5 comments about Creating a World without Poverty: How Social Business Can Transform Our Lives.

1. In "Creating a World Without Poverty: Social Business and the Future of Capitalism," the follow up to "Banker To The Poor: Micro-Lending and the Battle Against World Poverty", Muhammad Yunus describes a new economic entity he calls the "social business." In short, this is an organization that has a specific social goal as opposed to regular business, for which profit is the only goal.
   
   Yunus is most famous for receiving the Nobel Prize in 2006 along with his Grameen Bank, which is the world's largest maker of microloans. Since then, microlending has come into vogue, and the term has become very popular, though I venture that many people who use the term do not understand the implications. The idea is exciting enough that you don't need to understand; money is given like charity, but then gotten back like an investment. It's like the mystical quarter on a string that allows you unlimited candy from the vending machine. Except, now it's real.
   
   Yunus is not the inventor of microlending, but the first person to effectively practice it on a large scale. He says, "it was appropriate that the Nobel committee in 2006 chose to award Grameen Bank, not the Nobel Prize for Economics, but the Nobel Prize for Peace. By lifting people out of poverty, microcredit is a long-term force for peace" (105). In Bangladesh, the only country in which Grameen Bank operates "80 percent of poor families have already been reached with microcredit" (66). The evidence shows that Bangladesh has undergone many improvements in quality of life for the poor that can specifically be attributed to microlending.
   
   The reason that this book is almost 250 pages is because Yunus is serious about proposing Social Business as an idea, and he lays out strategies for social entrepreneurs and pre-emptively tackles the naysayers. Yunus is a man who knows his audience. I will leave you with this:
   
   "Young people all around the world, particularly in rich countries, will find the concept of social business very appealing. Many young people today feel frustrated because they cannot recognize any worthy challenge that excites them within the present capitalist system. When you have grown up with ready access to the consumer goods of the world, earning a lot of money isn't a particularly inspiring goal. Social business can fill this void" (39).



2. Professor Yunus' book pales in comparison to his Banker to the Poor - this current book is light on action and heavy on rhetoric. It does tell a story about how he was able to create a social enterprise - using his connections as a Nobel Prize winner and book author.
   
   It does not give any type of action plan on how the typical person could arrange a social business or even more their company more toward a social function. I was disappointed as it was more a book of opinions and far-flung ideas about how to create institutions like social stock markets, etc., and little about how to actionably help the poor.
   
   In all, an interesting book, but mostly due to Yunus' writing style and easy of telling stories. It contains some short history but not enough action. I highly prefer C.K. Prahalad's Fortune at the Bottom of The Pyramid for more direct guidance on how this has been done.



3. Yunus has written a frank and straightforward description of a vision of a different and better world. The best part is that his theory has experience and people to back it up--not just dreams. It challenges the American views of community and commerce but I found that to be a source of hope in our crumbling economy. I believe it's best read if you are interested and invested in seeing society grow up.



4. The cover is the same you see in the picture. However it's removable paper cover, meaning it's not the original book. Someone got the original book, made thousands of cookies in a blue cover book, and added this beautiful removable paper cover to it.
   
   The bootom line is I bought thinking it was the original book, but it wasn't. However, the text is the same, so I'm going to enjoy it anyway!



5. I've just finished reading the book from Muhammad Yunus - the 2006 Nobel Peace Prize winner, and I cannot give it less than 5 stars. It is an inspiring book that can touch your heart and motivate you to fight against poverty. At the same time, it did not quite match my expectations in terms of content, so I'd like to make clear in this review what you should and should not expect from this great book.
   
   First of all, Muhammad Yunus presents his vision of the social business. It is a powerful idea based on challenging the assumption of one-dimensional human beings that aim at maximizing profit. This concept lies at the core of established economic theories, and supports the current notion of the business that should maximize value for its shareholders. The social business is totally dedicated to solving social or environmental problems. It is different from charities or NGO's as it does not generate losses, and it's different from profit-maximizing businesses as it does not pay dividend.
   
   Furthermore, the author gives an account of real social businesses that he has created. It starts with Grameen Bank, the microcredit organization providing banking services to the poor people from Bangladesh, including beggars. Grameen Bank is a huge success story, and its model has been reapplied in numerous countries. Another example is Grameen-Danone yoghurt factory that aims at improving the diet of poor Bangladeshi children. It's been recently opened as a joint venture between the Danone corporation and Grameen Bank, and it follows the social business model as described by Yunus.
   
   Finally, the reader is confronted with a vision of the world where poverty can only be seen in museums. I would compare this part of the book to a manifesto that describes the building blocks of a new world where social business can flourish, the environmental problems are resolved by mutual consensus between nations, and the information and communication technologies help the developing nations to participate in and benefit from the globalized market.
   
