Best Of Book Bits 2022: Part II

Here’s the second installment to Best of Books 2022. Last week we reviewed highlights from this column over the past year. With just hours to go before 2022 goes dark, here’s the second batch of books that captured our attention over the preceding 12 months. Cheers!

The Price of Time: The Real Story of Interest
Edward Chancellor
Review via The Economist
The critics who label as artificial the low interest rates that have prevailed in the world economy in recent decades must therefore answer the question: low relative to what?
“The Price of Time” is the answer of Edward Chancellor, a historian and financier who has written a book by that name. Humans prefer jam today to jam tomorrow. Interest rates are the reward for deferring gratification, for renting out money that could have been spent today. When rates fall too low, grave consequences follow: financial instability, higher inequality and pain for savers. As he makes his case, Mr Chancellor’s panoptic survey of the history of interest, and what classical economists said about it, will not fail to dazzle. The argument, however, is seriously flawed.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
Christopher Leonard
Excerpt via Politico
Between 2008 and 2014, the Federal Reserve printed more than $3.5 trillion in new bills. To put that in perspective, it’s roughly triple the amount of money that the Fed created in its first 95 years of existence. Three centuries’ worth of growth in the money supply was crammed into a few short years. The money poured through the veins of the financial system and stoked demand for assets like stocks, corporate debt and commercial real estate bonds, driving up prices across markets. Hoenig was the one Fed leader who voted consistently against this course of action, starting in 2010. In doing so, he pitted himself against the Fed’s powerful chair at the time, Ben Bernanke, who was widely regarded as a hero for the ambitious rescue plans he designed and oversaw.

The Economic Weapon: The Rise of Sanctions as a Tool of Modern War
Nicholas Mulder
Review via Foreign Affairs
For those who see economic sanctions as a relatively mild way of expressing displeasure at a country’s behavior, this book, charting how they first emerged as a potential coercive instrument during the first decades of the twentieth century, will come as something of a revelation. In an original and persuasive analysis, Mulder shows how isolating aggressors from global commerce and finance was seen as an alternative to war that worked precisely because of the pain it imposed on the target society.

Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least
Antti Ilmanen
Summary via publisher (Wiley)
Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least provides an evidence-based blueprint for successful investing when decades of market tailwinds are turning into headwinds. For a generation, falling yields and soaring asset prices have boosted realized returns. However, this past windfall leaves retirement savers and investors now facing the prospect of record-low future expected returns. Emphasizing this pressing challenge, the book highlights the role that timeless investment practices – discipline, humility, and patience – will play in enabling investment success. It then assesses current investor practices and the body of empirical evidence to illuminate the building blocks for improving long-run returns in today’s environment and beyond. It concludes by reviewing how to put them together through effective portfolio construction, risk management, and cost control practices.

Prediction Revisited: The Importance of Observation
Mark P. Kritzman, et al.
Summary via publisher (Wiley)
In Prediction Revisited: The Importance of Observation, a team of renowned experts in the field of data-driven investing delivers a ground-breaking reassessment of the delicate science of prediction for anyone who relies on data to contemplate the future. The book reveals why standard approaches to prediction based on classical statistics fail to address the complexities of social dynamics, and it provides an alternative method based on the intuitive notion of relevance. The authors describe, both conceptually and with mathematical precision, how relevance plays a central role in forming predictions from observed experience. Moreover, they propose a new and more nuanced measure of a prediction’s reliability.