Book Bits | 3.1.14

Money Mania: Booms, Panics, and Busts from Ancient Rome to the Great Meltdown
By Bob Swarup
Summary via publisher, Bloomsbury
Money Mania is a sweeping account of financial speculation and its consequences, from ancient Rome to the Meltdown of 2008. Acclaimed journalist and investor Bob Swarup tracks the history of speculative fevers caused by the appearance of new profitable investment opportunities; the new assets created and the increasing self-congratulatory euphoria that drives them to unsustainable highs, all fed by an illusion of insight and newly minted experts; the unexpected catalysts that eventually lead to panic; the inevitable crash as investors scramble to withdraw their funds from the original market and any other that might resemble it; and finally, the brevity of financial memory that allows us to repeat the cycle without ever critically evaluating the drivers of this endless cycle. In short, it is the story of what makes us human.

GDP: A Brief but Affectionate History
By Diane Coyle
Review via The Washington Post (Tyler Cowen)
If you are going to read only one book on GDP, Diane Coyle’s “GDP: A Brief but Affectionate History” should be it. More important, you should read a book on GDP, as many of the political debates of our time revolve around this concept. Can we afford our current path of entitlement spending? Was the Obama fiscal stimulus worth it? When will China overtake the United States as the world’s largest economy?
The answers all depend on GDP. In 140 pages of snappy text, Coyle lays out what GDP numbers measure, what roles they play in economic policymaking and forecasting, and how GDP numbers can sometimes mislead us, albeit not in the way many current critics suggest.

The Little Book of Market Wizards: Lessons from the Greatest Traders
By Jack Schwager
Summary via publisher, Wiley
What differentiates the highly successful market practitioners—the Market Wizards—from ordinary traders? What traits do they share? What lessons can the average trader learn from those who achieved superior returns for decades while still maintaining strict risk control? Jack Schwager has spent the past 25 years interviewing the market legends in search of the answers—a quest chronicled in four prior Market Wizards volumes totaling nearly 2,000 pages. In The Little Book of Market Wizards, Jack Schwager seeks to distill what he considers the essential lessons he learned in conducting nearly four dozen interviews with some of the world’s best traders.

Fragile by Design: The Political Origins of Banking Crises and Scarce Credit
By Charles W. Calomiris and Stephen H. Haber
Summary via publisher, Princeton University Press
Why are banking systems unstable in so many countries–but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances. Rather, these fluctuations result from the complex bargains made between politicians, bankers, bank shareholders, depositors, debtors, and taxpayers.

Unleashing the Second American Century: Four Forces for Economic Dominance
By Joel Kurtzman
Review via Kirkus Reviews
Fasten your seat belts. If Kurtzman is right, the American economy is fueled for an unprecedented takeoff into a new era of economic growth…. Kurtzman assumes that the fuel for the coming economic surge will be provided by four transformational forces: 1) the continuing strengths of the country’s manufacturing sector (still the world’s largest and most productive); 2) the rapid approach of energy self-sufficiency; 3) the accumulation of around $5 trillion in the bank accounts of corporations and reserves of the banking system; 4) the promising future of collaboration among government, university research and the private sector (this may be the most intriguing to many readers).

Portfolio Management under Stress: A Bayesian-Net Approach to Coherent Asset Allocation
By Riccardo Rebonato and Alexander Denev
Summary via publisher, Cambridge University Press
Portfolio Management under Stress offers a novel way to apply the well-established Bayesian-net methodology to the important problem of asset allocation under conditions of market distress or, more generally, when an investor believes that a particular scenario (such as the break-up of the Euro) may occur. Employing a coherent and thorough approach, it provides practical guidance on how best to choose an optimal and stable asset allocation in the presence of user specified scenarios or ‘stress conditions’. The authors place causal explanations, rather than association-based measures such as correlations, at the core of their argument, and insights from the theory of choice under ambiguity aversion are invoked to obtain stable allocations results. Step-by-step design guidelines are included to allow readers to grasp the full implementation of the approach, and case studies provide clarification. This insightful book is a key resource for practitioners and research academics in the post-financial crisis world.