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Share Buybacks and the Contradictions of “Shareholder Capitalism”

In the jargon of finance, America is suffering from a capital allocation problem. The country seems incapable of making the necessary investments to fuel future productivity and growth, or to ensure widespread prosperity. At the government level, public spending on basic research and development as well as infrastructure investment has declined significantly over the past…

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Principles for Dummies

On the first page of his best-selling memoir, Ray Dalio unburdens himself of the opinion that he is “a dumb shit.” Nothing in the ensuing six hundred or so pages convinced me that I should dissent from this verdict. I can say honestly, in keeping with the book’s own serial inducements to “radical transparency,” that my endorsement of Dalio’s conclusion about his own intelligence was arrived at without prejudice…

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The Past and Future of Political Economy

In this remarkable work, Robert Skidelsky—historian, biographer, and tribune of Keynesian ideas in the House of Lords—unites his experience, knowledge, and talents in a sweeping account of money and power. His topic is not money and power…

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Hamilton’s Revolutionary Financial System

At George Washington’s invitation, Hamilton eagerly accepted office as the nation’s first treasury secretary. Though only 34 years old, he had long considered the severe economic and financial problems facing the country…

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The Rise of the Financial Economy

Remember auction rate securities? For decades, financial institutions hosted “auctions” of these fixed-rate instruments for buyers and sellers. They were considered so safe, and the auctions (where the interest rate would be “reset” depending on the level of interest in the securities, among other factors) so routine, that auction rate securities became an alternative to money…

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A Proper Accounting of Glass-Steagall

Over the past two decades in the United States and Europe, elite decision-making has hit an extended rough patch. Fairly or not, a lot of important public policy decisions have turned out horribly for the best and brightest. Whether that involved running a stratospherically levered financial institution hurtling into the financial crisis; or the government…

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Private Equity: Overvalued and Overrated?

America is in the grips of a speculative frenzy. Investment bankers, private investment firms, and even a few dozen recently graduated MBAs labelling themselves “searchers” are calling, emailing, wining, and dining small business owners. Their goal is to translate prosaic small businesses into the poetry of private equity. The great postcrisis private equity gold rush…

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Capitalism without Capitalists

Western capitalism is in bad shape. A decade has passed since banks and financial houses began to crumble and took Western economies to the brink of collapse, but economic growth on both sides of the Atlantic remains weak. It is still determined more by governments and central banks than the animal spirits of entrepreneurial capitalism.…

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The Bankruptcy of Modern Finance Theory

Outcomes are easy to measure in financial markets: you either beat the index or you don’t. And the results could not be clearer about how few people possess any real skill. A recent study found that 70 percent of actively managed funds have failed to beat their benchmark index and just 2.3 percent have delivered excess…

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