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How to Speak Money
Money is our global language. Yet so few of us can speak it. The language of the economic elite can be complex, jargon-filled and completely baffling. Above all, the language of money is the language of power - power in the hands of the same economic elite.Now John Lanchester, bestselling author of Capital and Whoops! sets out to decode the world of finance for all of us, explaining everything from high-frequency trading and the World Bank to the difference between bullshit and nonsense.As funny as it is devastating, How To Speak Money is a primer and a polemic. It's a reference book you'll find yourself reading in one sitting. And it gives you everything you need to demystify the world of high finance - the world that dominates how we all live now.
304 pages, Hardcover
First published January 1, 2014
208 people are currently reading
2176 people want to read
About the author
John Lanchester
35 books597 followersJohn Lanchester is the author of four novels and three books of non-fiction. He was born in Germany and moved to Hong Kong. He studied in UK. He is a regular contributor to The New Yorker and was awarded the 2008 E.M. Forster Award. He lives in London.
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Displaying 1 - 30 of 154 reviews
December 23, 2014
If economists are today’s esoteric priesthood, vocabulary is key: learn it and you have a way in. Lanchester’s father worked in a bank issuing small business loans, so he grew up with some rudimentary knowledge of how money works but no specific expertise. With his books
Capital
and Whoops!, however, he’s set himself up as the layman’s expert on the financial crisis.
The central section of this book is a glossary, in alphabetical order, of economic terms. Everything is nicely laid out in red and black – symbolically appropriate colors. It’s a cross between straightforward definitions and a “devil’s dictionary” approach. For instance, the “hot waitress index” is a slang term for judging how the economy is doing; when it’s performing poorly, pretty girls have to be waitresses instead of receptionists and gallery assistants. Lanchester also reveals the metaphorical origins of many terms, such as hedge funds and bailouts.
If, like me, you often scratch your head over where money comes from and how the economy functions (or fails), Lanchester will be your enthusiastic and knowledgeable guide.
The central section of this book is a glossary, in alphabetical order, of economic terms. Everything is nicely laid out in red and black – symbolically appropriate colors. It’s a cross between straightforward definitions and a “devil’s dictionary” approach. For instance, the “hot waitress index” is a slang term for judging how the economy is doing; when it’s performing poorly, pretty girls have to be waitresses instead of receptionists and gallery assistants. Lanchester also reveals the metaphorical origins of many terms, such as hedge funds and bailouts.
If, like me, you often scratch your head over where money comes from and how the economy functions (or fails), Lanchester will be your enthusiastic and knowledgeable guide.
September 9, 2014
How to Speak Money – Very Funny
John Lanchester has followed up his highly successful book Whoops!, with a funnier but brilliant account and well timed book, How To Speak Money. Be honest we all know that if bankers and economists want to exclude all people from listening in to their conversations they start talking money. It can go straight over your head as it seems so obscure as to exclude most.
Once up on a time when I had a sensible job I used to be a mortgage underwriter and was part of this world where money and its uses had its very own language. This is what Lanchester brings us in this funny but honestly well written account.
As John Lanchester shows us in the book that we are not being stupid if we do not understand what the money men are talking about, even the suggestion that they make it hard to understand and that made me smile as the book shows once deciphered it is easy to understand. Rather like those who have MBAs or management speech once you clear the unnecessary words it is clear what they are talking about.
He is also able to show us that all money men are not above using euphemisms to hide what they really mean and within the book we get an excellent lexicon of all this. Rather than saying sacking or making redundant we get “reducing payroll” or “synergy” all words that should send a shudder down your back.
One of my personal favourite metaphors that Lanchester uses is in the description of the World Bank and the IMF. One that hands out loans is nice and cuddly out good cop and the other is the bad cop, I wish I could have thought of that as probably the best description for them both.
How To Speak Money is one of the funniest, most needed polemics for a long time, something that will be kept on my bookshelf as an interesting but required reference book. This may sound like a very serious book way to heavy for a normal person to read, but it is gentle and entertaining while being informative. If you want to keep up with what is happening in our economy now and in the future this is the book for you.
John Lanchester has followed up his highly successful book Whoops!, with a funnier but brilliant account and well timed book, How To Speak Money. Be honest we all know that if bankers and economists want to exclude all people from listening in to their conversations they start talking money. It can go straight over your head as it seems so obscure as to exclude most.
Once up on a time when I had a sensible job I used to be a mortgage underwriter and was part of this world where money and its uses had its very own language. This is what Lanchester brings us in this funny but honestly well written account.
As John Lanchester shows us in the book that we are not being stupid if we do not understand what the money men are talking about, even the suggestion that they make it hard to understand and that made me smile as the book shows once deciphered it is easy to understand. Rather like those who have MBAs or management speech once you clear the unnecessary words it is clear what they are talking about.
He is also able to show us that all money men are not above using euphemisms to hide what they really mean and within the book we get an excellent lexicon of all this. Rather than saying sacking or making redundant we get “reducing payroll” or “synergy” all words that should send a shudder down your back.
One of my personal favourite metaphors that Lanchester uses is in the description of the World Bank and the IMF. One that hands out loans is nice and cuddly out good cop and the other is the bad cop, I wish I could have thought of that as probably the best description for them both.
How To Speak Money is one of the funniest, most needed polemics for a long time, something that will be kept on my bookshelf as an interesting but required reference book. This may sound like a very serious book way to heavy for a normal person to read, but it is gentle and entertaining while being informative. If you want to keep up with what is happening in our economy now and in the future this is the book for you.
July 22, 2020
“One of the most brilliant things the financial services industry ever did was to take the word ‘debt’, which people were brought up to believe was a bad thing that you want to avoid, and to rename it as ‘credit’, which sounds like a good thing that you want more of.”
Hey! Well those guys actually sound like decent sorts and are really just like you and me, they are just trying to do a job in a reasonable, honest and transparent way and we should just trust them to get on with what they do, they know what they are doing.
At no point did any of these thoughts cross my mind during the reading of this hugely enjoyable guide. Lanchester is one of those names I have come across countless times, but have never read before. From the very first page this read like a cool, soothing breeze through the staid stuffy landscape and language of economics, just like Grayson Perry (who he actually quotes in here) with the art world, he takes the BS of economics head on in an open and honest way, which is so rarely done, and has pulled off a highly readable and really entertaining overview.
Oh this was one of those books where the highlights took up so much space that you felt spoiled for choice, but another particular favourite moment, was when he was describing the top ten kleptocracies (I had fun counting how many on the list were also backed or supported by the CIA and/or the US government) and then after finishing the list he segues onto the British royal family, discussing the many ways they have stolen from the public, including the way they greedily keep art work for themselves, which actually belongs to the public and he finishes by saying,
“That wealth was not stolen in the same way that Mobutu stole his, but it was expropriated from the collective wealth through the non-payment of tax-which is closer to kleptocratic arrangement than to a democratic one. If we accept this line of argument, then number 8 spot on the list belongs to ‘UK, Windsor, $500 million’. Just saying.”
