Book Bits | 10.27.12

Misunderstanding Financial Crises: Why We Don’t See Them Coming
By Gary Gorton
Summary via publisher, Oxford University Press
Before 2007, economists thought that financial crises would never happen again in the United States, that such upheavals were a thing of the past. Gary B. Gorton, a prominent expert on financial crises, argues that economists fundamentally misunderstand what they are, why they occur, and why there were none in the U.S. from 1934 to 2007. Misunderstanding Financial Crises offers a back-to-basics overview of financial crises, and shows that they are not rare, idiosyncratic events caused by a perfect storm of unconnected factors. Gorton shows how financial crises are, indeed, inherent to our financial system. Economists, Gorton writes, looked from a certain point of view and missed everything that was important: the evolution of capital markets and the banking system, the existence of new financial instruments, and the size of certain money markets like the sale and repurchase market. Comparing the so-called “Quiet Period” of 1934 to 2007, when there were no systemic crises, to the “Panic of 2007-2008,” Gorton ties together key issues like bank debt and liquidity, credit booms and manias, moral hazard, and too-big-too-fail–all to illustrate the true causes of financial collapse. He argues that the successful regulation that prevented crises since 1934 did not adequately keep pace with innovation in the financial sector, due in part to the misunderstandings of economists, who assured regulators that all was well.

ValuFocus Investing: A Cash-Loving Contrarian Way to Invest in Stocks
By Rawley Thomas and William Mahoney
Summary via publisher, Wiley
ValuFocus Investing is written for the contrarian investor who wants an investing method that is based on cash flow facts, not on media hype and speculative impulse. This book combines an accessible presentation of a contrarian investment model and the ValuFocus tool that offers a highly studious, detailed explanation of understanding a company’s true intrinsic value. If you can calculate a company’s intrinsic value on the basis of knowing if the market is currently under, fairly, or over pricing its stock, then it is possible to invest wisely in the stock market. Investors who want to buy undervalued stocks, or sell (short) overvalued ones will find this book immensely useful. The ValuFocus investing tool calculates the intrinsic value of every company in their database automatically. Thus, an individual investor can become an “A” student of a modeling process, or can go right ahead in using this tool to pick stocks and manage their own portfolio. Additionally, this book helps to develop an enhanced framework to fundamental equity valuation.
Tiger Head, Snake Tails: China Today, How It Got There, and Where It Is Heading
By Jonathan Fenby
Review via The Guardian
China, Jonathan Fenby argues in his new book, “does everything on a scale that breeds shock and awe”. It has the largest monetary reserves in the world, at more than $3.2 trillion; it consumes more than a third of the world’s supplies of key metals and half the world’s cement. Every two and a half minutes, Greenpeace estimates, it produces enough toxic ash to fill one Olympic-size swimming pool. It is a nation of violent contrasts: it may have as many as 600 dollar billionaires, as well as 300 million people without access to clean drinking water. Despite the government’s fixation on national unity (its “tiger head”), Fenby asserts, it is a mass of snake’s tails. “There is not one China but a hundred, a thousand or a million.”
The Dawn of Innovation: The First American Industrial Revolution
By Charles R. Morris
Review via USA Today
The United States of America, a fledgling nation during the 19th century, managed to thrive against colossal odds, even surpassing Great Britain as the world’s hyperpower. Charles R. Morris — lawyer, former banker and prolific popular historian — has wondered how the metamorphosis occurred. So he decided to write a book on the subject. To some extent, “The Dawn of Innovation” is of a piece with Morris’ opus. For example, it grows organically from his previous book “The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould and J.P. Morgan invented the American Supereconomy.” On the other hand, the new book seems far afield from his book-length profile of AARP, subtitled “America’s Most Powerful Lobby and the Clash of Generations,” as well as his previous book “American Catholic: The Saints and Sinners Who Built America’s Most Powerful Church.”
The Indispensable Milton Friedman: Essays on Politics and Economics
Edited by Lanny Ebenstein
Event announcement of discussion with editor via Heritage Foundation
Milton Friedman is one of the most famous economists in history. His writings and theories on everything from capitalism and freedom to deregulation and welfare have inspired movements, influenced government policies, and changed the course of America’s economic history. In The Indispensable Milton Friedman: Essays on Politics and Economics, Dr. Lanny Ebenstein brings together twenty of Friedman’s greatest essays in the only collection of Friedman’s writings to span his entire career – including some of Friedman’s never-before-republished writings as well as the best and most timeless of his works. These exceptional essays not only illuminate the progression of Friedman’s thought, but also explain how America might overcome some of its most difficult challenges.
A Debtor World: Interdisciplinary Perspectives on Debt
Edited by Ralph Brubaker, Robert M. Lawless and Charles J. Tabb
Summary via publisher, Oxford University Press
A Debtor World contains a collection of contributions about the societal implications of private debt. The essays comprising this volume are authored by dozens of leading U.S. and international academics who have written about debt or issues related to debt in a wide range of disciplines including law, sociology, psychology, history, economics, and more. The goal of this collection is to explore debt neither as a problem nor a solution but as a phenomenon and to promote the exchange of knowledge to better comprehend why consumers and businesses decide to borrow money. It asks what happens to businesses and consumers under a heavy debt load, and what legal norms and institutions societies need to encourage the efficient use of debt while promoting a greater understanding of the global phenomenon of increased indebtedness and societal dependence.
The Book of the Poor: Who They Are, What They Say, and How To End Their Poverty
By Kenan Heise
Summary via publisher, Marion Street Press
Collecting dozens of interviews conducted over 50 years to give voice to the 16 percent that live below the poverty line, journalist Kenan Heise’s The Book of the Poor addresses unemployment, prison, nutrition needs and hunger, the lives of impoverished children, panhandling, health-care struggles, the role of race in poverty, and dumpster diving, This moving work attempts to correct misconceptions surrounding an all-too heartbreaking and persistent social problem, offering a historical perspective on American’s attitudes toward poverty—from Thomas Jefferson’s chance conversation with a poor French woman laborer, to Confederate war widows rioting for food, to the lasting effects of Reaganomics on the poor and incarcerated.