Book Bits | 13 September 2014

The Shifts and the Shocks: What We’ve Learned–and Have Still to Learn–from the Financial Crisis
By Martin Wolf
Review (
For Freud, everything was about sex. For Marx, it was the struggle between capital and labor. These thinkers took their big idea and applied it relentlessly. Or, as the saying goes (sort of): They had a favorite hammer, so every problem looked like a nail.
For Martin Wolf, the chief economics commentator for the Financial Times and one of the world’s foremost writers on macroeconomics and international finance, his hammer is “global imbalances.” And many of the economic and financial problems of today are the nails.
His latest book, “The Shifts and the Shocks: What We’ve Learned — and Have Still to Learn — from the Financial Crisis,” was released Thursday in the United States. It’s a great read. The book will be unsettling to anyone who thinks the financial system is any more stable now. The financial sector in many high-income countries is still vulnerable to crises, and reforms put in place have not gone far enough, he argues.

The End of Normal: The Great Crisis and the Future of Growth
By James K. Galbraith
Q&A with author via Institutional Investor
Q; What does the economic future look like, and how might we get there?
A: The private financial sector has ceased to serve as a motor of growth. It is bloated in relation to the economy, and it isn’t geared toward doing many of the things that need doing. It’s not in the business plan of the banking sector to support new private sector job creation, for example, or restore the credit of the household sector. Private credit markets are stagnant, and there has been no full recovery of demand. But companies are swimming in cash.
Why not build factories or buy equipment? We also need to think more about how to organize lives so that the human resources we have are first of all used effectively and secondly supported. We can create institutions that will provide employment in areas where it continues to be needed and useful, of which there are a very large number of possibilities. We need to engineer the economy to grow at a stable, low, positive rate for a long time and adjust ourselves materially to that prospect.

The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment
By Guy Spier
Summary via publisher (Palgrave Macmillan)
What happens when a young Wall Street investment banker spends a small fortune to have lunch with Warren Buffett? He becomes a real value investor. In this fascinating inside story, Guy Spier details his career from Harvard MBA to hedge fund manager. But the path was not so straightforward. Spier reveals his transformation from a Gordon Gekko wannabe, driven by greed, to a sophisticated investor who enjoys success without selling his soul to the highest bidder. Spier’s journey is similar to the thousands that flock to Wall Street every year with their shiny new diplomas, aiming to be King of Wall Street. Yet what Guy realized just in the nick of time was that the King really lived 1,500 miles away in Omaha, Nebraska. Spier determinedly set out to create a new career in his own way. Along the way he learned some powerful lessons which include: why the right mentors and partners are critical to long term success on Wall Street; why a topnotch education can sometimes get in the way of your success; that real learning doesn’t begin until you are on your own; and how the best lessons from Warren Buffett have less to do with investing and more to do with being true to yourself.

Aftermath: The Unintended Consequences of Public Policies
By Thomas E. Hall
Summary via publisher (Cato Institute)
Government policies created for one set of purposes almost always generate additional results that were not part of the original plan. Very often these unintended consequences are seriously adverse, and in some cases are so severe as to render the policy a failure. In Aftermath, noted economist Thomas Hall examines four major instances of significant unintended consequences, all of them negative, resulting from major public policies: the federal income tax, cigarette taxes, minimum wage laws, and alcohol prohibition. Each widespread, well known policy was instituted as a positive measure, but almost immediately gave rise to enormously damaging consequences and harmful side effects. What were these terrible consequences? Hall demonstrates how these policies played a significant role in creating America’s vast welfare state, criminal activities, a bloated government hungry for more revenue, smuggling, a scarcity of jobs for teenagers and the working poor, corrupt public officials, overcrowded prisons, and much more. Not exactly what the originators had foreseen.