This book is up there with other fine guides or easily accessible economic based books by the likes of Ha-Joon Chang, Yanis Varoufakis and Joseph Stiglitz. Anyway don’t waste your time reading me, you should hunt this book down, sit back and enjoy! I cannot wait to read more of his stuff.
December 28, 2014
If, like me, you both loathe talking about money and high finance -- and are terrified by it -- this is the book for you. In clear, often funny and always insightful ways, writer John Lanchester exposes some of the "bullshit" -- and a lot of the "nonsense" (read the book for the difference) -- in modern finance. Some terms I thought I understood but didn't (hedge find). Others, I didn't understand, but am newly terrified by. Hollowing out is one. "Hollowing out" is when jobs disappear from an economy while from the outside things look the same, except for the fact that families that once depended on these jobs are devastated. Other terms are surprisingly beautiful, like La ricchezza e una ragione: richness is a relationship between two people. Both his forward and afterword are must-reads, as he both parses where we've come from and, ominously, where we're going, especially in terms of the increasing gap between haves (and haves way to much) and have-nots. Spoiler: the gap will gets much, much worse.
May 5, 2019
I was looking for good introductory books I could assign to students interested in finance and this one is a good one, but I don't think I will be assigning it. I like the project a lot--demystifying finance buzzwords and showing the complexity and emptiness behind some of the concepts. I also like that he did it while knocking down the neoliberal assumptions behind the whole project of market fundamentalism. But it felt too scattered to be useful as a holistic critique and not comprehensive enough as a dictionary of terms. I did really enjoy reading it and Lanchester is hilarious
October 13, 2025
Audiobook - I thought this was going to be enlightening but it was just boring
September 27, 2014
I received this book for free in exchange for my honest opinion through the Goodreads First Reads program.
This book is well written and very informative. The majority of the book is written in a dictionary style where you can find an entry alphabetically and see a "definition" next to it. I put the word definition in quotes, because he does more than just dryly define each word. There are anecdotes, analogies and life experiences that he uses to explain or expound upon each definition. This has the added benefit of adding context to what he is teaching, as well as making it more entertaining.
There were a couple minor negatives that I saw in this book. The first was that there are several places where the author's political opinions start to bleed through into the text. There is nothing wrong with an opinion. However when the book purports to be teaching the meaning of words, opinions become a big distraction from that central purpose, particularly when an opinion is part of the definition of a word.
The second was that I felt like his use of the term "reversification" sort of complicated things that most people understand intuitively. For example, he talked about how the term "bail out" has come to mean the opposite of what it should. When you bail out a boat, you are using a bucket to get water out of the boat, while bailing out a bank is infusing money into the bank. In that sense, it is sort of an opposite and I get his point, but I think we all intuitively understand the metaphor that the bank is being saved from sinking. Decoupling the words from the metaphor actually makes it more confusing in my mind, where he was trying to make it less confusing.
Despite those minor issues, this book is a great jumping off point for someone seeking to understand the world of finance. It would definitely make a good reference book when reading more complicated books and trying to understand the terms that are used.
This book is well written and very informative. The majority of the book is written in a dictionary style where you can find an entry alphabetically and see a "definition" next to it. I put the word definition in quotes, because he does more than just dryly define each word. There are anecdotes, analogies and life experiences that he uses to explain or expound upon each definition. This has the added benefit of adding context to what he is teaching, as well as making it more entertaining.
There were a couple minor negatives that I saw in this book. The first was that there are several places where the author's political opinions start to bleed through into the text. There is nothing wrong with an opinion. However when the book purports to be teaching the meaning of words, opinions become a big distraction from that central purpose, particularly when an opinion is part of the definition of a word.
The second was that I felt like his use of the term "reversification" sort of complicated things that most people understand intuitively. For example, he talked about how the term "bail out" has come to mean the opposite of what it should. When you bail out a boat, you are using a bucket to get water out of the boat, while bailing out a bank is infusing money into the bank. In that sense, it is sort of an opposite and I get his point, but I think we all intuitively understand the metaphor that the bank is being saved from sinking. Decoupling the words from the metaphor actually makes it more confusing in my mind, where he was trying to make it less confusing.
Despite those minor issues, this book is a great jumping off point for someone seeking to understand the world of finance. It would definitely make a good reference book when reading more complicated books and trying to understand the terms that are used.
September 22, 2014
I really learned a lot from this book. If you want complex financial information explained in every-man language, this book is awesome. He does a great job of demonstrating really difficult information in a simple way. I will say that this book requires some focus, it's not a casual read. But it was great to read on the Metro and I can definitely say, I'm smarter about money now than before I read it.
The only negative is that he sometimes goes off on tangents in the middle of explaining something and it got frustrating after a while. He also uses a lot of colloquial phrases and examples that, I can tell, he was trying to use to make the book not as dry but just weren't entertaining for me.
The author does a great job breaking down complex ideas and readers will, without a doubt, learn a lot from this book.
The only negative is that he sometimes goes off on tangents in the middle of explaining something and it got frustrating after a while. He also uses a lot of colloquial phrases and examples that, I can tell, he was trying to use to make the book not as dry but just weren't entertaining for me.
The author does a great job breaking down complex ideas and readers will, without a doubt, learn a lot from this book.
November 20, 2014
I made a startling discovery while reading this book -- it turns out I already know how to speak money. This would no doubt shock my college economics professors (assuming they still remember me), but apparently over the last 20 years I've picked up a decent understanding of how finance and economics work -- or, at least, of the language economists use. And yet, the humor and clarity that Lanchester brings to his definitions made this book so entertaining that I didn't even mind that fact that I wasn't learning a whole lot from it. How many books on money cite South Park and the Wu-Tang Clan? Or sum up macroeconomics in one word: "wrong"?
Those who don't "speak money" will learn a lot from this book (though they may still need to look up a few terms that Lanchester uses without defining). Those who do will just enjoy reading it.
Those who don't "speak money" will learn a lot from this book (though they may still need to look up a few terms that Lanchester uses without defining). Those who do will just enjoy reading it.
April 6, 2015
I'm a great admirer of John's writing, and he's a friend who lives only a few doors away. He has a remarkable knack of explaining the complex in simple language, illustrating his explanations with lots of good stories and quotations. I'm not sure, however, that he expects this book to be read right through. It's mostly, as the title implies, a series of explanations of the strange words of finance and economics. But reading it was like reading a dictionary, so I baled out after 28% (a Kindle tells you these things).
