Casino Capitalism

The party is over

Casino Capitalism, the English-language version of Hans-Werner Sinn’s German best-seller Kasino Kapitalismus, will be released this month by Oxford University Press. Revised and updated, the book examines the causes of the banking crisis, points out the flaws in the economic rescue packages, and presents a master plan for the reform of financial markets.

Mr Sinn argues that the crisis occurred because limited liability induced both Wall Street and Main Street to gamble with real estate properties. He describes meticulously the process of lending to American homeowners, and provides a critique of the securitisation process, the selling of mortgages, and the poor job rating agencies did in providing transparency. Ultimately, he asserts, the American Dream ended once it became clear that it was built on dubious loans.

Mr Sinn also asserts that the banking crisis has not yet been resolved. The discrepancy between actual write-offs of toxic debts and those estimated by the IMF suggests that substantial parts of the world debt have yet to be revealed. The banking systems of many countries, he warns, remain on the brink of insolvency.

In view of this, he directs sharp criticism at the various rescue packages, arguing that the plans assume banks have a liquidity problem while, in fact, they suffer from a solvency crisis. Mr Sinn identifies the inevitable conflict between the goals of rescuing banks in the short term, and inducing more prudent behaviour in the longer term, and supports governments helping banks (but not their shareholders) by becoming temporary co-owners.

In addition, he calls for higher equity requirements, a worldwide return to more cautious accounting methods, and a ban on extremely speculative short selling, as well as strict regulations on conduits, hedge funds, and credit default swaps.

Jean-Claude Trichet, President of the European Central Bank, rates this as “one of the best books” he has seen on the financial crisis, while Nobel Laureate Robert Solow says that by seeing events in the US from abroad, Mr Sinn gains “a perspective worthy of Jonathan Swift”.

Exclusive 20% discount

CESifo Newsletter readers will receive a 20% discount for this book

http://ukcatalogue.oup.com/product/9780199588275.do
Now: £16.00 (normally £20.00)

You can claim the discount by visiting the OUP website, adding a book to the shopping basket, and entering the code AAFLY8 in the promotional code box in the shopping basket.

For further information on this offer, please contact michael.burt@oup.com