   It is important to note what you should not expect from this book. It definitely isn't an instruction, or a how-to guide for creating a social business. It isn't a science book either - instead of presenting sound models and theories, the author focuses on his vision and experience, and the book is an account of real-life stories and examples.
   
   The value of Creating a World Without Poverty lies in the inspiration it provides, in fascinating real-life examples of the author's journey to eliminate poverty in his country. It may sometimes sound like a science-fiction vision, but the example of Grameen Bank shows that nothing described in this book is impossible. It's a must-read.

5 comments about The Alchemy of Finance: Reading the Mind of the Market (Wiley Audio).

1. Essential reading for the practitioner and even more critically required reading for the academically baked student of the markets. From living with frustrating ideas of Utopian equilibrium found in well-stocked university libraries this is a voyage of reading that changes lucidly the thought process into understanding the perpetuity of change in the markets.
   It is critical to understand the significant role the size of markets play in the present day world as to how markets are driving the shape of events rather than focusing searching only the events that would drive markets.
   
   Do not expect any recipes of magic that would turn stale ideas into profit machines here though. Instead be ready to be soaked in a process of thought that applies to not just markets but well in anticipating the outcomes of the human struggle for furthering competitive excellence.



2. You cannot make a billion dollars without possessing some extraordinary skills. George Soros has such skills; that, no one can ever deny him.
   
   Personally speaking, I've always considered my own command of the English language to be one of my stronger suits. Save for occasional scientific phraseology, it's been nigh a decade since I've encountered a word through the course of ordinary dialog, page or verse that I absolutely, positively did not understand. I think I encountered three such words within the first couple chapters of this book.
   
   The thing is, it isn't that Soros is simply so many levels above everyone that we, the lowly rabble, cannot understand brilliance; no, too many other top-flight investors and achievers have written books detailing the methods behind their genius that everyone can comprehend. It's very apparent that, with "Alchemy", Soros is being intentionally verbose, to the severe detriment of a book that had so much potential. There's no question in my mind that Soros probably melted a half-dozen thesauruses by the time this abortion was submitted for publication.
   
   Soros is a brilliant investor who is attempting to be a brilliant writer but unfortunately, fails to realize that brilliance in authorship doesn't come from being excessively digressive, constant use of unnecessarily complex descriptives and structuring ones thoughts in such a fashion that makes them almost impossible to read. This book is akin to an airline pilot attempting to be a chef, who masks his culinary inabilities by adding huge amounts of obscure ingredients, hoping no one will notice he sucks amidst all the confusion.
   
   Pay no mind to the high-minded types amongst us who blather about this book as being some sort of brilliant insight into anything other than the bizarre mind of Soros. It isn't. Those are the same people who believe that the paintings of Jackson Pollock are infused with a deeper meaning that only they, by virtue of their elite sophistications, can understand. Sorry, folks. "Alchemy" is, for the most part, just a lot of drips and splatters on a canvas. This cigar is nothing more than a cigar.
   
   Soros is a sophist-extraordinaire, which is about the only thing you will learn by enduring "Alchemy" from cover to cover. The fact that "Alchemy" is considered to be a "financial classic" in certain circles isn't a legitimate testimony to it's quality, but rather, another example of the strange human phenomenon that causes people to praise garbage in an effort to appear "cosmo". The worse it is, the more they love it...
   
   Yes, there are occasional flashes of genius, yes, there is the infrequent insight that's useful and unique (which is why I give this nightmare two stars instead of one), however the chaff is so disproportionate to the wheat that I seriously question if the book is even worth reading. If you decide to buy and read this book, might I suggest laying in for a hefty supply of painkillers and booze for the journey. You're gunna need it.
   
   The government needs to mandate some kind of warning label for this thing... WARNING- THE WRITINGS OF GEORGE SOROS CAN CAUSE SEIZURES, INTELLECTUAL PANIC AND SUICIDAL THOUGHTS. PREGNANT WOMEN ARE ADVISED TO AVOID READING THIS BOOK.



3. 
   
   Have read a lot of reviews about this book. Some complain that it rambles on. It does, and thats what I liked so much about it. Like Mr. Soros's explanation of reflexivity you really have to contemplate this book with "reflexivity". In other words, if you come to this tome thinking you are going to learn some of his billionaire secrets, forget about it. He is too smart for that. He is not going to spell it out for you. Hoewever if you can read between the lines and learn by doing so, then that is where your free education from Mr.Soros appears. A lot can be learned from words and patterns of speech, and to hear his perceptions of life and market conditions, one can walk away with valuable info about how to time the market and life correctly.
   
   Wanted to listen to this book since hearing Mr O'Reilly (with whom I respect) harp about Soros so much nightly. If nothing else just want to hear the "fair and balanced" sake of the dispute.
   
   If you like listening to things that are somewhat abstract, I recommend this book. If your trying to get detailed info about how Mr. Soros made billions in hopes of repeating his success, start by studying Finance and Economics at your local community college.
   