January 23, 2015
Solid information liberally peppered with humor/sarcasm. A reader lacking a basic understanding of financial issues may be misinformed by this humor/sarcasm.
Also: am I the only one who wishes books written by Brits were left in British English rather than "translated" into American English? This book suffers a few awkward passages due to language/cultural translation.
Also also: read this book and be depressed about the marked lack of citations from female economic thinkers and also a gender bias in the language of author examples (of the sort: "when a banker signs a deal he...").
Also: am I the only one who wishes books written by Brits were left in British English rather than "translated" into American English? This book suffers a few awkward passages due to language/cultural translation.
Also also: read this book and be depressed about the marked lack of citations from female economic thinkers and also a gender bias in the language of author examples (of the sort: "when a banker signs a deal he...").
Read
February 2, 2015Lanchester is a good economic populariser but he spreads his wares thin with a needless dictionary format.
April 22, 2015
Since I began listening to NPR’s Planet Money and the Slate Money podcast, I’ve hatched a significant desire to correct my deficiency in economic and financial knowledge. When I heard John Lanchester plugging his new book on the "Read These Books Edition" of Slate Money, I thought How to Speak Money would be a good starting point. Lanchester makes a strong effort to render the language of finance transparent for laypeople, throwing in some personal commentary along the way. Lanchester doesn’t feign political objectivity (he particularly enjoys prodding the neoliberal agenda), but he also devotes about 150 pages to a sensibly-written glossary of financial terms. Readers will find it a handy reference tool, if nothing else.
Learning to analyze financial language and economic arguments is a lifelong process, but without a certain foundational vocabulary, it seems impossible to even get started. Lanchester’s central goal is to demolish (or at least compromise) the linguistic and conceptual walls between the financially literate and the general public. “The language of money…” he writes, “is powerful and efficient; but it is also exclusive and excluding” (8). I can’t say I’ve completely overcome this obstacle after reading How to Speak Money, but I’m definitely more informed than I was.
One of this book’s most intriguing points concerns the relationship between the lexicon of money and morality:
"The disagreements in economics aren’t just about technicalities: they’re usually based on profound divergences in moral analysis. In economics, though, the morality is buried below the surface of what you’re talking about. Morality and ethics are too basic, too fundamental to be given direct expression in economics. The language of money doesn’t express any implied moral perspective. Judgements of what’s right and wrong are left out. This can make the language seem abrasive, even shocking, to people habitually speak a different kind of discourse. Since much of the language of public life has an implied moral and political load, this makes money-speak very distinctive." (15-16)
I can understand the need for specialized terms that enable professionals to communicate directly and efficiently, but I don’t buy the claim that economic and financial lingo can be shaped and utilized without reference to any moral context. Money-speak is excellent for throwing up the illusion of amoral distance, but to claim that it truly achieves this goal is to overlook concrete outcomes of the Great Recession (and other economic debacles in history) for hardworking citizens whose betrayal by the financial sector has had costly consequences. To talk about money––whether chatting with a friend on your front porch or jabbering amongst hundreds of traders at the New York Stock Exchange––is to have an ethical discussion about the livelihoods of people, plain and simple.
Lanchester partially acknowledges this, even pointing out that those on the political left (such as myself) are especially sensitive to the supposed separation of money-speak and moral issues. As much as he aims to empower ordinary people, Lanchester also occasionally comes off as a financial apologist. Peculiarly, this apparent contradiction actually bolsters the book, because Lanchester can honestly walk the line between financial fanboy and outraged citizen. He understands that finance and economics are neither demonic practices benefiting only the wealthy elite nor structures that can properly function without enlightened regulation and––yes––moral guidance.
The most interesting idea in How to Speak Money is Lanchester’s concept of “reversification”: “A process in which words come, through a process of evolution and innovation, to have a meaning that is opposite to, or at least very different from, their initial sense” (19). Financiers can’t be accused of pioneering this practice, which has probably been occurring as long as language has existed; they should, however, be held accountable for generating particularly pernicious ways of twisting language to suit their needs, usually with the result––intentionally or not––of obfuscating meaning and redirecting criticism. Lanchester explores a slew of reversified terms, such as “Chinese wall,” “hedge fund,” “securitization,” “leverage,” and “bailout.” “[Reversification] is not a process intended to deceive,” Lanchester reminds us, “But the effect is much the same” (29).
Broadening public knowledge of money-speak can lessen the gap between regular folks and the financial sector, but much harsher measures will be necessary to rectify corporate abuses of public trust and funding, and also to address the fundamental economic inequalities that threaten the integrity of American democracy. I agree with Lanchester’s view that the neoliberal status quo, which he defines as “the intellectual force behind deregulation, free trade, privatization, lower taxes, and lower levels of state involvement in the economy,” is the opposite of what we need moving into the 21st century (177). Lanchester is correct that “arguments about the economy are going to dominate the next decade, and…arguments about fairness and inequality are going to be at the heart of those debates” (248). If books like this can help cross-pollinate the language of money with that of justice, science, and conscience, the debates and conflicts to come will be less savaged by avarice and ignorance than they are today.
This review was originally published on my blog, words&dirt.
Learning to analyze financial language and economic arguments is a lifelong process, but without a certain foundational vocabulary, it seems impossible to even get started. Lanchester’s central goal is to demolish (or at least compromise) the linguistic and conceptual walls between the financially literate and the general public. “The language of money…” he writes, “is powerful and efficient; but it is also exclusive and excluding” (8). I can’t say I’ve completely overcome this obstacle after reading How to Speak Money, but I’m definitely more informed than I was.
One of this book’s most intriguing points concerns the relationship between the lexicon of money and morality:
"The disagreements in economics aren’t just about technicalities: they’re usually based on profound divergences in moral analysis. In economics, though, the morality is buried below the surface of what you’re talking about. Morality and ethics are too basic, too fundamental to be given direct expression in economics. The language of money doesn’t express any implied moral perspective. Judgements of what’s right and wrong are left out. This can make the language seem abrasive, even shocking, to people habitually speak a different kind of discourse. Since much of the language of public life has an implied moral and political load, this makes money-speak very distinctive." (15-16)
I can understand the need for specialized terms that enable professionals to communicate directly and efficiently, but I don’t buy the claim that economic and financial lingo can be shaped and utilized without reference to any moral context. Money-speak is excellent for throwing up the illusion of amoral distance, but to claim that it truly achieves this goal is to overlook concrete outcomes of the Great Recession (and other economic debacles in history) for hardworking citizens whose betrayal by the financial sector has had costly consequences. To talk about money––whether chatting with a friend on your front porch or jabbering amongst hundreds of traders at the New York Stock Exchange––is to have an ethical discussion about the livelihoods of people, plain and simple.
