new groups and commonalities of interest, are not hierarchical, but self-organising. That ‘the knowledge, resources and computing power of billions of people are self organising into a massive new collective force, interconnected and self orchestrated via blogs, wikis, chat rooms, peer-to-peer networks and personal broadcasting.’ And indeed here we are on Walletwatcher with me commenting unmediated by a conventional publishing house, and you sending me back comments telling me how stupid my points are and how I spelled ‘organising’ wrong.

This then is Web 2.0, not top down anymore, the web gets interactive. Now going into paperback, Wikinomics has won stunning plaudits (though every book I pick up these days appears to be ‘best ever’), including ‘dazzlingly timely’ from the Guardian, it’s an FT and Economist Book of the year, and so on. But perhaps the coollest and most sensible puff comes from Eric Schmidt, CEO of Google, who talks of the ‘opportunities’ Web 2.0 presents for companies. And there are fascinating examples of companies throwing out their research programmes to open wiki access, breaking out of the lab to access huge amounts of knowhow among users of the internet. You may be a retired chemist who has discovered a better way to bottle soap? You can submit your ideas to Proctor and Gamble. Wikinomics takes the models of Linux and Wikipedia as examples of how open source and co-operative work can add up to a very big deal. Just as a swarm of ants can collectively move a huge log, our collective intelligence (and we’re getting into Wisdom of Crowds territory here) can produce goods and services better, faster and with more and quicker innovations.

Where Wikinomics is best is in describing these new self forming channels and groups, and talking about the way the next generation is already using them. CEOs may sniff at the idea of social networking, Technorati, Digg et al but they’re already out there and they are changing the way people work, think, talk and communicate about big companies. Think you can ignore Technorati in your company? Go online … you’ll find it’s not ignoring you. The writers also freely acknowledge the limitations of global collaboration - what does this mean for company security and protection of patents for example. What does it mean for workers’ pay and rights. Where it’s weakest is in the sheer weight of words the authors haul into place to make their thesis. Having slogged through ‘The Prosumers’,'Ideogoras’ and ‘the New Alexandrians’ I was struggling a little. This though could be mental flabbiness caused by too much dipping in and out of websites … A whole book? Not me!

And I chafe a little at their sympathetic description of how the BBC is changing itself into a collaborative news medium - yes, with enormous amounts of public money while making commercial capital, a situation bitterly resented by some of its commercial rivals. I’d also argue that the ‘mashup’ approach to music wasn’t invented by the rappers of Sugahill et al in the late seventies, but that they in turn simply copped the technique from Jamaican toasting in the early seventies. Wikinomics is required reading for anyone who runs a company.

Wikinomics (Paperback)
by Don Tapscott (Author), Anthony Williams (Author)
ISBN-10: 184354637X
ISBN-13: 978-1843546375
£8.99

Tags: Wikinomics, web 2.0, don tapscott, wiki, web2.0, wikis, mass collaboration, anthony williams,

Naked Trader 2 by Robbie Burns: Even for those of us who love reading about money, books on finance are a tricky one. Either they can be so dry and technical that they spur you to find the nearest wall of drying paint for light relief, or they are so simplistic and dumbed down to be almost useless. Into the latter skip I toss much of the positive thinking genre, while praying that the next author of a tome on technical analysis has managed to breathe life into his subject. Robbie Burns cut his teeth working on local papers and thank god for that, because he has the hack’s eye for a story, an angle and a human interest point that makes his copy sing.

I whizzed the 300 or so pages of Naked Trader 2 by Robbie Burns in a weekend … before picking it up to read again and making some serious notes. This is an elegant and readable explanation of how to invest and make money from shares. He relentlessly debunks the tipsters and systems merchants who would sell you their secrets (I think we all know what the secret of their money making success really is). He describes the traps for the unwary and, while making great play of being an excessively relaxed bald bloke, who likes nothing better than downing industrial quantities of tea and toast while monitoring his stocks, he constantly bangs on about the importance of research, hard work, discipline and understanding what you’re buying. Burns is a get-rich-slow merchant, which sounds good to me, and I think he’s at his best with this cautions to excise emotion from your trading. There is no magic in trading, there is a little luck, but mostly there’s assiduous research.

And if that sounds dry and boring then blame me not Naked Trader 2 by Robbie Burns, because it’s an enormously entertaining primer on buying and making money from the stockmarket. Coming from a property investment background, I’m only too aware of the legions of people who pat themselves for raising the value of their properties in a rising market (where does Property Ladder go in these credit crunch days). Similarly there are lots of stock picking geniuses during bull markets, but during the current stumbling, confused bear of a stockmarket? I reckon you need a good guide and this is the best I’ve read. Certainly this is a high-concept popular finance book, and not everyone will go for the matiness of it - the tea, the toast, the toddler, the lovely Mrs Naked Trader. I loved it though and, more to the point, Mr Burns publishes his trades on the www.nakedtrader.co.uk website, so you can see if he really DOES know his stuff. Don’t buy a system, buy this instead.

The Naked Trader, 2nd Edition, (How anyone can make money trading shares) by Robbie Burns. Published by Harriman House, £12.99, ISBN 9781905641512.