   His words are like a beautiful Operatic Aria. His Political schemes a perk of success. And, you have to admire his freedom to do that.
   
   "That which does not destroy us, only makes us stronger.



4. It's funny to see the criticism of Soros and his book. I suspect much of it is politically driven, but there are fair comments to be made about his opaque and digressive writing style. He could have used a good editor, and probably a competent ghost. Since he's the king, however, that clearly didn't happen. The king doesn't need an editor. OK, so we know that about the book. Let me clue you in on a secret. Most financial writing that has any value at all (and most of it doesn't) could express all crucial points, with examples, in a 20-100 page essay. That's it. That's all that is necessary. But that isn't a book and no one would buy a 50 page essay, thinking it was too light on content. So 50 pages of real insight gets larded with 200 pages of anecdote, example and just plain silliness. This is the reality of books on many subjects, not just finance.
   
   Here's another thing. George Soros is a self-made billionaire. You aren't. Neither am I. Some have commented that he had charges of insider trading against him. This is true. But what you may not know is just how much European securities and trading regulators hate him. He broke the pound, for God's sake. To dismiss him as "a criminal" is silly at best, reactionary at worst.
   
   Even worse are the geniuses who say Soros is "shallow" "trivial" "obvious" or "invalid". These comments smack of utter arrogance, and likely, ignorance.
   
   Look at the problems of today. They were caused by people applying "valid" academic financial theory and "sound" models. There is a veritable mountain of data and modeling supporting the catastrophe at hand. But the academics will handwave the actual result of application of theory with some phrase like "It wasn't properly applied. If only you'd asked ME!"
   
   I myself wonder if the underlying error is in believing that finance is a scientific discipline, and that it will yield its secrets when the method is properly applied, like the production of industrial chemicals, or something like that. The tangible results of the application of increasingly complex models and theory are, to be mild, not encouraging.
   
   In my observation, the greatest investors apply simple concepts with great discernment and acuity. They rarely, if ever, let even a well-understood "portfolio theory" tell them what to think, let alone how to invest. It might be that such investors really can't explain how they do it, it's simply a gift from heaven. That seems entirely possible. Lots of people try to be like Warren Buffet, no one succeeds at the same level, despite Buffet being quite open about his methodology and thought processes. But let's assume you can learn something from these sports of nature.
   
   I find many of Soros' thoughts quite penetrating, despite his often baroque ornamentation. Applying them is hard, because you can't easily throw it into a model. You have to think, analyze and understand conditions with subtlety and precision. Then you have to be incredibly brave and believe in your analysis against the weight of the world's opinion and action. You have to accurately gauge the effect of a constantly altering, and self-referential decision loop on you positions and outlook. Soros is trying to provide a method for you to do that. He may not have succeeded, but dismissing him outright is the action of an idiot.



5. This is a remarkable book by a remarkable man. Billionaire George Soros is one of the most notorious, successful speculators of the 20th century and one of the most freehanded philanthropists. Here he outlines a theory that leads to the conclusion that markets are not morally good, that the financial system is rigged to protect the interests of the rich and powerful, and that economics is a spurious science. Much can be said in criticism of this book. It is replete with logical fallacies, muddies the arguments of those with whom the author disagrees, sets up straw men, and does not take adequate account of work done by philosophers and psychologists in some of the areas the author explores. But, getAbstract finds that there is also a great deal of good that can be said. Soros is an original thinker, at his best when he is talking about his own direct experience. He is straightforward about how his ideas have changed, and about his trading and forecasting errors. And why shouldn't he be, when, as he says, his errors are the keys to his success?

2 comments about The Little Book That Makes You Rich.

1. I am sure there are some people who can time the market and deal in and out of stocks frequently. I am just not one of them. I found the author's website interesting because it allows you to see how he rates stocks that you are following and how he has rated them in the past. The recommended (A) and discouraged (F) stocks are almost the exact opposite of Value investing stocks from Magic formula (Little Book that Beat the Market).
   Navallier's book is interesting in getting an idea about how the market is reacting almost independent of the value of the underlying company. His grades on stocks seem to change frequently. While I cannot argue with his success, his methods are too unpredictable for me.



2. Louis puts his success formula to paper to help the average investor. He explains the eight factors he uses to effectively beat the market on a consistent basis.
   
   Unlike value investing where one might have to wait months or years for a stock to be valued properly as being a steal, Louis' growth investing finds stocks that are making money now and recognized as such.
   
   He provides a free stock and portfolio grader to give your portfolio an instant checkup and tells you how you can make money without taking on investing as a second job.
   
   Although he doesn't give you any screeners for the stocks he picks, he does give you sources for good stocks which you can then decide if you want to add by using his screener (imagine that!).
   
   Overall a great resource for the retail investor.