Lanchester partially acknowledges this, even pointing out that those on the political left (such as myself) are especially sensitive to the supposed separation of money-speak and moral issues. As much as he aims to empower ordinary people, Lanchester also occasionally comes off as a financial apologist. Peculiarly, this apparent contradiction actually bolsters the book, because Lanchester can honestly walk the line between financial fanboy and outraged citizen. He understands that finance and economics are neither demonic practices benefiting only the wealthy elite nor structures that can properly function without enlightened regulation and––yes––moral guidance.
The most interesting idea in How to Speak Money is Lanchester’s concept of “reversification”: “A process in which words come, through a process of evolution and innovation, to have a meaning that is opposite to, or at least very different from, their initial sense” (19). Financiers can’t be accused of pioneering this practice, which has probably been occurring as long as language has existed; they should, however, be held accountable for generating particularly pernicious ways of twisting language to suit their needs, usually with the result––intentionally or not––of obfuscating meaning and redirecting criticism. Lanchester explores a slew of reversified terms, such as “Chinese wall,” “hedge fund,” “securitization,” “leverage,” and “bailout.” “[Reversification] is not a process intended to deceive,” Lanchester reminds us, “But the effect is much the same” (29).
Broadening public knowledge of money-speak can lessen the gap between regular folks and the financial sector, but much harsher measures will be necessary to rectify corporate abuses of public trust and funding, and also to address the fundamental economic inequalities that threaten the integrity of American democracy. I agree with Lanchester’s view that the neoliberal status quo, which he defines as “the intellectual force behind deregulation, free trade, privatization, lower taxes, and lower levels of state involvement in the economy,” is the opposite of what we need moving into the 21st century (177). Lanchester is correct that “arguments about the economy are going to dominate the next decade, and…arguments about fairness and inequality are going to be at the heart of those debates” (248). If books like this can help cross-pollinate the language of money with that of justice, science, and conscience, the debates and conflicts to come will be less savaged by avarice and ignorance than they are today.
This review was originally published on my blog, words&dirt.
December 31, 2017
I saw John Lanchester speak at the recent Auckland writers festival. He was one of those people who has a delightful way of thinking, not a loudmouth or a phoney, someone you'd like to spend time with. I've read quite a few books about the financial crisis and worked hard to get my head around what happened in the GFC, Lanchester seems to have gone on a similar track and explains the key concepts in simple to understand ways. He is refreshingly not doctrinaire and praises the great achievements of capitalism eg raising hundreds millions out of poverty in just a generation, while happily pointing out all its faults.
He reminds me a bit of the wonderful Ian Buruma, a similarly thoughtful and subtle fellow ( opposite of a show pony like Christopher Hitchens). I'll certainly read more of his books.
He reminds me a bit of the wonderful Ian Buruma, a similarly thoughtful and subtle fellow ( opposite of a show pony like Christopher Hitchens). I'll certainly read more of his books.
November 3, 2019
Quite an interesting read for outsiders. Gives a nice overview of most of the terms, while keeping it funny and engaging. Gives a nice explanation, without making it mathematical or too intense.
Would recommend it for people trying to decipher the language of the "finance people"
Would recommend it for people trying to decipher the language of the "finance people"
Read
January 25, 2018The title didn't exactly enthrall me, but I checked out the ebook from my library and was happy to find it's a :great: companion to books like "The Big Short" for anyone who wants to see through the rhetoric and linguistic codes of the finance world. It's been fun to sift through while trying to make sense of the blockchain/cryptocurrency world, and all the old schemes getting resurrected in unregulated markets. It's hard to read all the way through lexicons that don't thread everything together in a narrative, but it's a big topic, he covers a lot of ground for such a short book, and you'll probably save yourself a lot of effort elsewhere by chipping away at this.
February 12, 2023
learnt some new words, reminded of others, and glad to have known most of the terms.
read it to understand more about the UK / European financial terms which weren't really used in HK like China Wall / austerity
read it to understand more about the UK / European financial terms which weren't really used in HK like China Wall / austerity
July 6, 2019
This book helps one understand many of the money terms that float around the news today such as credit swaps, GDP, marginal value and much of the rest of the jargon of the money industry. It necessarily also helps you understand how much of that world functions and how it impacts or controls the way we work and play. All that is good stuff.
What I didn't like about it was that it was laid out like a dictionary and went through the terms alphabetically. Yes, they were more complete definitions and contained good insights and commentary, and were even humorously discussed, but by adopting a dictionary format, Mr. Lanchester made the text harder to retain. Story formats that linked like terms regardless of their alphabetical order would have made a more lasting impression on my memory.
Also, if you read the book, it has a left-leaning political philosophy, so just be aware of that on the way in. If you're a liberal, you're the choir being preached at, and if you're a conservative, some of the material may be off-putting. If you use that to avoid it because you may not agree with it, or you read because you want to bolster your opinions, then shame on you. It's important to know the slant the author takes, but it's also important to think for yourself and be able to read it without falling victim either to confirmation bias or to rejecting the whole because of a few of its parts.
Overall, a good intro to the world of how value is accounted for, won, lost and traded--basic stuff you should know about the world in which you live and hope to succeed.
What I didn't like about it was that it was laid out like a dictionary and went through the terms alphabetically. Yes, they were more complete definitions and contained good insights and commentary, and were even humorously discussed, but by adopting a dictionary format, Mr. Lanchester made the text harder to retain. Story formats that linked like terms regardless of their alphabetical order would have made a more lasting impression on my memory.
Also, if you read the book, it has a left-leaning political philosophy, so just be aware of that on the way in. If you're a liberal, you're the choir being preached at, and if you're a conservative, some of the material may be off-putting. If you use that to avoid it because you may not agree with it, or you read because you want to bolster your opinions, then shame on you. It's important to know the slant the author takes, but it's also important to think for yourself and be able to read it without falling victim either to confirmation bias or to rejecting the whole because of a few of its parts.
Overall, a good intro to the world of how value is accounted for, won, lost and traded--basic stuff you should know about the world in which you live and hope to succeed.
February 11, 2015
Lanchester has written a funny, engaging book that should appeal to financial newbies as well as those who are well-versed in the money lexicon. The first sixty pages constitute an essay about the importance of learning "how to speak money," and the rest of the book is a glossary of terms.
The format works because Lanchester is such a good writer that he can use the brief literary form of the dictionary entry to convey information, humor, outrage, derision, and cheekiness. This format makes it easy to put the book down and come back to it also.
