expenditures

On the minus side, the book is not particularly well documented (in terms of, for example, the graphs and the sources of the data) and some chapters seem suspiciously like lecture notes, hastily adapted to a book format. Still, an enjoyable trip to the dark side of financial market.

When the interest rates went through the roof (from 5,25% to 8% = + 52%), the value of the collateral (the bonds) for his position fell (with a factor 3). He got a margin call, but couldn't pay it. The biggest part of the investment (held by FBCS) was liquidated with a phenomenal loss. Only Merrill Lynch didn't cover their position.

The author gives excellent explanations on some very specialized investments like reverse floaters and other high tech financial operations of which the value can only calculated by partial integrals.

Food for investment bankers.

From this book, we learn that Robert L. Citron was head of a large portfolio, had no oversight, and an inflated ego. His superiors and fellow investment participants (such as the county school district) knew full well what he was doing, but allowed him to continue unsupervised because of his past stellar performance- much of which was due to pure luck and favorable market conditions. We also learn that Citron, much like Nicholas Leeson, the orchestrator of the fall of Barings, was a financial neophyte. While on the one hand believing that he was fully invested in bonds, Citron had taken a heavily leveraged position in very exotic derivative securities, proving to Jorion's point that he really did not have a clue as to what he was doing.

We also learn that Citron (nor the people above him and his investment participants), who had no real background in finance, did not know the difference between market price and face value, nor did he know the difference between an option on an asset and the outright ownership of an asset. Based on one very bad bet on the movement of interest rates, Citron fully invested Orange County's finances in derivative securities that he did not understand at all, and compounded the problem by leveraging his position (basically using a little money to borrow a lot of money) to the extreme.

After reading this book, those of us who believe that our investments, from the retirement funds managed for us by fund advisors and our places of work to our bank accounts and our kids' education funds, are safe should have our heads examined. People such as Citron were not financial gurus, that is certain, but as the more recent derivative led failures at hedge fund Long Term Capital Management (which included the two Nobel laureates who literally wrote the book on derivative pricing on its stellar team of rocket scientists) and Bank of America demonstrate, no one is truly safe.

I know the author personally, from his time as the New York Times investigative journalist responsible for covering the US national and military intelligence programs, and I consider him one of the most balanced, thoughtful, and well-intentioned reporters in the intelligence field.

His book remains very, very important because the Pentagon is in the process of reconstituting the "Yellow Fruit" organization, with the same blank check black budget, and the same mind-sets that previously led to enormous ineffectiveness, waste, and some outright corruption and theft of government funds. Known as Gray Fox, this new incarnation of Yellow Fruit has Richard Secord, one of the leaders or the Iran-Contra scandal for which several top personalities were indicted and some convicted, as a primary player.

Tim Weiner's book is important, it is relevant, and it should be read by those responsible for the oversight of military intelligence budgets and capabilities--and by citizens who might wish to question their elected representatives on this important topic.

This would make an excellent resource for economics or business classes where the student would be asked to separate the wheat from the chaff. Fortunately, there is more of the former than the latter thereby earning it 4 stars rather than the 3 stars I'm inclined to rating it.

"The Transfer Society" is a slim but marvelous study on how much the government spends each year on enforcing the coercive transfer of money from one party to another. You may think that these forced transfers do not cost very much money -- and if one takes each transfer at a time, he may be right. But taken as a whole, multiplied by the government's long reaching tenacles, they estimate that the government spends $400B redistributing.

But if that was not enough, Laband and McClintock go on to demosntrate that this projected $400B is in reality an understatement; they cannot estimate the preemptive measures taken by individuals to protect their property from the government. For example, if the government used eminent domain to seize somebody's land, L&M's model would not account for the costs of one hiring a lawyer to protect himself from coercive government. Forced transfers, thus, waste a staggering amount of money that would be better used in productive activity.

This book is a timely economic complement to the moral argument against forced expropriation. The magnitude of the problem is exposed so convincingly that it should become a focus of attention for quite some time.