No comments about Rich Woman: A Book on Investing for Women.

No comments about Fundamental Analysis, Value Investing and Growth Investing (Secrets of the Great Investors).

1 comments about Doing What Matters: How to Get Results That Make a Difference - The Revolutionary Old-Fashioned Approach.

1. I usually find business books very boring. If it's written by a business leader, these books tend to be a bit self-congradulatory, and don't really explain how to do something. If written by an academic, these tend to be very Aristotelian--that is, categorize well, but don't don't explain the pressures involved when something needs to get done. If written by a business author, tends to be hyped.
   
   When I tried the audio here, I was truly surprised. I learned a lot. The author explains his business management concepts very well. These are practical and theoritical. I have to admit I haven't tried too many business audios, but have read many business books. This is probably the best business course I've ever had from a business leader.

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5 comments about America's Great Depression.

1. The definitive scholarly analysis of why the Great Depression happened and the policy failures which tried to allievate its tragic consequences.
   
   This is the seminal volume that launched Rothbard's reputation as the world-class expert on this issue.
   
   His subsequent work related to the history of the Federal Reserve and its destructive monetary policy which formented the Depression cemented this important assessment.



2. Murray Rothbard's book, America's Great Depression, is really two books in one. One is a very bad book. It purports to use economic tools to explain how the Great Depression came to be. The other is a potentially very good book. What is suggests is that Herbert Hoover, although well intended, engineered a bad situation into a catastrophe. Overall, I do not recommend the book to the general public as having a good explanation of why events of the 1920s led to the Great Depression, nor would I recommend it to the general public as an exemplar of good economic thinking. But I do recommend it to my fellow economists as an exemplar of how not to do economics.
   
   The bad book occupies the introductions to each of Rothbard's five editions of the book (the last published posthumously, and with an introduction by Paul Johnson), and then the first six chapters. From those introductions, it is apparent that Rothbard was a follower of Ludwig von Mises' Austrian school of economic "thinking," a school that apparently believes, economics can be a fact-free science. That can be seen in Rothbard's Introduction to the First Edition where he wrote (xxxix f.): "... I make no pretense of using the historical facts to "test" the theory. On the contrary, I contend that economic theories cannot be 'tested' by historical or statistical fact. ... The only test of a theory is the correctness of the premises and the logical chain of reasoning." If that is indeed the Misesian-school's thinking, I question what kind of theory and what kind of economics can be produced by its fact-free science. Unlike Athena and Zeus, truth cannot spring from von Mises' head unvarnished by observation, and it cannot do so from anyone else's head for that matter. After all, how did von Mises first get to the theory he proposed, and Rothbard used, without actually having observed facts on the ground. In the end, truth needs recourse to facts and observations, and to refutable hypotheses. It is the scientist's task to tease the evidence, or lack thereof, from recalcitrant facts and observations for the hypothesis or theory being proposed. Absent that, all one is left with is fact-free science, which is no science at all. It is simply assertion papered over by an ideological just-so story. In that regard, the Misesian-school appears to be no better than the Marxian school (although ideologically, the polar opposite). If Rothbard represented the Misesian-school accurately, I would dismiss that school's approach as being theory without measurement, in the same way, as in my graduate days, that we dismissed measurement without theory.
   
   To show how misleading fact-free science can be, I recall a famous story about Albert Einstein and quantum mechanics. Einstein, using a thought experiment in 1935 (the so-called EPR paradox) had proposed a seemingly irrefutable test about particles in quantum mechanics. The paradox was impossible to test with the equipment available at the time, and so stood for quite a while. Only in the 1970s and later, with the advent of high-energy cyclotrons, did the paradox become testable and indeed was refuted.
   
   Of course, Rothbard's book is not entirely fact-free. He did use some historical facts to 'test' the theory, or at a minimum, to demonstrate its validity. He did that despite his contention that economic theories cannot be "tested" by historical or statistical fact. I find the difference between what he said he would not do and what he did to be most puzzling.
   
   Rothbard's book, in its first part, contains much that was ill defined, seemingly inconsistently defined, or downright misleading. Also, there seems to have been too narrow a focus on component parts, coupled with a unwillingness to look at larger and possibly more pertinent aggregates. The book has other areas of confusion as well, but those are of less import, and I will skip them in the interest of brevity.
   