Lanchester's obvious contempt for the disciples of Milton Friedman makes the book much more compelling than it might be otherwise; it makes a tremendous difference to know that the author maintains a super-sized skepticism about topics such as synergy and rational choice theory.
The format works because Lanchester is such a good writer that he can use the brief literary form of the dictionary entry to convey information, humor, outrage, derision, and cheekiness. This format makes it easy to put the book down and come back to it also.
Lanchester's obvious contempt for the disciples of Milton Friedman makes the book much more compelling than it might be otherwise; it makes a tremendous difference to know that the author maintains a super-sized skepticism about topics such as synergy and rational choice theory.
October 19, 2015
Enjoyed this and learned a lot.
Tim Adams wrote that:
"Sandwiched between enjoyably baggy state-of-the-global-economy essays that take in everything from the (successful and underreported) pursuit of Millennium Development Goals to the digital contraction of the newspaper and publishing industries, he offers a compulsive gloss on an A-Z of financial terms, with a paragraph or three in explanation of each. "
http://gu.com/p/4xcq6?CMP=Share_iOSAp...
Tim Adams wrote that:
"Sandwiched between enjoyably baggy state-of-the-global-economy essays that take in everything from the (successful and underreported) pursuit of Millennium Development Goals to the digital contraction of the newspaper and publishing industries, he offers a compulsive gloss on an A-Z of financial terms, with a paragraph or three in explanation of each. "
http://gu.com/p/4xcq6?CMP=Share_iOSAp...
September 16, 2017
The first third is 4 stars, the second third is 3 stars, the final third is 2 stars.
Fun and readable, but a bit too glib in places- veering into smarmy.
Topical, in a bad sense. A bit too focused on the issues de jour, and may date badly.
Takes a HARD turn left in the final chapter, but the rest is pretty non-partisan.
His love of language is obvious and makes the first third of the book a delight to read.
Fun and readable, but a bit too glib in places- veering into smarmy.
Topical, in a bad sense. A bit too focused on the issues de jour, and may date badly.
Takes a HARD turn left in the final chapter, but the rest is pretty non-partisan.
His love of language is obvious and makes the first third of the book a delight to read.
November 7, 2015
Witty and sardonic look at the vocabulary of what used to be called "high finance"--- the thieves' argot of merchant banks and Treasury mandarins. Clever and informative, and certainly a book to make you raise an eyebrow.
July 27, 2015
This was the most fun I've had reading an alphabetical list of terms for a long time. Made me laugh out loud in several places. Does that make me a terrible nerd?
July 6, 2015
I didn't read the afterword.
October 21, 2016
Interesting book, democratising the vocabulary used in Finance.
November 8, 2015
What other finance book references South Park, the Wu-Tang Clan and the price of transsexual prostitutes in Catholic countries? None, I'm guessing.
Here are some quotes that jumped out at me:
[T]he money the government uses to buy back the debt is newly created electronic money. It’s money that simply didn’t exist before. It’s like typing 100,000 at a keyboard and magically having $100,000 added to your bank account. Then you use that newly created money to pay off your debts. That’s QE. As for QE2, well, that’s just the second lot of QE, put into place because the first one didn’t have enough of a stimulus effect on the economy.
Some of the people who speak money do genuinely not give a shit about anything other than money.
Most hedge funds fail: 90 percent of all the hedge funds that have ever existed have closed or gone broke.
The chaotic lack of consensus [on economics] arises because economics is “the study of mankind in the ordinary business of life.” When is anyone going to reach any final verdicts about that?
Western economies did not grow to dominance by pursuing a neoliberal, free-market model: during the years of their growth, every economy in the Western world pursued policies that were to various degrees protectionist. The United States, now such a strident advocate of free markets for its own exports, was during the nineteenth and early twentieth centuries the most protectionist economy in the industrialized world.
[Quoting Charles Kindleberger:] [T]he economist with only one model, which he or she applies to all situations, is wrong much of the time.
Basis point: One hundredth of a percentage point... Referring to basis points is one of the quickest and easiest ways of pretending to know what you’re talking about when it comes to money.
[W]hen there were two beers, a third of people chose the cheaper; adding an even cheaper beer made the share of that beer go up, because it was now in the middle of three prices; adding an even more expensive beer at the top, and dropping the cheapest beer, made the share of the new beer in the middle (which had previously been the most expensive) go up from two-thirds to 90 percent.
Benford’s law: A seriously cool but quite strange law of math. It says that, in many types of random data, the number 1 is the most frequently occurring number, cropping up as much as 30 percent of the time. This is a surprisingly useful finding that is often employed to detect phoney figures in areas such as accounting and science. The math is immensely complicated, and I would love to give a full explanation of it here, but unfortunately I have to rush off now because I’ve just remembered I’ve got a thing.
Black Swan: A term coined by the philosopher-investor Naseem Nicholas Taleb for an event so rare it doesn’t fit in normal models of statistical probability... An example would be Earth being hit by an asteroid big enough to cause global disaster, something NASA says happens every 500,000 years or so. That puts the odds of its happening in a typical 80-year life at one in 6,250 — which is uncomfortably high. It’s very hard to know how to think about this fact.
Ordinary members of the public hear much more about the equity market—the “stock market” — in the news and general chatter, but the bond market is much bigger and more important, in global financial terms.
“Exclusive” is bullshit, not least because it is used mostly about places that are open to the public, like restaurants and hotels... There is an enormous amount of bullshit in the world of money.
[T]he most recent and glaring example of nonsense was in the run-up to the credit crunch, in which broad sectors of banks and investors convinced themselves that they had invented a new category of financial instrument that guaranteed high rates of return with no risk. Since it is a fundamental axiom of investment that risk is correlated with return—that you can’t make higher rates of return without taking on higher levels of risk—this is like claiming to have invented an antigravity device, or a perpetual motion machine.
As one wit has said, search makes 110 percent of Google’s profits—all its money, and then the 10 percent that it loses paying for all the other stuff. That advertising model reaches deep down into the core of Google’s being and is starting to taint its search function, so that it brings you not necessarily the thing you most need to look for, but the link that will make it most money if you click on it.
[A] company will often prefer to buy back shares when it believes those shares are undervalued—which can shade very close to a form of insider dealing, profiting the insiders who know the truth.
Politicians like to talk about competitiveness because it sounds less painful than “doing more work for less money with fewer employment rights,” even though that in practice is what it tends to mean.
My favorite example of the power of compound interest concerns the Native Americans who sold Manhattan to Peter Minuit in 1626 for some beads and trinkets worth about $26. A grievous rip-off, obviously. But if the Native Americans had been in a position to invest the $26 at 8 percent interest—historically a by no means unprecedented rate—and had left the investment to compound annually, it would by now be worth a useful $282 trillion, far more than enough to buy the whole place back.
