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ECONOMICS/FINANCE/TRADING, etc. > FINANCIAL CRISES

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message 1: by Bentley, Group Founder, Leader, Chief (new)

Bentley | 44207 comments Mod
This is a thread to discuss Financial Crises and the history or origin of those crises - domestically and internationally.


message 2: by Douglass, HBC Admin/TL - Economics/Finance (last edited Mar 28, 2018 08:05PM) (new)

Douglass Gaking | 550 comments Mod
The End of Alchemy: Money, Banking, and the Future of the Global Economy

The End of Alchemy Money, Banking, and the Future of the Global Economy by Mervyn King by Mervyn King Mervyn King

Synopsis:

This may be the most comprehensive book on financial crises that has been published since the Great Recession. Mervyn King headed up the Bank of England during the 2008 Financial Crisis. King criticizes the system that allowed the crisis to happen, allowed the crises before it, and will inevitably create future crises if it is not changed.

King defines to financial alchemy as the transformation by banks of illiquid real assets into liquid financial assets. Banks finance long term lending with short-term borrowing, a risky practice that–when pushed to its limits–can result in financial ruin for the bank and its depositors if the short-term lending ever dries up. A run on the bank is often blamed on a lack of liquidity, but the real problem is often a lack of capital.

Banks put themselves in these risky positions because there is an economic incentive for them to do so. Central banks have acted as the "lender of last resort" for over a century. King argues that they should instead function as the "pawnbroker for all seasons." If you don't have the capital to use as collateral, we let you fail.

King focuses on a few core economic concepts to explain the problems that lead to economic crises and to propose solutions. He emphasizes that we need to change our perception from the economics of "stuff" to the economics of "stuff happens." This is an approach we should take in managing the macroeconomy, but also in our households and businesses.


message 3: by Douglass, HBC Admin/TL - Economics/Finance (new)

Douglass Gaking | 550 comments Mod
Stress Test: Reflections on Financial Crises

Stress Test Reflections on Financial Crises by Timothy F. Geithner by Timothy F. Geithner Timothy F. Geithner

Synopsis:

Timothy Geithner was President of the Federal Reserve Bank of New York from 2003 to 2009 and U.S. Secretary of the Treasury under from 2009 to 2013. Geithner explains how he and the other central bankers and government officials made decisions during the 2008 financial crisis and how they constructed bailouts and other solutions to the crisis.

This book is mostly a personal defense of unpopular decisions like the TARP bailouts, saying that the bailouts worked because they injected capital into failing banks and liquidity into the banking industry, and that it "didn't cost the taxpayers anything" because the banks paid it back.

Geithner argues that they did what they had to do and that the criticisms of "moral hazard fundamentalists" are unrealistic. The American people were out for blood, but Geithner doesn't believe that punishing the bankers would have solved anything. Instead, he used whatever resources he could to help prop up the banks, even against the will of some of the banks that didn't want help.

Geithner does not talk much about the fundamental flaws in our financial system or how to prevent future crises.


message 4: by Bentley, Group Founder, Leader, Chief (new)

Bentley | 44207 comments Mod
Excellent add - I had just ordered that on audible last week.


message 5: by Douglass, HBC Admin/TL - Economics/Finance (new)

Douglass Gaking | 550 comments Mod
The Big Short: Inside the Doomsday Machine

The Big Short Inside the Doomsday Machine by Michael Lewis by Michael Lewis Michael Lewis

Synopsis:

Best-selling author Michael Lewis tells the story of a rogue group of investors who bet against mortgage-backed securities leading up to the 2008 Financial Crisis.

Lewis makes sense of a complex system of debt speculation that the people who were responsible for understanding didn't seem to understand. He concisely explains mortgage-backed securities, collateralized debt obligations, credit default swaps, and other technical finance concepts involved in the Crisis.

The investors covered by Lewis are outsiders. They share many characteristics with Wall Street stereotypes, but for various reasons they don't fit in to those social circles, which makes them fascinating characters. They invested all of their time and money (and their clients' money) into a bet that the entire system on Wall Street was built on a big lie.

Lewis explains one of the more esoteric phenomena in the history of Wall Street through a sort of narrative history that is both informative and entertaining.


message 6: by Bookaholic (new)

Bookaholic Confessions (bookaholic_confessions) Hello @All. I'm new in the group and I see that you have an entire thread about Economics/Finance, which I considered an awesome topic. I started to invest 2 years ago and from there, I've read a lot of books about Investing, Finance, Economics, etc.

This week a finished a great book regarding Financial Crisis and I want to share with you. Here you have its name and author (hope my first add book/author works fine!).

This Time Is Different Eight Centuries of Financial Folly by Carmen M. Reinhart by Carmen M. Reinhart

Synopsis (from Goodreads)
Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned.

Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts--as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur.

My Opinion
For anyone interested in learn more about Worldwide Crisis, I really recommend this book. The work that the authors have done gathering the myriad of data in regards foreign/national debt/default, inflation, exchange rates, etc over sixty-six countries for a span of around 200 years, it's quite remarkable and pretty amazing.
Literature about crisis is quite broad but in general, the authors took more like a fairy tale approach. In this case, the reader will find factual data and a lot of graphics that will enrich any previous knowledge he/she may already has.


message 7: by Bentley, Group Founder, Leader, Chief (last edited Apr 15, 2018 04:58PM) (new)

Bentley | 44207 comments Mod
Thank you Pablo - I am sure that our thought leader for these threads will be right along to discuss this with you and welcome you.

