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The Death of Capital: How Creative Policy Can Restore Stability

ISBN: 978-0-470-46650-6
292 pages
May 2010
The Death of Capital: How Creative Policy Can Restore Stability  (0470466502) cover image
In The Death of Capital, respected portfolio manager and longtime investment professional Michael Lewitt looks at how the U.S. economy has increasingly been dominated by short-term speculation rather than industrial expansion in recent years. These disastrous trends, described here as financialization, ignore the fact that capital itself is a highly unstable process rather than a fixed object or category. As a result of our failure to understand the true nature of capital, we have developed a financial and regulatory system that does exactly the opposite of what it should be doing—favoring obscurity over transparency and fomenting instability rather than growth.

In explaining where we have gone wrong Lewitt pulls few punches in criticizing some of the counterproductive forces that have led to the death of capital—including Wall Street practices such as private equity and derivatives trading—which he views both as economically unproductive and morally misguided. Page by informative page, this timely guide:

  • Addresses "financialization" and its consequences, such as a weaker U.S. dollar, the destruction of American industries, and the loss of American economic and political influence
  • Explores the most important aspects of capital and capitalism through the prism of four of the world’s great economic thinkers
  • Discusses how the legal system aided economic weakening by privileging short-term investment goals
  • Calls for politically controversial reforms such as stricter regulation of hedge funds and private equity firms, banning naked credit default swaps and Structured Investment Vehicles, and principles-based reforms to improve systemic stability

Financial reform is needed to make sure capital does not die again. Filled with in-depth insights and practical advice, The Death of Capital is not just a play-by-play of the recent financial crisis, but an original and passionate analysis of the trends that led to it and what can be done in a regulatory sense to address the problems.

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Acknowledgments.

Introduction: The 2008 Crisis – Tragedy or Farce?

Chapter One: The Death of Capital.

Chapter Two: Capital Ideas.

Chapter Three: Empty Promises.

Chapter Four: Financialization.

Chapter Five: From Innovators to Undertakers.

Chapter Six: Welcome to Jurassic Park.

Chapter Seven: The Road to Hell.

Chapter Eight: Finance After Armageddon.

Conclusion: “This Is Later”.

Notes.

Bibliography.

About the Author.

Index.

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Michael E. Lewitt is the President of Harch Capital Management, LLC and editor of the HCM Market Letter. He studied at Brown University, Yale University, and New York University School of Law. His writing has appeared in the New York Times, the New Republic, Trusts & Estates, and the Spanish newspaper El Mundo.

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April 19, 2010
The Death of Capital

The United States exited the first decade of the twenty-first century far weaker than it entered it. By the time the total damage from the credit crisis that began in 2007 is tallied, well more than one trillion dollars of capital will have been destroyed. Seasoned analyst Michael Lewitt believes that a large part of this problem is that the rules governing the financial industry at the turn of the millennium were, frankly, archaic compared to financial technology they were intended to police. He also believes another component was the complicity of Wall Street, lawmakers, and regulators who refused to apply the brakes before the train ran off the tracks.

In his new book The Death of Capital: How Creative Policy Can Restore Stability (Wiley, $27.95, 978-0470-46650-6, May 2010) Lewitt, President of Harch Capital Management, LLC looks at how, in recent years, the U.S. economy has increasingly been dominated by short-term speculation rather than productive investment, debt rather than equity, and short-term thinking rather than long-term planning. These disastrous trends, described here as "financialization," ignore the fact that capital is a highly unstable social process rather than a fixed, historical object or category. As a result of our failure to understand the true nature of capital, we have developed a financial and regulatory system that does exactly the opposite of what it should be doing—favoring obscurity over transparency and fomenting instability rather than a stable path to growth.

In explaining where we have gone wrong, Lewitt doesn’t hold back in criticizing some of the counterproductive forces that have led to the death of capital—including Wall Street practices such as private equity and derivatives trading—which he views both as economically unproductive and morally bankrupt. This timely guide:

  •  
    • Explores the most important aspects of capital and capitalism through the prism of four of the world's great economic thinkers.

                                                  -more-

  •  
    • Addresses "financialization" and its consequences, such as a weaker U.S. dollar, the decline of American industries, and the loss of American economic and political hegemony.

    • Examines how the legal system contributed to economic deterioration by privileging short-term profitability above other important societal interests such as labor, the environment, and social welfare.

    • Calls for politically controversial reforms such as stricter regulation of hedge funds and private equity firms, banning naked credit default swaps and off-balance sheet financing vehicles, imposition of a Tax on Speculation, and principles-based reforms to improve systemic stability.

And much more.                                                                                     

Filled with in-depth insights and practical advice, The Death of Capital is not just a play-by-play of the recent financial crisis, but also an original and passionate analysis of the trends that led to it and how the financial system can be reformed to avoid future crises.

 

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