How to Win at Rotisserie Baseball author Les Leopold’s book on Fantasy Finance

I’ve mentioned my friend Les Leopold’s book, The Looting of America, here before. But a review at, does a better job than I can recommending the book and explaining what it has to do with fantasy baseball. I copy the whole thing here because the website doesn’t seem to offer permalinks to individual pages. Forgive me:

Can a Book on Derivatives Be Delightful?

Les Leopold, The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity. Chelsea Green Publishing, 2009. 220 pp.

Great teachers love metaphors. To help learners grasp the unfamiliar, great teachers — like Les Leopold, the founder of the respected Labor Institute in New York — latch on to realities students already understand. Leopold has been using metaphors, for decades, to help working men and women understand how our economy really works.

But two years ago, amid the gathering Wall Street storms, Leopold suddenly realized that, as a teacher, he really didn’t understand the high-finance “innovations” just then beginning to crash into the headlines, the CDOs and the swaps, the tranches and the quants.

So Leopold set about to educate himself on Wall Street’s innards, and now he’s sharing what he has learned — in an energizing and remarkably entertaining new book,The Looting of America.

The book’s core, perhaps not surprisingly, revolves around a delightfully insightful metaphor. If you really want to comprehend how Wall Street has melted down our economy, Leopold suggests, give a look to fantasy baseball.

In fantasy baseball, groups of baseball fans create their own “teams” and stock them with players they pick from lists of real-life baseball players. If the players you pick for your fantasy team do well on the real-life baseball diamond — if they hit lots of homers, for instance — your fantasy team will do well.

Your fantasy team, in effect, “derives” value from real baseball. You have no actual relationship to this real baseball. But you can still make money, playing fantasy baseball, if the real-life players you pick for your fantasy team put up better numbers than the players your fantasy league competitors pick.

“In effect,” explains Leopold, “you are speculating on the stats derived from real major league players, but those players don’t know they’re playing on your team.”

This same sort of speculation, over recent years, has been driving Wall Street. We have “fantasy finance.” Bankers and traders have created a sticky global web of “derivatives” — collateralized debt obligations, credit default swaps, and more — that bear the same relationship to the “real” economy as fantasy baseball bears to real balls and strikes.

In the “old” days, bankers and traders bought and sold claims to real things. Owning a stock entitled you to a stake in a real enterprise. Holding a mortgage gave you a claim to an actual home. In fantasy finance, bankers and traders don’t have to hold a claim on anything real. They buy and sell financial products that only “derive” their value from real economic activity.

Bankers, for instance, can sell you a “derivative” that will rise in value if the price of oil goes up. They don’t have to own any oil to sell you this derivative. They can create derivatives based on anything.

But the fantasy baseball metaphor, Leopold notes, only takes us so far. Fantasy baseball players don’t claim they’re “improving” baseball. And they can’t cause any great damage either. If baseball players go out on strike, fantasy baseball leagues simply grind to a halt. No big deal.

Fantasy finance, by contrast, involves trillions of dollars. And the players of fantasy finance have spent decades insisting that these trillions help our economy by “spreading economic risk.” In fact, their derivatives ended up concentrating risk — and wrecking the economy.

At the root of all this fantasy: the concentration of America’s income and wealth that began in the 1970s. With so much money in so few pockets, our real economy couldn’t offer enough lucrative opportunities for the investor class. Wealthy investors would find those opportunities in fantasy finance.

The Looting of America traces how all this unfolded with clarity, wit, and patience. And hope. The bank bailouts and partial federal takeovers we’ve so far seen, Leopold points out, do help clarify the “fateful choices” we now face.

“We can hold onto and supervise the semi-socialized financial sector,” he notes, “or we can return the entire banking system to private investors. We can enact policies that allow workers’ real wages to rise. Or we can keep the wealth flowing upward to the super rich. We can put limits on financial engineering, or we can wait and see what the next orgy of fantasy finance does to our economy.”

Crucial choices. Thanks to Les Leopold, many more of us will understand them.

–The Council on Public and International Affairs