   In Chapter 1 of the book, we come across the first of Rothbard's confusing and ill-defined terms. It is in the context of the hypothesis he sets as to the economic theory behind what caused the Great Depression. According to Rothbard, the hypothesis depends on von Mises' view that bank credit expansion will lead to a series of investment errors that turn out to be "malinvestment in higher-orders of production." One can ask, what are "higher-order of production"? Rothbard definition was: investment in capital-goods "most remote from the consumer"(10). What does that mean? Can one consider investment in farmland, a form of capital, as investment in a higher-order of production, insofar as farmland can be pretty remote from the consumer? I doubt that is what Rothbard had in mind. The next question is, what is "malinvestment," and how does it lead to a downturn in the economy? As to the question's first part, what is the definition of malinvestment, frankly, it was never clear to me, being based on the already ill-defined notion of "higher-orders of production." As to the question's second part, Rothbard's reasoning there seems to fail his "logical chain of reasoning." Rothbard's reasoning was that the decline in demand for higher-orders of production is accompanied by an increase in demand for lower-orders of production (whatever that means) and that is what leads to an economic downturn. But that is not logical. When one component of demand is increasing while another is decreasing, why should demand in the aggregate decline? Only a decline in aggregate demand will lead to an overall decline in profits and employment. Otherwise, all we are talking about is a change in the composition of demand, not a change in its total. Rothbard's focus on that component of demand he called, "malinvestment," to the exclusion of other components does not logically explain why the total should decline. If the Misesian hypothesis is that a single component's decline reduces total demand, the burden of proof is on Rothbard, or members of the Misesian-school, to provide first, a tight definitions of terms and then observable evidence to support the hypothesis. Otherwise, all they have done is engage in just-so fables.
   
   Another definition Rothbard used, one that I think is highly misleading, was his definition of "inflation." When I first skimmed through the book, I thought Rothbard had used it as it has been historically used, to mean price inflation. So, I then wondered, what inflation was he talking about? That's because the 1920s was a period of mild deflation in most prices, except for farm land prices, which declined significantly, and for stock prices, which increased significantly. Only upon reading the book carefully did I discover the peculiar meaning Rothbard attached to the term, "inflation." It can be found on p. 12, n.8: " 'Inflation' is here defined as an increase in the money supply not consisting of an increase in the money metal." So, any increase in non-metallic money was for Rothbard, by definition, "inflation." (Some of the reviewers, I observed, do not seem to have noticed Rothbard's odd definition of the term.) Rothbard's terminology was and is downright confusing. The term, inflation, first came into use in the US in the late 1830s when it meant what it means today. (The precise definition is in: Online Etymology Dictionary, © 2001 Douglas Harper: "Monetary sense of, enlargement of prices - originally by an increase in the amount of money in circulation.") In contemporary terminology, it means an increase in the price of good in services. In the 1920s and 1930s, it seemed to have meant an increase in stock prices. (See Amity Shlaes' The Forgotten Man, p. 4.) No twentieth-century economist I know of has ever used the term as Rothbard did.
   
   The meaning Rothbard assigned to the term "inflation" may have in part stemmed from the Misesian thought that bank credit expansion leads to business cycles. But I think the primary reason he used the term was his animus to fractional-reserve banking in general, and to central banks in particular. Specifically, Rothbard saw fractional-reserve banking as being "fraudulent" (25). He would have had the government outlaw fractional-reserve banking by imposing 100% gold reserves on deposits. I find it odd that Rothbard, who professed to be a libertarian, saw no contradiction here between his recommending the use of the heavy-hand of the government to override the people's own decision-making and his own libertarian principles. What I have to conclude is that he viewed depositors as incapable of making decisions in their own best interests. Of course, one can ask, why stop with having government imposing its will in this area? Go the whole hog and become a true Marxist. Have government impose its will in all areas by making all the decisions for the public. I, though, take the opposite view. People have to be considered as capable of making their own decisions and as having responsibility for them. In the field of banking, depositors have to be considered as knowing what's going on, and as being willing participants in fractional-reserve banking. That's because they benefit immensely from fractional reserve banking, with the primary benefit being the reduction in the costs of holding and using money. As a contrafactual, suppose depositors don't want to use fractional-reserve banking. They could always hold cash balances in a vault in their homes or offices or factories. For transactions needing checks, they could go to the bank for cashiers' checks. All that, though, is expensive and inconvenient, which is why depositors use banks whose reserves are just a fraction of deposits. I would also have to conclude here that, not only was Rothbard apparently an ideologue, he was an elitist. Because he thought he knew better, he wanted to make people toe the line for what is good for them. Again, that is not very different from Marxism wherein the leaders supposedly know just the right kind of goods and services to produce for the people (who, though, never seem to concur).
   
   Chapter 4, titled, "The Inflationary Factors," is the heart of the bad part of the book. Rothbard opened the chapter by describing what he thought would happen in the absence of fractional-reserve banking. Specifically, he said (86): "For a hallmark of the inflationary boom is that prices are higher than they would have been in a free and unhampered market." (He of course revealed there that he misunderstood the difference between the level, and the rate of increase of prices. Interpreting a free and unhampered market to mean a market with 100 percent gold reserves for deposits, prices would indeed be higher with fractional-reserve banking, but in an inflationary boom - meaning one where the money supply increases rapidly and relative to gold reserves - prices would not only be higher, they would be increasing faster than they otherwise would have.) But even before the advent of the US current central bank, the Federal Reserve, there never was a period in US history without fractional-reserve banking and with the market being totally free and unhampered. Below I will compare the period 1899-1912, when the market was more free and less hampered, with the period of the 1920s. That is because the first period was prior to the Federal Reserve's establishment, and the second was afterwards when the market was, supposedly, less free and more hampered.
   
