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"I would sleep better if I knew that Bernanke, Geithner, Bachus, Sen. Tim Johnson, Obama and Romney all kept dog-eared copies of Kevin Mellyn's Broken Markets on their nightstands. . . . Mellyn's work is a fascinating, important, and eminently good read and should inform the debate on overhauling the U.S. and global financial regulatory systems and sustainable macro fiscal and monetary policy."

--Eric Grover, in his review of Broken Markets in The American Banker

Broken Markets allows the intelligent non-specialist to understand and navigate the ongoing worldwide aftermath of the 2008 financial market meltdown. The key theme of the book is how the leading financial institutions and the political leadership of the U.S. and European Union have failed us and set the stage for continued market turmoil. It explains what this means for investors, borrowers, society in general, and the financial-services industry. Former banker Kevin Mellyn focuses on providing readers with clear and simple explanations of the forces at work and the potential consequences for their future prosperity.

As this book makes clear, what’s coming is a world in which high structural unemployment and flat or declining real income is likely—not to mention a diminished retirement financial safety net. The book therefore provides actionable information for protecting wealth and making prudent investment decisions in an economy that is nothing like the one that has sustained us for decades.

As a forward-looking narrative about rapidly changing events and volatile markets and politics, Broken Markets will provide no single prediction about the future but rather describe alternative scenarios and provide the reader with signposts to watch out for in deciding which reality is actually unfolding. Unlike most books written by journalists on global finance, the scenarios and signposts described will be largely based on the lessons of financial and political history rather than breaking news. This book:

Tells you in plain language how today’s financial system threatens your livelihood and wealth Tells you why and how governments worldwide, with some notable exceptions, are taking actions likely to make things worse instead of better Explains how the leading financial institutions lost their way during the bubble years and how they can find the path back to prosperity and value to society Tells you what life will be like in a “post-finance” economy and how you can protect your wealth



Chapter 1. The Rise and Fall of the Finance-Driven Economy

Where We Are Today
“Occupy Wall Street” does not quite seem credible as a revolution that can overthrow capitalism, at least not yet. However, the finance-driven economy that transformed America and the world between the early 1980s and the financial market meltdown appears irretrievably broken. The critical question for our economic and political future is whether or not the broken financial markets of today can be mended, by themselves or by the politicians. If they cannot be, we are likely to see a “world without finance” in our future with profound consequences for workers, savers, investors, and employers … in a word, all of us.
Kevin Mellyn

Chapter 2. Banking, Regulation, and Financial Crises

What Went Wrong with Banking and Why
As human beings, we tend to understand the world around us through stories, or, to use a more formal term, narratives. Without these simplifying devices, it is very difficult to make sense out of the random events that constitute reality. Controlling the narrative is a key objective of political life because public opinion is formed at this basic level. What happened to the global financial system in the 1930s was highly complex and shaped by many random events, but the dominant narrative that emerged was extremely easy to grasp. Selfish “economic royalists,” to use Franklin Roosevelt’s phrase, had been allowed to have their way at the expense of the little guy.
Kevin Mellyn

Chapter 3. The Economic Consequences of Financial Regulation

Main Street Caught in the Crossfire
The dividing line between Main Street and Wall Street is nonsense in an economy that has become so heavily finance driven as that of the United States. It feels good to punish the banks, but it always involves punishing ourselves. Accountability for individual bankers is a horse of a different color, and it remains sorely lacking, to be sure. Cutting finance down to size begs the question of what will replace it as a driver of employment and economic growth.
Kevin Mellyn

Chapter 4. Life After Finance

Living Within One’s Means
What will economic life be like for average Americans, or Europeans for that matter, after the policies and regulations discussed in the last chapter take hold? We are going back to the future, to a world where elected and unelected officials, not bankers, are in the economic driver’s seat. We do not face Armageddon, but we do face a world of less growth, less opportunity, and less freedom in economic matters. That would not necessarily be a bad tradeoff for economic security and stability. The odds are, however, that we won’t get that either.
Kevin Mellyn

Chapter 5. Global Whirlwinds

Why We Are All in This Together
In the previous chapter, I noted that it was both natural and mistaken to look upon the finances of a country as if it were a household. It is equally misleading to think that a country’s finances can be viewed in isolation from those of all other countries it trades with and in which it invests money or raises capital. Yet that is precisely what the political class and the general public naturally do.
Kevin Mellyn

Chapter 6. The Consumer in the World After Finance

Living Within Our Means
The notion of defining human beings as consumers is very American and very recent. For all of history up to the 20th century, men and women were primarily defined as producers. We see this in surnames such as Taylor, Weaver, and Smith. Before production and daily life became divorced by industrial organization and urban life, only a small elite of landholders and officers of church and state were in any sense consumers of anything but the staples of life. Most people worked to survive and little else, and generation after generation lived the same way their forebears did.
Kevin Mellyn

Chapter 7. Reconstructing Finance

Relearning and Living the Basics
Today the financial services industry in the rich world—sometimes just called “the banks”-finds itself, as Shakespeare put it, “in disgrace with fortune and men’s eyes.” What is remarkable is the degree to which “bankers” as a group just don’t understand their disgrace and its consequences. Nor do the leaders of the industry fully comprehend the fact that they accumulated outlandish riches not through any talent or industry on their part (though many displayed both in high degree), but through pure grace. John Brooks, who wrote beautifully about such things in the New Yorker 50 years ago, titled his book on the golden age of Wall Street Once in Golconda (Harper & Row, 1969), after a fabled city in India so wealthy that a man only had to go in one gate to pass out the other side rich. Such was Wall Street in the days of Harding and Coolidge. If you left Yale or Williams and joined a Wall Street firm, it was hard not to become extremely well heeled in the decade before the Crash of 1929. If you look at the physical reality of New York City and its suburbs, the wealth generated in that decade still lives in hundreds of prewar luxury apartment buildings and thousands of faux-Tudor mansions, a pattern repeated in large cities across the country where big killings in the market were turned into big real estate. If you went to the Street with the same pedigree in 1934 or after, you might do all right. But the gate to Golconda was shut. Luxury buildings and big houses largely ceased to be built around the financial centers.
Kevin Mellyn


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