[W]hen a company or government talks about “cutting costs,” what it really means is “sacking people.”
[I]t’s interesting just how much the subject of money, economics, business strategy, and so on features in rap music: I don’t think there’s ever been a form of music, anywhere in the world, with such a focus on money (and I don’t just mean modern Western popular music; I mean all music).
[O]ne of the most brilliant things the financial services industry ever did was to take the word “debt,” which people were brought up to consider a bad thing that you want to avoid, and to rename it as “credit,” which sounds like a good thing that you want more of. This is a major example of reversification at work.
dead cat bounce: An apparent but illusory recovery in a falling market. It’s the same kind of bounce a dead cat would give if you chucked it out a window: not a very big one. If you’re wondering who on earth would be so sick as to come up with a metaphor like that, greetings, and welcome to the world of money.
deadweight costs: The things that are indirect consequences of tax. If you raise tax on business, you raise more money from the businesses that are paying tax; but the increased rates of tax will cause some other firms to go broke and therefore stop paying tax altogether. That is a deadweight cost of the tax rise. A government will notice the tax it receives from the tax rise, but may not pay enough attention to the tax it is no longer receiving from the firms that have gone under. Deadweight costs are difficult to measure because to do so involves an attempt to put a price on this missing economic activity. Advocates of lower taxes argue that governments consistently understate the impact of deadweight costs.
In general, financial markets are keen to make default sound like the end of life as we know it, though the fact is that countries do default—Argentina in 2001, Iceland in 2008—and life went on.
[G]overnments quite like inflation, because it reduces the value of their outstanding debts.
Although much of the coverage of the stock market focuses on how the price of shares goes up and down, history shows that about half the value of stocks has always come from the dividends they pay.
The USA, amazingly to non-Americans, has no statutory vacation entitlement. That, right there, is the single biggest argument for trade unions, since it is thanks to unions that ordinary citizens in other countries got these rights.
[I]n a normal life span, more than three-quarters of your adult waking hours are spent not working.
There has never been a war between two countries that trade freely with each other.
People often speak of Glass-Steagall as a magic formula for making banks safe, but it’s worth emphasizing that the distinction between the two kinds of banking had been steadily eroded to the point where it was barely functioning. Also, many banks that did not breach the line between retail and investment banking went broke, and had to be bailed out.
The total GDP of the world... is... $71.83 trillion. This is according to the CIA, so it must be true... The world’s total burden of debt, government and personal and corporate all added together, is 313 percent, or $223.3 trillion. That means our planet has the equivalent of a mortgage three times its income.
It’s been estimated that about 12 percent of the world’s gold is in use in electronics. (The other place where it has a practical use is in Vietnam, where all property purchases are made in gold.)
One of the things I’ve been doing since I began taking an interest in the world of money is ask people involved in that world what they do with their own money. My question in essence is whether they do the things we civilians are advised to do, in respect of pensions and equity investments and the like. I reckon I’ve asked forty or so finance professionals this, and I haven’t yet met a single one who follows the advice given to civilians.
The alarming thing about high-frequency trading is that nobody really understands it.
hollowing out: An important phenomenon in the modern world. A private equity guy once told me how it’s done: “You get some capital together and buy a company in Germany that makes machine parts. Then you close the factory and move the manufacturing to China, where the quality control maybe isn’t as good but it costs a tenth as much to make, and because you still own the brand and control the distribution network, none of your customers will notice.”
immigration: A hotly contested issue in politics, but not so much in economics. The birthrate in the developed world, especially Europe, is too low... Since the next generation of taxpayers are not being born, they will have to be imported: that is why the Western world needs high and sustained levels of immigration... The long-term benefits of immigration are general; the short-term costs are local. It should not be beyond the competence of governments to address that discrepancy.
insurance: A great idea—but it is distressing how often, in its real-life manifestations, it turns out to be a scam dependent on the customer’s not having read the small print.
I haven’t seen a single even halfway convincing argument that universal banks [mixing retail with investment banking] convey any benefit at all to the general public.
Jáchymov: I bet you’ve indirectly referred to this place in the Czech Republic at some point in the last week; if you’re interested in money you will certainly have used it at some point in the last day, maybe even in the last hour. How so? Can you guess? Give up? Well, the Bohemian town of Jáchymov is known in German as Joachimsthal—does that help? It was the site of a famous silver mine, a town that grew tenfold in population between 1516 to 1526 as it became the center of a boom based on the manufacture of a silver coin known as Joachimsthaler. It in time became known as thaler, or taler. The coins were a standard size and form of currency throughout much of Europe for four hundred years, and it’s from this ubiquity that we get the word “dollar”—so every time a dollar is mentioned, someone is unknowingly citing this otherwise obscure spot in rural Bohemia.
[R]ichness is a relationship between two people.
[P]eople would rather earn $60,000 in a place where average earnings are $40,000 than earn $80,000 where the average is $100,000.
Another microeconomic study that I liked concerned the rates charged by transsexual prostitutes in the middle of their sexual transformation, who in some countries charge less than straightforwardly female prostitutes and in other countries charge more. The conclusion reached was that they charge more in Catholic countries. At least, that’s what I think it said, but I can’t find the reference anywhere so now I’m wondering if I imagined it.
Bailing out the banks... creates a classic form of moral hazard, because it exempts those banks from the consequences of their mistakes.
Here is my favorite money-related onion fact: onions are so important in India that the government has twice fallen, in 1980 and 1998, because of surges in their price.
Perhaps the most vivid example of the resource curse in the modern world is the Congo, which is in resource (especially mineral resource) terms one of the richest countries in the world, and where 5.4 million people have died in conflict since 1998.
rich lists: Such lists are good fun, but they shouldn’t be taken too seriously. A journalist at the Financial Times once told me, “We’d love to do one and we often talk about it, but the problem is you just can’t stand it up.” That’s a journalist’s way of saying that the facts and numbers are impossible to verify.
It’s interesting that the richest monarch in the world, who in 2011 (the last time Forbes did a rich-monarch list) was King Bhumbibol of Thailand at $30 billion, is hovering only at around the number 10 mark in the broader global rich list.
Government rhetoric is consistenly pro-saver; government policy is consistently anti-saver.
72: A useful number because you can use it to calculate how long it takes for the power of compound interest to double your money. For any given rate of interest, just divide it into 72, and that’s how long it takes: 6 percent, say, will double your money in twelve years.