   The inflation (of the money supply) of the 1920s on which Rothbard dwelled can be found in Table 1 of chapter 4 (p. 92). To measure inflation of the money supply, Rothbard used a very broad definition of money that included life insurance net policy reserves. While I have seen many definitions of money, I have never seen one like that. Of course, one is free to use any definition one wants, but it has to be grounded in some observable relationship. But Rothbard's approach, that hypotheses and definitions "cannot be 'tested' by historical or statistical fact," precluded his doing so. If we stick with the usual definitions of money for that period, either M2 or M2 + S&L deposits, we find that the money supply grew respectively by 45 to 43 percent in the 1920s. (Rothbard's inclusion of life insurance net policy reserves and S&L capital rather than deposits, increases that number to about 63 percent.) Of course, one could ask, what was the increase in the period 1899-1912, prior to the Federal Reserve's establishment? The respective increases turn out to be, 149 and 132 percent. At a compound annual rate, the numbers for the 1920s are respectively, 4.5 and 4.8 percent, while for the period 1899-1912, they are, respectively, 7.3 and 6.7 percent. (For consistency, I would have compared Rothbard's definition that included life insurance but I did not have data on life insurance for the earlier period; also, again, for purposes of consistency, the data I used were from Table A-1 pp. 704-711 of Friedman and Schwartz's, A Monetary History of the United States, 1867-1960.) Clearly, there is nothing outlandishly large about the money supply growth of the 1920s to get very exercised about. Again Rothbard's narrow focus on a particular datum for a short period turns out, on the surface, not to have any explanatory power.
   
   In both periods, one contributing factor to money supply growth was that both banks and depositors chose to increase the ratio of deposits to reserve money each held (currency plus bank reserves, also called, high-powered money or the monetary base). The difference in the two periods is that reserve money grew more rapidly in the first period than in the second period. In the first period, reserve money grew at a 4.8% annual compound rate while in the second period, it grew at a compound annual rate of slightly more than 1%. Not surprisingly, prices in the first period rose faster in than in the 1920s. (Specifically, from 1899 to 1912 wholesale prices rose 32 percent while from 1921 through 1929 they fell 2.5%!) What we see here is that the 1920s, being less free and more hampered can, sometimes bring about a modest deflation compared to a period that was more free and less hampered. One can see what happens when fact-free science comes to face to face with pesky little facts.
   
   If chapter 4 is the heart of the bad book, Table 7 on p. 109 is the heart of chapter 4. It was from the data in that table, that Rothbard argued (108): "...the inflation [in money] was clearly precipitated deliberately by the Federal Reserve. The plea that the 1920s was simply a 'gold inflation' that the Federal Reserve did not counter actively is finally exploded." His reasoning was that "controlled reserves increased by $1.79 billion for the entire period and that exceeded the monetary gold stock's increase of $1 billion." The problematic aspect with the 'controlled reserves' in Table 7 is that Rothbard's never provided a definition for controlled reserves. While he did provide some computations pertinent to controlled reserves on p. 113, when those computations are applied consistently throughout Table 7, the figures do not add to the amounts he termed there, controlled reserves.
   
   Another way of looking at what Rothbard was describing can be found Chart 25 on p. 282 of Friedman and Schwartz's Monetary History. The chart demonstrates the opposite of Rothbard's claim. It makes it quite clear that what the Fed was attempting to do was to use Federal Reserve credit to offset changes in monetary gold stocks that were occurring at the time. Based on the modest growth of reserve money, we would have to say they were somewhat successful.
   
   Another problematic aspect raised by Table 7 is its narrow focus on reserves held at the Federal Reserve by banks that are members of the Federal Reserve system. He did not account for the vault cash of the members or the reserves of the non-members. By focusing just on those reserves, he gave a skewed accounting of the increase in bank reserves. By Rothbard's accounting, reserves increased by 47.5 percent from June 1921 through June 1929. (See his Table 6, 102.) When all bank reserves are taken into account, though, the increase comes to 27.5%; and when all reserve money is taken into account, the increase is just 8.4 percent. (See, respectively, Table A-2, 738f., and Table B-3, 802f., of the Monetary History.) Again Rothbard's focus on a specific component, rather than on the total, presents results that can be viewed as misleading.
   
