Pirates of Manhattan by Barry James Dyke

Pirates of Manhattan by Barry James DykeThe modern finance industry, what Dyke calls “The Casino Age,” is focused on rapid wealth using risky investment vehicles and screwing the little guy. Banks have been fined millions of dollars over the years in penalties for fraud and unethical activities, but the fines pale in comparison to the profits they earned by those actions, and almost nobody ever goes to prison, and so the abuses continue. Banks and other financial corporations have lobbied successfully to centralize most regulations at the federal level–laws that ultimately protect their rapacious, economically destructive activity and protect them from the losses that arise from speculative investments made with other people’s money.

Next is a sort of odd section that seems to contradict his professed commitment to free market principles and lack of government intrusion. Dyke spends a lot of time describing the deregulation spree of the 80s and 90s, arguing that the Gramm-Leach-Bliley Act of 1999 (which Dyke claims repealed the Glass-Steagall Act of 1933) allowed the banks to increase their risky speculation and caused the market crashes that followed. But as author and investor Peter Schiff has argued in his own book, The Real Crash, this was not a full repeal; all it did was remove bank restrictions that the market otherwise would have put in place but kept the implicit promise of government bailout, so it only incentivized the banks to speculate. Schiff writes: “The market used to regulate banks; Glass-Steagall [1933] killed the market regulation and replaced it with government regulation; Gramm-Leach-Bliley [1999] killed the government regulation but didn’t replace it with anything.” So while Dyke is right that the banks’ behavior was illegal and unethical, by blaming “deregulation” he doesn’t go far enough. Regulations that skewed the banks’ incentives to speculate irresponsibly were the real culprit.

The next section is well summarized by the chapter title: “Never Met A Man Who Made His Millions In Mutual Funds.” Dyke explains why mutual funds are terrible investment vehicles for the layman; they tend to make money for the fund managers and stock brokers, not for the consumers providing the capital and taking on the risk. The modern mainstream financial world–from mutual funds to retirement planning–is a hoax, filled with advice that the biggest and most profitable banks decline to follow themselves. Which leads Dyke into surprising territory.

You probably wouldn’t expect him to go here, but the next section is an incredibly detailed look at permanent (“whole life”) insurance. Although this type of insurance has been around for over 200 years, and indeed was the most common type of policy held by American households prior to the mid-twentieth century, it is denigrated and sneered at by mainstream financial advisers. Dyke argues that “Buy term and invest the difference” is one of the most wealth-destructive lies ever told in investment history. As it turns out, banks and corporations have literally stashed hundreds of billions of dollars in high-cash-value permanent life insurance policies. It makes up significant portion of many banks’ Tier-1 capital, the safest and most secure of any financial institution’s assets. But the benefits and advantages of this type of vehicle are even greater for the average consumer, if you know how to leverage it. Whole life insurance provides liquidity, preferential tax treatment, guaranteed growth, creditor protection, retirement funds, a simple and tax-free way to pass on an inheritance, and a source for financing a lifetime’s worth of expenses. This section is the gold mine of the book, for those with eyes to see. It’s a paradigm shift, but one that pays incredible dividends (pun intended).

The book is self-published and in desperate (at times embarrassing) need of an editor, and the author has an annoying habit of referring to himself in the third person. But those quirks aside, this book is a fantastic resource for anyone looking for a straightforward description of the havoc wreaked by modern “crapitalism” (government + corporations; not Dyke’s term), and the common sense solution out of the malaise presented by whole life insurance. I highly recommend it.

The Pirates of Manhattan Purchase Links: Paperback

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