Here’s five books to consider reading over the Summer. None are ‘light reading’ but should prove thought provoking and go into more detail on some of the themes regularly discussed on this blog.
Wishing you a relaxing Summer.
The Rise and Fall of American Growth by Robert J Gordon View on Amazon.
In the century after the Civil War, an economic revolution improved the American (and much of the Western World) standard of living in ways previously unimaginable. However, we are now mired in a prolonged period of lacklustre growth for the global economy. Looking back through history, Gordon argues that our current economic stagnation is the product of a hiatus of meaningful innovation in key industries, which has halted the economy’s ability to deliver productivity advances. The author makes the case that not all inventions are equal and that innovation is cyclical. He explains how massive breakthroughs in energy, health care and infrastructure helped the US economy to rapidly grow and develop. In the current context, we need innovation in these areas more than ever, in order to propel a productivity-driven return to economic prosperity – not just in the US, but globally.
How Good We Can Be by Will Hutton View on Amazon.
Despite all the talk about rebalancing the UK economy that we heard from policymakers in the immediate aftermath of the financial crisis, the UK economy is more unbalanced today than it ever has been. In this book, Hutton explores why that is the case and what can be done about some of the challenges that the UK faces. He argues that one important element for revitalising the UK’s economic and social harmony is to reform the capitalist system, making the case that the free market has failed to deliver the better living standards and economic prosperity that society has come to expect. Whilst one may not agree with all of its conclusions but the idea of a conflict between short-term incentives and the long-term needs of the economy certainly chimes.
The End of Alchemy by Melvyn King View on Amazon.
With the aftermath of the financial crisis still reverberating through the global financial system, banks are still not behaving normally across much of the western world. Mervyn King was, of course, the Governor of the Bank of England throughout the crisis and his book explores how and why money – and banking more generally – has become the ‘Achilles Heel’ of the global economy. Among other themes, King argues that markets are inefficient, that the banking system amplifies those inefficiencies and that, ultimately, a serious reform of the global banking system and financial markets are required before we can expect to see a sustainable recovery in global growth.
The Intelligent Investor, Rev. Ed by Benjamin Graham View on Amazon.
Benjamin Graham’s classic, The Intelligent Investor, offers no guarantees or gimmicks but overflows with the wisdom at the core of all good portfolio management. The hallmark of Graham’s philosophy is not profit maximisation but loss minimisation. In this respect, The Intelligent Investor is a book for true investors, not speculators or day traders. Where the speculator follows market trends, the investor uses discipline, research, and his analytical ability to make unpopular but sound investments in bargains relative to current asset value. Graham coaches the investor to develop a rational plan for buying stocks and bonds, and he argues that this plan must be a bulwark against emotional behaviour that will always be tempting during abrupt bull and bear markets.
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay View on Amazon.
Lastly, here’s one from the history shelf. Published in the 19th century, the book provides a brilliant analysis of market psychology and tackles topics such as economic bubbles, herd behaviour and the root causes of financial mania. By focusing on three historically important economic episodes – John Law’s “Mississippi Scheme”, the “South Sea Bubble” and “Tulipomania”, Mackay illustrates that the sentiments of greed and fear have always lurked in the dark corners of financial markets, becoming dominant in the right, frenzied conditions.