   A slightly different explanation of what happened is that individuals had a greater preference for bank money than currency in the 1920s, and so they converted their currency into bank money. Comparably, the banks had a greater preference for reserves at the Federal Reserve then they did for vault cash, so they, in effect, transferred any new funds received from the public into reserves at the Federal Reserve. The increase, than, in reserves held at the Federal Reserve was not so much an increase engendered by the Federal Reserve, but simply the workings of banks and depositors preferring one form of money to another.
   
   After chapter 6, we enter into Rothbard's discussion of Hoover's actions. Although he did occasionally discuss actions by the Federal Reserve in those chapters, his primary focus was on Hoover. This part of the book is potentially very good. It provided me with a good deal more insight into what could have made the Great Depression, great. Unfortunately, Rothbard, in accordance with his school's thinking, did not do a full analysis of Hoover. More statistical work would have been necessary, and that is why this part remains only potentially very good.
   
   Rothbard's description of Hoover painted him as an interventionist, a Roosevelt-lite character. According to Rothbard, Hoover attempted to prevent prices and wages from falling. When demand declines, though, both attempts are futile and just stave off the day of reckoning. Hoover may have been partially successful in preventing prices from falling far enough and fast enough. From 1929 to 1933, wholesale prices fell by about 25%. By comparison, in the previous recession in 1920, wholesale prices fell by 37% in the course of one year. Hoover's success on keeping wages from declining is less clear (especially because good wage indexes do not exist for that time). From 1929 to 1933, average hourly earnings in all industries fell by 25% while in the two years from 1920 to 1922 they fell by 15%. For both periods, the compound annual decline is amazingly close, about 7% per year. Hoover's intentions may have been noble, but all he did was to engineer the economy so it could not adjust to the decline in demand
   
   What about the Smoot-Hawley tariff, which many today blame for the Great Depression? The ostensible reason for the tariff was to help farmers, but if US imports are reduced, it becomes harder for farmers to sell products overseas. (Foreign importers won't have the foreign exchange available to buy the farm products.) Rothbard thought it contributed mightily to the Depression. His evidence was the opposition of almost all the economists and the fact that the market broke after the tariff was signed into law (241f.). That though does not constitute evidence. The market's having sunk is by itself not evidence. The old saw of, correlation is not causation is at work here. The fact that many economists opposed the tariff is also not evidence. Indeed, Rothbard did not accept stable prices as being a beneficial goal of monetary policy despite many economists having recommended it as policy. Moreover, there was an earlier tariff, the Fordney-McCumber Tariff, which went into effect in 1922, and was just as onerous as Smoot-Hawley. Yet, it seems not to have caused any lasting real effects. Rothbard, without having done any of the heavy lifting with regard to analyzing the costs of the Smoot-Hawley, then stated (241)" ... it was at a precarious time of depression that the Hoover administration chose to hobble international trade, injure the American consumer, and cripple the American farmers' export markets by raising tariffs higher than their already high levels." This is economics by assertion. It proves nothing.



3. If we are talking about collectivist government privileges interfering with the sound functioning of a prosperous economy, Rothbard knows we can't start researching the Great Depression with Roosevelt's response to an economic collapse. Rather, there's not much to be said about him in this book.
   
   Rather we look to some pretty non-traditional trends in government power. We go before WWI and the ensuing debt, and the resulting advantages in the world economy. Rothbard even goes into a history of America's previous depressions, which we don't hear about, and were all treated with an increased laissez-faire attitude. So we aren't given a "The Great Depression changed everything" theory of unsound economics, just like in foreign policy "9/11 changed everything". In the 1900's, we get a slew of "progressive" government interference with markets. This is not only the FED, but the income tax (reaching 79% in the middle of the depression), union privilege, increased government spending, removing domestic links between the dollar and gold, "protectionist" tariff hikes, price controls, and eventually a mix of fascism and socialism.
   
   Part of what Democrats don't like to hear is that Roosevelt was personally complemented by Hitler and Mussolini on his fascist economic system. Eventually America would "solve" its depression the same way Italy and Germany did - nationalism for war and increased military spending.
   
   But part of what Republican's don't like to hear is that Hoover started the New Deal, which Rothbard shows is what prevents the economy from recovering as it did in all previous depressions. Hoover supported wage controls in a deflating economy, forcing unemployment, which many people believe WAS the defining characteristic of the depression. Others believe it was the stock market crash. But any quick glance at the changes of money supply shows why prices had to do what they did. In an environment of artificially loose credit created by expanding the money supply, the ability to pay loans and make profitable loans, or even any long-term fixed rate contract, depends upon prediction of the central figures who determine how loose credit will be. Even a small change at the government and FED level can cause a sizeable bust.
   
   Many hold "speculation" accountable, saying that the rampant gains of capitalism spurred this reckless speculation. Well, what could be more recklessly speculative than a small group of men trying to set a monetary policy that would simultaneously create massive credit and consumerism? To function properly, the market would have to speculate the decisions of these people, who were trying to speculate the market. There's your excess speculation, which doesn't happen with sound money.
   
