In Trading Game, the author writes as he speaks, and the result is an expletive-laden account of life as a city trader. The book begins with the unlikely story of a child growing up in a struggling household, where a morning paper round meant that he was always late for school, and the lack of a safe space at home meant that homework was rarely done.
Early life and career
Expelled for dealing drugs, Stevenson’s talent for mathematics helped him find his way to study economics at the London School of Economics. There he would excel in his studies and cross paths with those from vastly more privileged backgrounds destined to be the next generation of those who inhabit the jungle of financial capitalism.
Competitions for a summer internship at the major banks were fierce. Citibank organised a competition for its candidates, and Stevenson, benefitting from a tip-off, progresses through all the early rounds only to seemingly fall at the last hurdle.
Shocked to learn that he had come out on top, he would later discover that his scores from the earlier rounds had given him an unassailable lead that secured his internship before the final. The organisers had even rigged the final round, dealing him an impossible hand to test how he would cope.
That summer, he started watching and learning about Short Term Interest Rate (STIR) trading, and the reader starts to understand how the banks really make money. After returning to finish his degree, he was offered a job at CITIBANK, which he started before the rest of the graduate intake. He was given a role in Foreign Exchange Swaps (FXSWAP).
Financial crisis opportunity
FXSWAP are transactions where a sum provided in one currency is secured by a sum in another. Each party pays their own interest, with the profit being the difference in the amount of interest paid.
With a typical spread (the difference between the bid and the asking price) of 67-69 the trade would yield a profit of 2 points. When the global economy faltered and banks failed, banks stopped lending to each other and FXSWAPs became the only way to borrow. The spreads became much wider, say 49-89, giving profit of 42 points. FXSWAP became very lucrative, for the banks and their traders (p.107-117).
Stevenson was the first in the office each morning, bringing coffee and sandwiches to senior traders, watching and listening – and he was quick to learn. A young man from a poor background, he was in no rush to spend or even share his first bonus, and that year he didn’t even buy Christmas presents for the family with whom he still lived.
Post-2008 disaster capitalism
After the 2008 crash, interest rates were at historic lows, and the assumption made by the traders was that interest rates would have to rise:
“By the beginning of 2011, it had started to become clear to me that the market was wrong. Not just the market, but the economists, the universities, the f****** monetary policy committee of the bank of England.” (p.229)
Stevenson joined the ranks of economists challenging current economic orthodoxy, notably Tim Jackson in Post Growth and Michael Hudson in The Destiny of Civilisation.
As a junior Euro Trader, Stevenson made a $700mn trade for the following year, betting that interest rates would fall, and against the expected recovery that every other economist was predicting.
Then, just off the coast of Japan, an earthquake struck, and Stevenson paused to reflect on the morality of a system where a disaster that killed 20,000 would yield a profit of $11mn as interest rates went down. Other traders lost millions. One catastrophe was followed by another as the Fukushima nuclear disaster hit Japan.
His bonus was calculated as 7% of the profit made from his trades. That year, he made a profit of $35mn, earning a bonus of $2.45mn. The following year the same strategy made $100mn, worth a bonus of $7mn.
Living in a newly purchased flat with little more than an old sofa as furniture, still wearing shoes with holes in and an old hoodie, everyone could see that he was not motivated by money. His colleagues never asked him how he made the huge profit; they just couldn’t understand why he wasn’t motivated by money. He found that he was sickened by the people around him, losing weight, having acid in his stomach, and depressed. He asked for a sabbatical and was transferred to Tokyo instead.
Revelation
It wasn’t until he was in Japan that a colleague, Arthur, asked him how he managed to make so much money. Here we come to perhaps the most important lesson in the book, as Stevenson explains the inequality argument to Arthur:
“The rich get the assets, the poor get the debt, and then the poor have to pay their whole salary to the rich every year just to live in a house. The rich use that money to buy the rest of the assets from the middle class, and the problem gets worse every year. The middle class disappears, spending power disappears permanently from the economy, the rich become much f****** richer and the poor, well, I guess they just die.” (p.321)
There are parallels here with how ‘the professor’ explains the money trick in The Ragged Trousered Philanthropist.
The book concludes with his battle to leave his job and retain the bonuses that were paid over a four-year period. The struggle took its toll, eventually leading to a breakdown, extended sick leave, threats of legal action, months of form-filling and applications thwarted, before finally and suddenly being set free with no explanation.
Today we can see the impact of ever-increasing inequality, but helped by books like this, a debate is finally forming around the detrimental impact of allowing a few to accumulate such extreme levels of wealth. Although this is far from a new revelation, as Michael Hudson pointed out:
“3,000 years ago, kingdoms in the Near East understood more about how to manage debt, money supply, and how to control the rich and powerful than governments do today.”
Comments? We want to hear them. Please write to editor@westenglandbylines.co.uk
Friends of Bylines Network
There has never been a greater need for grassroots journalism that investigates the stories that really matter, holds power to account and champions the voices of everyday citizens. We are proudly powered by volunteers but what we do isn’t free.
STAND WITH US for independent, citizen-led journalism that makes democracy stronger, and you will even get some exclusive benefits.