Shadow banking, or the shadow banking system, is plenty of people’s candidate for the next big thing to blow up in the global financial system... The best, in the sense of most institutionally trustworthy, estimate I’ve seen of the current size of the [shadow banking] system is that given by the Bank of England’s Financial Stability Board in late 2012. That put the total size of the shadow system at $67 trillion. Not a reassuring figure: that’s about the same size as the total GDP of planet Earth. Some of the people who get points for being publicly worried about the financial system in the run-up to the credit crunch now have shadow banking at the top of their list of concerns.
The theory of shareholder value [making money only for shareholders] has failed even on its own terms, because since it became popular in the late sixties the rate of return on assets and on invested capital has fallen by 75 percent. A countervailing idea of corporations is that they have a life and a character of their own and that the best of them make money by serving customers; customers should come first, rather than shareholders; this idea has gained force as companies that have followed it, such as Apple and Amazon, have had success.
Student loans were the only kind of lending to increase during the Great Recession, and have overtaken credit card debt and car and home loans to become the biggest source of personal debt apart from mortgages.
[T]he perception that Facebook is hygienic is sustained by tens of thousands of hours of badly paid labor on the part of people in the developing world who work for companies hired to scan for offensive images and who are, according to the one Moroccan man who went on the record to complain about it, paid a dollar an hour for doing so. That’s a perfect example of surplus value: huge amounts of poorly paid menial work creating the hygienic image of a company that at the time of writing has a market capitalization of $146 billion.
When two companies merge, the first thing that analysts look at when evaluating the deal is how many jobs have been lost: the higher the number, the better.
It’s one of the deepest and most important secrets of [the financial services industry] that, as old pros say, “You make more money by selling advice than you do by following it.”
On 29 February 2012, the World Bank announced that the proportion of the planet’s population living in absolute poverty—on less than $1.25 a day—had halved from 1990 to 2010. That rate of poverty reduction, driven by economic growth across the world from China to Ghana, is unprecedented in global history.
The MDGs [Millenium Development Goals] have seen 700 million people move out of absolute poverty. In 1990, 47 percent of the population of the developing world was below this threshold, a number that by 2010 had fallen to 22 percent. The proportion of the developing world’s population living in hunger fell from 23.2 percent to 14.9 percent. That still leaves 870 million hungry people, which, on a planet with the resources to feed all of them, is 870 million more than there should be.
[T]he first global leader to mention climate change in a speech was Margaret Thatcher, who in 1989 said in an address to the UN, “We are seeing a vast increase in the amount of carbon dioxide reaching the atmosphere. . . . The result is that change in future is likely to be more fundamental and more widespread than anything we have known hitherto.” ... Thatcher was and remains the only British prime minister to have had a degree in science. She saw the question as a scientific one rather than an issue of ideology. Conversely, since globalization and trade are the single biggest factors raising GDP in the developing world, we might expect the left to be in favor of them, and the right, which historically has had a strong protectionist streak, to be against. But it didn’t work out that way: climate change is owned by the left, globalization by the right.
[T]he particularities of Chinese Communist Party–mandated capitalism are so odd that nobody on the political right is willing to claim China’s progress as evidence for the virtues of free markets. So credit for the biggest economic achievement in the history of the world is in effect lying unclaimed on the table, like a weirdly toxic form of poker winnings.
The right is embarrassed by the fact that the economic growth that it would normally boast about has taken place mainly in a communist country.
If 16,438 children died today in a single disaster, it would dominate every news media outlet in the world for weeks. The fact that they aren’t dying isn’t news.
In the next decade, 1.2 billion young people are going to enter the labor market, worldwide... Projections at the moment are that growth in the labor market and retirement of the working population will open up 300 million new jobs over that same period. That’s a huge gap, 1.2 billion workers chasing 300 million jobs.
When I was growing up in Hong Kong, top-rate tax in the UK was over 90 percent, whereas top-rate tax in Hong Kong was 15 percent, and there was no mass exodus of the rich then, just as there wouldn’t be one now.
In Denmark, a judge earns more than a cleaner: two and a half times more. How does that work out for them? The Danes report the highest level of life satisfaction of anyone in the world.
Some readers may be disappointed that I am not advocating more-explicit alternatives to capitalism. I might well advocate one if I could see one that seemed to be working. The candidate that was touted more than once in the first decade of this century was the socialist countries of Latin America, but the problem with that as a model for elsewhere is that all those countries were benefiting from gigantic commodity booms, especially in the case of Venezuela and its oil.
When people say, “It can’t go on like this,” what usually happens is that it does go on like that, more extendedly and more painfully than anyone could possibly imagine; it happens in relationships, in jobs, in entire countries. It goes way, way past the point of bearability. And then things suddenly and abruptly change. I think that’s where we are today.
Here are some quotes that jumped out at me:
[T]he money the government uses to buy back the debt is newly created electronic money. It’s money that simply didn’t exist before. It’s like typing 100,000 at a keyboard and magically having $100,000 added to your bank account. Then you use that newly created money to pay off your debts. That’s QE. As for QE2, well, that’s just the second lot of QE, put into place because the first one didn’t have enough of a stimulus effect on the economy.
Some of the people who speak money do genuinely not give a shit about anything other than money.
Most hedge funds fail: 90 percent of all the hedge funds that have ever existed have closed or gone broke.
The chaotic lack of consensus [on economics] arises because economics is “the study of mankind in the ordinary business of life.” When is anyone going to reach any final verdicts about that?
Western economies did not grow to dominance by pursuing a neoliberal, free-market model: during the years of their growth, every economy in the Western world pursued policies that were to various degrees protectionist. The United States, now such a strident advocate of free markets for its own exports, was during the nineteenth and early twentieth centuries the most protectionist economy in the industrialized world.
[Quoting Charles Kindleberger:] [T]he economist with only one model, which he or she applies to all situations, is wrong much of the time.
Basis point: One hundredth of a percentage point... Referring to basis points is one of the quickest and easiest ways of pretending to know what you’re talking about when it comes to money.
[W]hen there were two beers, a third of people chose the cheaper; adding an even cheaper beer made the share of that beer go up, because it was now in the middle of three prices; adding an even more expensive beer at the top, and dropping the cheapest beer, made the share of the new beer in the middle (which had previously been the most expensive) go up from two-thirds to 90 percent.
Benford’s law: A seriously cool but quite strange law of math. It says that, in many types of random data, the number 1 is the most frequently occurring number, cropping up as much as 30 percent of the time. This is a surprisingly useful finding that is often employed to detect phoney figures in areas such as accounting and science. The math is immensely complicated, and I would love to give a full explanation of it here, but unfortunately I have to rush off now because I’ve just remembered I’ve got a thing.
Black Swan: A term coined by the philosopher-investor Naseem Nicholas Taleb for an event so rare it doesn’t fit in normal models of statistical probability... An example would be Earth being hit by an asteroid big enough to cause global disaster, something NASA says happens every 500,000 years or so. That puts the odds of its happening in a typical 80-year life at one in 6,250 — which is uncomfortably high. It’s very hard to know how to think about this fact.
