When the Money Runs Out: The End of Western Affluence

by Stephen D. King

Overview

An eminent economist warns that Western nations’ economic expectations for the future are way out of sync with the realities of economic stagnation and stringent steps will be required to avoid massive political and economic upheaval.
 
“It is alarmingly difficult to disagree with Stephen King. All one can say, perhaps, is that one of the great errors of human nature—strongly displayed before the credit crunch—is the belief that a prevailing trend will continue indefinitely. The crunch is surely a reminder that what goes up must come down.”—Charles Moore, Daily Telegraph
 
“[King] is dabbling in the financial equivalent of the horror genre. Perhaps even scarier, his is the stuff of nonfiction.”—Michael J. Casey, Wall Street Journal

Product Details

ISBN-13:	9780300240085
Publisher:	Yale University Press
Publication date:	04/24/2018
Sold by:	Barnes & Noble
Format:	eBook
Pages:	304
File size:	591 KB

About the Author

Stephen D. King is group chief economist and global head of economics and asset allocation research at HSBC. He lives in London.

Table of Contents

Preface to the updated edition ix

Acknowledgements xiii

Introduction: Whatever Happened to the Decades of Plenty? 1

1 Taking Progress for Granted 11

2 The Pain of Stagnation 39

3 Fixing a Broken Economy 57

4 Stimulus Junkies 71

5 The Limits to Stimulus: Lessons from History 99

6 Loss of Trust, Loss of Growth 123

7 Three Schisms 153

8 From Economic Disappointment to Political Instability 181

9 Dystopia 209

10 Avoiding Dystopia 233

Notes 263

Bibliography 273

Index 279

Editorial Reviews

HSBC economist King (Losing Control) argues that the West is doomed to suffer extended recessions, rising unemployment, and declining standards of living, with no end in sight. A fan of clunky metaphors—“the economic goose kept laying golden eggs,” he says, has become “menopausal”—King suggests that excessive lending has led to the rise of risky investments, causing debtor countries to default and creditor countries’ assets to vanish. According to King, in the end the entire international financial infrastructure is an illusion “involving a heavy dose of wish-fulfillment.” King’s forays through economic history mix long, highly technical passages with entertaining vignettes from U.S. lunar missions, the Israeli-Palestinian conflict, and Mary Poppins, but the conclusion is the same: we’re broke. King dismisses the economic lessons of past depressions as obsolete, based as they were on radically different fundamentals, but warns that the accompanying social ills are inevitably reappearing. His brief section on policy recommendations provides a set of disappointingly vague proposals for restoring trust and accountability in the Eurozone, which, relatively anodyne though they may be, are “near enough impossible” to implement in the current political climate. (June)

Publishers Weekly

“When the Money Runs Out sets out well the problems facing advanced economies.” —David Smith, The Sunday Times

The Sunday Times - David Smith

"A 'powerful' and 'convincing' book. Overall, as Charles Moore notes in The Daily Telegraph, 'it’s alarmingly difficult to disagree' with this book."—Matthew Partridge, Money Week.

Money Week - Matthew Partridge

"Well-written, thoughtful and highly convincing. . . . [King's] clear-eyed assessment of the problems ahead makes the book essential reading."—The Economist

The Economist

“In this book, HSBC’s chief economist describes a real-life economic horror story, picking over the bones of the global financial crisis with the professional detachment of a forensic scientist examining the scene of a crime. The conclusions are clear and compelling. By the end, we know whodunit, how it was done and why, without resort to economic jargon – there are few acronyms, no equations and no charts. Instead we are offered policy prescriptions that ring true – uncomfortably so . . . The book should appeal to a wider audience than economists. The author is a newspaper columnist as well as a professional economist, and it shows in the crisp and easy style of his prose. I recommend it heartily.”—Erik Britton, Management Today

Management Today - Erik Britton

"For many, the financial crisis is a temporary interruption in the rise of western prosperity that is due to easily remedied policy mistakes. The Keynesians believe this, as do anti-Keynesians on the free-market right. King argues, instead, that the future is not what it used to be. We have made promises to ourselves we cannot afford to keep. The argument is important, even if, like me, you are not persuaded." —Martin Wolf, Financial Times.

Financial Times - Martin Wolf

“[King] is dabbling in the financial equivalent of the horror genre. Perhaps even scarier, his is the stuff of nonfiction.”—Michael J. Casey, The Wall Street Journal

The Wall Street Journal - Michael J. Casey

"The book is jammed full of history [...] and is highly readable - being rich in the economic history that he argues was lacking in pre-crisis economic analysis. It is accompanied by some wonderful anecdotes and provides a good mix of economics and politics in addition to its historical detail."—George Buckley, Financial World

Financial World - George Buckley

“Stephen King, chief economist at HSBC, has just published an interesting and well-written book When the Money Runs Out.”—Paul Ormerod, City AM

City am - Paul Ormerod

“A welcome reminder of the role [literature] has played in our lives, and of its indubitable destiny to continue to do so.” —Jon Morris, PopMatters

PopMatters - Jon Morris

HSBC chief economist King (Losing Control) presents a concise description of the West's current economic problems with warnings and suggestions for the future. While he asserts "when the money runs out" is "a turn of phrase, not the literal truth," he analyzes what may happen if the economy doesn't recover. He contends that the expected economic cycle is not the present problem but rather that there is a lack of trust and a deterioration in structural economic performance. He claims the current economic stagnation will predominate if people continue to have entitlement expectations governments may no longer be able to meet. As the gap between expectations and reality widens, the future dims. Though the emphasis is on the United States and the UK, King looks for similar scenarios not only in the West but worldwide, and examines the effectiveness of tried solutions. The author has tightly reasoned arguments regarding the unworkability of past solutions and suggestions for the steps that should be taken to ensure economic stability for future generations even to the extent of mandated austerity. VERDICT For those seeking answers for rebuilding the economy and who believe the current economic approach is the wrong one.—Bonnie Tollefson, Cleveland Bradley Cty. P.L., TN

Library Journal

A high-ranking economist employed by a major international bank expresses pessimism about the future of the economy in the United States and other traditionally powerful nations. King issued many of the same warnings in Losing Control: The Emerging Threats to Western Prosperity (2010). Here, the author updates and expands his argument based on his vantage point in London, where he is group chief economist and global head of economics and asset allocation research at the HSBC banking conglomerate. King does not blindly defend gigantic banks when discussing the recent world financial crisis, but he does suggest that there is plenty of blame to distribute among smaller banks and nonbanking institutions. He believes central banks must act as a regulator of individual banks, forcing policies favoring long-term stability over short-term profit. But a conundrum exists, he writes, since national banks cannot effectively regulate international banking practices. As a result, King calls for regulation that crosses national boundaries but is vague about how that might actually work. Banking consumers might have to pay some of the costs through fees on checking accounts and ATM use. The author moves beyond banks to examine how the increasing financial clout of nations such as China will lessen the power of the Western nations and quite likely lead to further economic chaos. Policymakers in Western nations, whether they believe in austerity as the solution to the global economic mess or in larger government stimulus programs, are failing to grasp the enormity of the overhaul needed. King worries about an "optimism bias" emanating from both the austerity and stimulus camps, which would prevent sweeping reform. A well-written book, mostly free of jargon, that is short on practical solutions and thus, profoundly pessimistic.

Kirkus Reviews