The Two Trillion Dollar Meldown

The Reasons Why: Our current state of affairs per Charles R. Morris

In the book, “The Two Trillion Dollar Meltdown: Easy Money, High Rollers And The Great Credit Crash,” author Charles R. Morris, gives his account of what he believes are the reasons for our current state of economic affairs, his arguments are many and his belief is that a combination of events is what has lead to our current dilemma. He informs the reader of the current credit crisis by discussing the instruments that were involved in making decisions, how those particular instruments work, and the abuse of those instruments. He begins his book by discussing the 2000’s credit bubble, the “long cycle of liberal government-centric policy-making” (1) that eventually led to the Great inflation of the 70’s. He also discusses the attempts of price controls, and the success of Paul Volcker in “arresting the collapse” (2). He then follows that with the “watershed” (3) presidential election of the 80’s that brought with it the concept of the free market “Chicago School” ideology, and how this brought financial deregulation, and a cutting back of the centralized government in the domestic market. He continues on to discuss three critical developments that combined to create the credit bubble, those being (1) the birth of “structured finance”, (2) the great expansion of derivative markets, and the mathematization of trading. (4) He then begins to get into the value of the dollar and how it is beginning to lose it value internationally. He also notes that because of the “debasement” of the U.S. dollar we are more susceptible to other wealthy nations, who have the financial ability to buy up U.S. stock, giving them a controlling interest, such is the case with Sovereign Wealth Funds. This in turn causes a backlash on the U.S., with them having to, as Morris states, “sell off the family jewels to pay interest on our past excesses.” (5) As he begins to conclude his thoughts he touches on the actual...