Doomsday Debt Machine Roars as Wizard Das Chides Buffett: Books

The cover jacket of "Extreme Money: Masters of the Universe and the Cult of Risk," by Satyajit Das. Source: Newman Communications via Bloomberg

If you’re feeling suicidal, steer clear of Satyajit Das.

His new book, “Extreme Money,” will leave you Googling national debt clocks, clicking on home-foreclosure maps and wondering if your retirement plan is a fata morgana.

Das is a derivatives specialist who wrote the acerbic expose “Traders, Guns & Money.” An insider with an outsider’s eye, he has spent more than three decades in the markets, including stints at Merrill Lynch & Co. and Citigroup Inc.

Now he has concocted an idiosyncratic yet withering analysis of how 30 years of financial alchemy and excessive credit have plunged us into what feels like a slow-motion depression. (Surely something more than a “recession” is afoot when 46.2 million Americans sink below the poverty line.)

When Das calls money “extreme,” he means that it has broken loose from its traditional role. Money is no longer just a store of value and a medium of exchange -- a claim on real things in the real economy. It has instead become a room lined with mirrors reflecting “the image of the world that money can make possible.” Like the Mirror of Erised in Harry Potter’s world of wizards, it shows only what we desire.

“Extreme money was money made endless, capable of infinite multiplication, completely unreal,” Das writes. “It changed everything -- individual life, business, even countries.”

Financial Fundamentalism

Das addresses, one by one, the overarching themes of the great credit boom and bust of the late 20th century -- from the collapse of the Bretton Woods currency system to the rise of financial fundamentalism, with its dogmatic belief in the efficient-market hypothesis. It all adds up to what he calls a “doomsday debt machine.”

His quirky style is an acquired taste, and the material he presents, though voluminous, is -- dare I say it? -- derivative. A refracted almanac of facts and statistics, the text dispenses with traditional chronology, sometimes presents opinions as fact, and is marbled with quotations from the likes of Will Rogers and John Maynard Keynes. On one page, German sociologist Max Weber rubs shoulders with Sigmund Freud and Lewis Carroll.

Yet the cumulative effect is powerful, making this omnium-gatherum a book to be studied, ideally in short bursts rather than in one go. His grasp of minutiae is strong, his summations concise: Belgium, my adopted home, is described in passing as a land “where the two main ethnic groups shared little more than a king and a large amount of public debt.” Too right.

Russian Roulette

Black humor is Das’s natural medium, and he gave me a rueful chuckle every few pages. One table lists his unofficial definitions of debt ratings: Triple C, he says, connotes “Russian roulette with five bullets in the chamber.”

You know that a writer is hard to pigeonhole when the advance praise compares him to both Candide and Hunter S. Thompson. I prefer to view Das as a modern-day Ishmael with an attitude, a weathered seaman who has witnessed firsthand the crazed hunt of hedge-fund captains for alpha, the great whale of superior investment returns.

Few heroes appear in these pages, only rogues, charlatans and suckers of all shapes and sizes. John Paulson’s legendary bet against the U.S. housing bubble is dismissed as a “parasitical” feeding on human misery. Alan Greenspan is fingered for championing adjustable-rate mortgages and worse. Even Warren Buffett comes under scrutiny.

Jets and Sokol

Das praises Buffett’s thriftiness and foresight about the intoxicating effects of “effortless money.” He also faults the Sage of Omaha for activities at odds with his image, including his use of private jets and his initial defense of David Sokol, the Berkshire Hathaway Inc. executive who bought some $10 million in Lubrizol Corp. shares shortly before recommending, successfully, that Berkshire buy the company.

No one in this book is without sin, including the author, it seems. In the epilogue, Das describes how he helped one bank tweak its valuation models during the crisis, allowing it to “increase the margin calls and the cash the other side must pay up. In finance, flexibility and split personalities are important.”

Though I put down this book with a jumble of admiration, exhaustion and depression, I could only endorse the conclusion. “There is no simple, painless solution” to the fix we’re in, Das writes. “The world has to reduce debt, shrink the financial part of the economy, and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less.”

It all comes down to common sense, which is uncommonly rare these days.

“Extreme Money: Masters of the Universe and the Cult of Risk” is published by FT Press (459 pages, $29.99, 20 pounds). To buy this book in North America, click here.

(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE