The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis

Interesting book. 

The next financial crisis could be very different! 

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis

Interesting book. 

The next financial crisis could be very different! 

Published into 2021, I wonder if there any major changes in the four years since it was written? 

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis

Interesting book. 

The next financial crisis could be very different! 

Published into 2021, I wonder if there any major changes in the four years since it was written? 

we are closer to what they write in the end chapters...

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis

Interesting book. 

The next financial crisis could be very different! 

Published into 2021, I wonder if there any major changes in the four years since it was written? 

we are closer to what they write in the end chapters...

Downloaded to my Kindle, that's the weekend's read sorted out. Cheers! 

great exactly what I hoped for someone reading it for me and giving me the summary, thank you enjoy your weekend! Work hard and give us a report! (yes I have the book also, but I am lazy)

Collector: What in particular gives you cause to believe that collateralization and central clearing are not adequate mitigants?

great exactly what I hoped for someone reading it for me and giving me the summary, thank you enjoy your weekend! Work hard and give us a report! (yes I have the book also, but I am lazy)

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I see what you did there, I'll send you my rate card..... 

I gave the book and some reviews a quick perusal. What is reported in table of contents and reviews sound like old ideas being recycled. The oldest of which would be worries about the incentive effects of limited liability and leverage, something Adam Smith identified centuries ago. Financial leverage has been increasing with more than just the carry traders. The overall equity base of the US has been in a secular decline for decades what with management take-outs, stock buybacks and substituted leverage. Add central banks printing money at dizzy paces. Individual leverage varies according to circumstances, but individuals too are highly levered. Leverage up everywhere, it’s not just the carry traders. Which is a legitimate concern, all other things equal. Leverage works in the small but maybe not the large. But that was true before this book and this book will not change anything in that regard.

More recent but still decidedly old thinking seen in the book is the suggestion that the Japanese zombie firm phenomenon (courtesy of loose central bank policy) has moved across the pond and forward in time. Not a new idea either.

I find weird the suggestion that market systems are shakier when they deal in distressed assets. If price discovery is ever needed, it is needed there. I’ll go out on a limb and opine that market mechanisms generally prove less expensive in resolving messes than the courts.

Where things start to sound pretty wodgy with the book are suggestions that leveraged carry trading suppresses volatility. And economic growth. And how the activity is at its peak just when things look rosy but are about to get bad. That last bit is about as informative as saying that a person is law abiding until they are not. Tautologically true but not of any practical use.

Someone with an electronic copy of the book should search it to see if the other side of the equation is discussed.  I am referring to the significant and empirically successful market-based mitigations of collateralization and central clearing that arose from the smoke of the 2008+ experience. US bank failures are significantly down since 2008 from long-term trend. Something has been working as intended. IF the major mitigations are missing (note the qualification), the book is already dated and playing with something of a short deck, presenting an incomplete picture to perhaps frame an agenda, probably book sales. I note the book is a 2019 effort and the price has been slashed in half of late. 

Of course the equity market is a mystery today. The leader of the free world elected a deranged, depraved, convicted, and amoral criminal who now has his dirty hands on all kinds of things he doesn't understand.  What could possibly go wrong?