If Samuelson spoke with Chomsky:

Samuelson: I'm sick of hearing that there are ghettos; I'm tired of listening to people whine about how Washington is a function of corporate interests; stop crying about how the government has systematically squashed the interests of Labor. Things are not perfect and people should stop demanding a free lunch.

Chomsky: What about health care? Do you realize we are the richest Country in the World, yet we are one of the only progessive "Democratic" states that doesn't provide some basic level of care to all citizens.

Samuelson: If poor people want health care, than they should get jobs dammit! They are not entitled to a free lunch. No free lunch! No free lunch!...

Chomsky: Isn't it true that you support a system that created NAFTA, which basically raises domestic unemployemnt, lowers wages and, yes, destroyes the very jobs you are telling poor people to get?

Samuelson: I said the system works, it's not perfect. No free lunch! No free lunch!

Chomsky: The system is filled with structural injustice: it fixes the betting in favor of corporations and against working Americans . . . and the best you can say is that it's not perfect. By the way, do you own stock in companies that routinely fire hard working Americans in order to raise profit and boost your portfolio.

Samuelson: Um, well, um. You see, well. The system works dammit! No free lunch! No free lunch!

Conservatives will find the book biased, which it is since Krugman is pretty democratic. Although conservatives might be able to argue the political philosophy of progressive versus regressive taxes, they will find it very difficult to challenge the numbers that Krugman presents. The end conclusion is that Bush has used "fuzzy math" to propose a tax cut and that the money is just not there for such a huge cut. Krugman is right.

Even though the cuts have already come, this book is a great (and quick) read because it gives a clear explanation of social security, medicare, and other issues related to the national budget. Clear, concise, and easy to understand.

This book, "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt" is a good, if brief, overview of the fiscal history of the American government. It is somewhat misnamed, since the National Debt serves as a background and tie in to each period of fiscal history studied.

The author does a superb job of explaining Alexander Hamilton's establishment of our financial, banking, debt and money system. Here is a woefully under appreciated founder explained succinctly and whose brilliance and indispensability are brought forth by Gordon.

Descriptions of attitudes towards and major changes in financial policy and tools follow. Gordon covers the major aspects: the struggle over the Second National Bank, Jackson's paying off the debt (the only time the US Gov't has been debt free), Lincoln and Chase's tax, greenback and bond finance of the Civil War, the long fight to establish the income tax, the fight over high marginal rates and an efficient system of taxation, and the change in view in the last century from one that deficits and debt were something to be controlled to our current sorry state of view whereby no one worries about much about deficits anymore.

Debt, when properly used, has allowed us to primarily wage wars. It was retired in times of peace. We face an interesting time now, when debt as a percentage of GDP is much higher than it has been in most peacetimes. This raises the question that if we have to fight a truly massive and long war in the future, will we have the capacity to borrow what we need (based on historic statistics, it is a question well worth pondering).

Gordon finishes the book with a polemic against the political culture that has lost its way in terms of providing an efficient and fair and economically sound system of taxation and the willingness to moderate the nation's debt.

This is a good and interesting book. Anyone looking for a succinct telling of the development of our government's fiscal structure will appreciate this gem.

This is no longer the case. A tax cut, the war on terrorism, and a slowdown in the economy have combined to push the U.S. government's outlays above its revenues. They have also made this book -- "Hamilton's Blessing" -- relevant again.

Gordon's book is two things: 1) a basic history describing the twists and turns of U.S. fiscal policy over the last two hundred-plus years and 2) a political tract condemning the latest turn U.S. fiscal policy has taken since the Great Society.

By combining the two, Gordon seeks to show that the most recent practice of U.S. fiscal policy -- that of habitually running deficits in peacetime -- is not only unprecedented in U.S. history, but also, more importantly, unsupported by any sound theory of economics.

"Hamilton's Blessing" is well-written and interesting. The book is only slightly marred by a lack of detail in some areas. How exactly does a large public debt hurt your average citizen and by how much? We never find out.

Gordon also should have kept his own political bent out of the book. Among other things, he spends three pages in a less than 200-page book detailing Jack Kemp's personal and political history, including his football career. All very interesting, but not really relevant to the history of the U.S. debt.