   Rothbard gives a lengthy and powerful description of the Austrian Theory of the Business Cycle, which Hayek would eventually win a Nobel Prize for. Also, Higgs shows how the depression could have been considered to last until 1946, if you don't believe that military production bought with debt indicates a good economy. Keynesian and military-keynesian approaches to solving depressions took almost 20 years to fix after an inflationary boom of 8 years.
   
   I recommend this book to anyone interested in a mixture of government policy and the economics behind the Great Depression. It contains well-written arguments and factual numbers to support them. It is not hard to read, although it will read easier if you know a thing or two about economics. Rothbard shines in being able to speak in clear and simple terms while delivering powerful arguments that anyone should be able to grasp.
   
   I do not recommend this book to anyone who is dead-set upon socialism or fascism; however, if you haven't heard of the Austrian Business Cycle Theory to explain the Great Depression, you cannot be dead-set upon those principles. Take the time to read this book. Rational debate requires complete knowledge of opposition viewpoints.
   
   I would supplement this book with other literature from Mises, as well as study the financial situation of Japan in the 90's.



4. We all understand that particular industries and markets may go through hard times at one point or another. But what causes an entire economy to flourish, only to contract at a later date? What causes the entire economy to misread the economic signs? What causes the entire economy to misforecast and make bad investments? What causes a "Cluster of Errors"?
   
   It is hard to believe that anyone could casually discount Rothbard's analysis of the business cycle and the Great Depression given America's current struggle with a depressed housing market caused by the villian that Rothbard goes to great lengths to describe: Credit Expansion.
   
   The fact that this book was written 40 years ago, and that it is just as applicable to today's market as it is to the market in 1929, adds to the intellectual weight and veracity of this work.
   
   This is not a historical narrative, this is a book on economics. It first explains Ludwig Von Mises theory concerning boom-bust business cycles as they are caused by loose Federal monetary policy and loose lending by banks. It then delves into the history of the Great Depression, applying the theory to the history. In terms of readability, I found the book very easy to read and very compelling. In terms of economic analysis I found Rothbard's arguments in favor of Mise's theories regarding the business cycle to be very thorough and convincing.
   
   The Austrian School of Economics is not mainstream. Rothbard is not Friedman, and he is not Keynes. It is unfortunate that some reviewers were hoping to read an echo-chamber for Lord Keynes or Milton Friedman, and seemed to rate Rothbard based on how close Rothbard's theories and conclusions were to the theories and conclusions of their favorite economist.
   
   It is also unfortunate that some of the reviewers were not expecting an economic analysis, but their false expectations should not reflect poorly on the author or his work.



5. In his 1982 introduction to the third edition, Rothbard wrote: "A Democratic administration may be expected to inflate with even more enthusiasm (than the Reagan administration was then engaged in doing). We can look forward, therefore, not precisely to a 1929-type depression, but to an inflationary depression of massive proportions." Although premature in this prognosis, the state of the economy in October 2008 makes Rothbard's remark sound prescient. Anyone wondering whether or not the economic rescue plan of Congress and the Bush administration, or those of the two main presidential candidates, can cure the current depression must read Rothbard's analysis of the 1929 version.
   
   Certainly the current depression vindicates Rothbard of the charges against him (as well as against Ludwig von Mises and the entire Austrian-school of economics) leveled by Amazon critic Jack L. Rutner. Mr. Rutner purports to be an economist himself, yet demonstrates in his review that he fails to comprehend the methodology of economics. Every one of the charges Rutner makes against Rothbard, von Mises and the Austrian school were considered and incisively refuted by von Mises in a 150-page, 1962 essay entitled, which is also available from Amazon (The Ultimate Foundation of Economic Science: An Essay on Method). Rutner obviously suffers from a weakness described by von Mises therein: "The epistemologist who starts his lucubrations from the analysis of the methods of the natural sciences and whom blinkers prevent from perceiving anything beyond this field tells us merely that the natural sciences are the natural sciences and that what is not natural science is not natural science. About the sciences of human action he does not know anything, and therefore all that he utters is of no consequence."

3 comments about The Book of Investing Wisdom: Classic Writings by Great Stock-Pickers and Legends of Wall Street (Wiley Audio).

1. Well conceived and organized with keen insight into how some of the best investors attained their success through intelligent financial investments.



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   This collection of essays proves to be interesting, entertaining, and filled with informative thoughts. This is not a 'how to get-rich-quick in the stock market book'; it is more of a solid, conservative investment for your reading portfolio. Reviewed by Gerry Stern, founder, Stern & Associates, author of Stern's Sourcefinder The Master Directory to HR and Business Management Information & Resources, Stern's CyberSpace SourceFinder, and the Compensation and Benefits SourceFinder.