"The Return of Depression Economics and the Crisis of 2008" (Paul Krugman)
On the plane trip to Miami, I had a nice long block of time with which to finish this book by Paul Krugman. Highly recommended. If you are short on time, skip to the end and read the final 2 chapters.
Unlike my economics classes in business school, this book is very easy to understand and follow. No mathematical models. No IS-LM curves.
From the book I got a real sense that there is an inherent problem with trade between countries and currencies which is at the heart of all these "crises". Such trade is also at the heart of globalism.
Another thing I get from this book, the current crises and other sources is that the "economy" is just too complex to comprehend -- and it is always basically out of control. We build our models and make our arguments but we dont really know what is going to happen or why. Dont take it too seriously when anyone tells you things are "under control".
One of the critical issues that I had never heard of elsewhere was this idea of a "shadow" banking system - sources of money outside of the regulated banking system. Fascinating and significant. Krugman estimates that 40% of the total banking system is now this shadowy, unregulated, unmeasured segment.
The funny is that as you read this book, you feel like you understand what is happening in the story. You think you are following along and things are happening in a logical, common-sense way.
But when it was over, I still dont feel like I understand what is going on in the economy today. I still dont really know what I think should be done or what I should do as an investor. I have moments when I think I understand followed by complete confusion. It's getting old.
As I write this, the stock market has zoomed up from 8,000 to 8,400 over the past two weeks. I was convinced that the market was going to go in the opposite direction when it was at 8,000. So reading the book has not helped me understand stock market dynamics, at least in the short term, but it has given me some insight into the problems we face.