You did a great job on the synopsis and citation too - just add (no photo) after the author's link of those citations that have no author's photo.

This Time Is Different Eight Centuries of Financial Folly by Carmen M. Reinhart by Carmen M. Reinhart (no photo)


message 8: by Douglass, HBC Admin/TL - Economics/Finance (new)

Douglass Gaking | 550 comments Mod
Pablo wrote: "Hello @All. I'm new in the group and I see that you have an entire thread about Economics/Finance, which I considered an awesome topic. I started to invest 2 years ago and from there, I've read a l..."

Welcome to the group, Pablo! I took a personal interest in economics and finance for a long time before my boss asked me to add business and finance to my teaching schedule, which has been a challenge, but very fun. I am currently in graduate school getting my MBA in Economics to get better at it. I too have gotten into investing. In addition to being a way to save for future plans, it is a fun hobby that I love learning about and discussing with people.

I am fascinated by the psychology of economics and finance and how financial crises happen, so I will definitely be checking out your book suggestion. Today I just finished reading A History of the United States in Five Crashes, which is very interesting. It talks about how with every crash there was some new technology or method or financial instrument that made everybody feel like they had the solution to safe investing, whether it was trust funds or portfolio insurance or mortgage-backed securities.

The "this time it's different" idea is central to crashes. It's all about the false sense of security that investors get with a financial instrument. What makes a bubble so dangerous is not the excessive valuation as much as the widespread belief that it won't pop.

A History of the United States in Five Crashes Stock Market Meltdowns That Defined a Nation by Scott Nations by Scott Nations (no photo)

This Time Is Different Eight Centuries of Financial Folly by Carmen M. Reinhart by Carmen M. Reinhart (no photo)


message 9: by Bentley, Group Founder, Leader, Chief (new)

Bentley | 44207 comments Mod
Fool's Gold

Fool's Gold by Gillian Tett by Gillian Tett Gillian Tett

Savage Minds views this book as anthropology. You decide.

Synopsis:

From award-winning "Financial Times" journalist Gillian Tett, who enraged Wall Street leaders with her newsbreaking warnings of a crisis more than a year ahead of the curve, "Fool's Gold" tells the astonishing unknown story at the heart of the 2008 meltdown. Drawing on exclusive access to J.P. Morgan CEO Jamie Dimon and a tightly bonded team of bankers known on Wall Street as the "Morgan Mafia," as well as in-depth interviews with dozens of other key players, including Treasury Secretary Timothy Geithner, Tett brings to life in gripping detail how the Morgan team's bold ideas for a whole new kind of financial alchemy helped to ignite a revolution in banking, and how that revolution escalated wildly out of control.

The deeply reported and lively narrative takes readers behind the scenes, to the inner sanctums of elite finance and to the secretive reaches of what came to be known as the "shadow banking" world. The story begins with the intense Morgan brainstorming session in 1994 beside a pool in Boca Raton, where the team cooked up a dazzling new idea for the exotic financial product known as credit derivatives. That idea would rip around the banking world, catapult Morgan to the top of the turbocharged derivatives trade, and fuel an extraordinary banking boom that seemed to have unleashed banks from ages-old constraints of risk.

But when the Morgan team's derivatives dream collided with the housing boom, and was perverted -- through hubris, delusion, and sheer greed -- by titans of banking that included Citigroup, UBS, Deutsche Bank, and the thundering herd at Merrill Lynch -- even as J.P. Morgan itself stayed well away from the risky concoctions others were peddling -- catastrophe followed. Tett's access to Dimon and the J.P. Morgan leaders who so skillfully steered their bank away from the wild excesses of others sheds invaluable light not only on the untold story of how they engineered their bank's escape from carnage but also on how possible it was for the larger banking world, regulators, and rating agencies to have spotted, and heeded, the terrible risks of a meltdown.

A tale of blistering brilliance and willfully blind ambition, "Fool's Gold" is both a rare journey deep inside the arcane and wildly competitive world of high finance and a vital contribution to understanding how the worst economic crisis since the Great Depression was perpetrated.

Source for recommendation: Savage Minds


message 10: by Douglass, HBC Admin/TL - Economics/Finance (new)

Douglass Gaking | 550 comments Mod
A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History

A First-Class Catastrophe The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques by Diana B. Henriques Diana B. Henriques

Synopsis:

Monday, October 19, 1987, was by far the worst day in Wall Street history. The market fell 22.6 percent – almost twice as bad as the worst day of 1929 – equal to a one-day loss of nearly 5,000 points today.

Black Monday was more than seven years in the making and threatened nearly every U.S. financial institution. Drawing on superlative archival research and dozens of original interviews Diana B. Henriques weaves a tale of missed opportunities, market delusions, and destructive actions that stretched from the “silver crisis” of 1980 to turf battles in Washington, a poisonous rivalry between the New York Stock Exchange and the Chicago Mercantile Exchange, and the almost-fatal success of two California professors whose idea for reducing market risk spun terribly out of control. As the story hurtles forward, the players struggle to forestall a looming market meltdown and unexpected heroes step in to avert total disaster.

For thirty years, investors, regulators, and bankers have failed to heed the lessons of 1987, even as the same patterns have resurfaced, most spectacularly in the financial crisis of 2008. A First-Class Catastrophe offers a new way of looking not only at the past, but at our financial future as well.


message 11: by Bentley, Group Founder, Leader, Chief (new)

Bentley | 44207 comments Mod
Another great add, Douglass.


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