Ordinary members of the public hear much more about the equity market—the “stock market” — in the news and general chatter, but the bond market is much bigger and more important, in global financial terms.
“Exclusive” is bullshit, not least because it is used mostly about places that are open to the public, like restaurants and hotels... There is an enormous amount of bullshit in the world of money.
[T]he most recent and glaring example of nonsense was in the run-up to the credit crunch, in which broad sectors of banks and investors convinced themselves that they had invented a new category of financial instrument that guaranteed high rates of return with no risk. Since it is a fundamental axiom of investment that risk is correlated with return—that you can’t make higher rates of return without taking on higher levels of risk—this is like claiming to have invented an antigravity device, or a perpetual motion machine.
As one wit has said, search makes 110 percent of Google’s profits—all its money, and then the 10 percent that it loses paying for all the other stuff. That advertising model reaches deep down into the core of Google’s being and is starting to taint its search function, so that it brings you not necessarily the thing you most need to look for, but the link that will make it most money if you click on it.
[A] company will often prefer to buy back shares when it believes those shares are undervalued—which can shade very close to a form of insider dealing, profiting the insiders who know the truth.
Politicians like to talk about competitiveness because it sounds less painful than “doing more work for less money with fewer employment rights,” even though that in practice is what it tends to mean.
My favorite example of the power of compound interest concerns the Native Americans who sold Manhattan to Peter Minuit in 1626 for some beads and trinkets worth about $26. A grievous rip-off, obviously. But if the Native Americans had been in a position to invest the $26 at 8 percent interest—historically a by no means unprecedented rate—and had left the investment to compound annually, it would by now be worth a useful $282 trillion, far more than enough to buy the whole place back.
[W]hen a company or government talks about “cutting costs,” what it really means is “sacking people.”
[I]t’s interesting just how much the subject of money, economics, business strategy, and so on features in rap music: I don’t think there’s ever been a form of music, anywhere in the world, with such a focus on money (and I don’t just mean modern Western popular music; I mean all music).
[O]ne of the most brilliant things the financial services industry ever did was to take the word “debt,” which people were brought up to consider a bad thing that you want to avoid, and to rename it as “credit,” which sounds like a good thing that you want more of. This is a major example of reversification at work.
dead cat bounce: An apparent but illusory recovery in a falling market. It’s the same kind of bounce a dead cat would give if you chucked it out a window: not a very big one. If you’re wondering who on earth would be so sick as to come up with a metaphor like that, greetings, and welcome to the world of money.
deadweight costs: The things that are indirect consequences of tax. If you raise tax on business, you raise more money from the businesses that are paying tax; but the increased rates of tax will cause some other firms to go broke and therefore stop paying tax altogether. That is a deadweight cost of the tax rise. A government will notice the tax it receives from the tax rise, but may not pay enough attention to the tax it is no longer receiving from the firms that have gone under. Deadweight costs are difficult to measure because to do so involves an attempt to put a price on this missing economic activity. Advocates of lower taxes argue that governments consistently understate the impact of deadweight costs.
In general, financial markets are keen to make default sound like the end of life as we know it, though the fact is that countries do default—Argentina in 2001, Iceland in 2008—and life went on.
[G]overnments quite like inflation, because it reduces the value of their outstanding debts.
Although much of the coverage of the stock market focuses on how the price of shares goes up and down, history shows that about half the value of stocks has always come from the dividends they pay.
The USA, amazingly to non-Americans, has no statutory vacation entitlement. That, right there, is the single biggest argument for trade unions, since it is thanks to unions that ordinary citizens in other countries got these rights.
[I]n a normal life span, more than three-quarters of your adult waking hours are spent not working.
There has never been a war between two countries that trade freely with each other.
People often speak of Glass-Steagall as a magic formula for making banks safe, but it’s worth emphasizing that the distinction between the two kinds of banking had been steadily eroded to the point where it was barely functioning. Also, many banks that did not breach the line between retail and investment banking went broke, and had to be bailed out.
The total GDP of the world... is... $71.83 trillion. This is according to the CIA, so it must be true... The world’s total burden of debt, government and personal and corporate all added together, is 313 percent, or $223.3 trillion. That means our planet has the equivalent of a mortgage three times its income.
It’s been estimated that about 12 percent of the world’s gold is in use in electronics. (The other place where it has a practical use is in Vietnam, where all property purchases are made in gold.)
One of the things I’ve been doing since I began taking an interest in the world of money is ask people involved in that world what they do with their own money. My question in essence is whether they do the things we civilians are advised to do, in respect of pensions and equity investments and the like. I reckon I’ve asked forty or so finance professionals this, and I haven’t yet met a single one who follows the advice given to civilians.
The alarming thing about high-frequency trading is that nobody really understands it.
hollowing out: An important phenomenon in the modern world. A private equity guy once told me how it’s done: “You get some capital together and buy a company in Germany that makes machine parts. Then you close the factory and move the manufacturing to China, where the quality control maybe isn’t as good but it costs a tenth as much to make, and because you still own the brand and control the distribution network, none of your customers will notice.”
immigration: A hotly contested issue in politics, but not so much in economics. The birthrate in the developed world, especially Europe, is too low... Since the next generation of taxpayers are not being born, they will have to be imported: that is why the Western world needs high and sustained levels of immigration... The long-term benefits of immigration are general; the short-term costs are local. It should not be beyond the competence of governments to address that discrepancy.
insurance: A great idea—but it is distressing how often, in its real-life manifestations, it turns out to be a scam dependent on the customer’s not having read the small print.
I haven’t seen a single even halfway convincing argument that universal banks [mixing retail with investment banking] convey any benefit at all to the general public.
Jáchymov: I bet you’ve indirectly referred to this place in the Czech Republic at some point in the last week; if you’re interested in money you will certainly have used it at some point in the last day, maybe even in the last hour. How so? Can you guess? Give up? Well, the Bohemian town of Jáchymov is known in German as Joachimsthal—does that help? It was the site of a famous silver mine, a town that grew tenfold in population between 1516 to 1526 as it became the center of a boom based on the manufacture of a silver coin known as Joachimsthaler. It in time became known as thaler, or taler. The coins were a standard size and form of currency throughout much of Europe for four hundred years, and it’s from this ubiquity that we get the word “dollar”—so every time a dollar is mentioned, someone is unknowingly citing this otherwise obscure spot in rural Bohemia.
[R]ichness is a relationship between two people.
[P]eople would rather earn $60,000 in a place where average earnings are $40,000 than earn $80,000 where the average is $100,000.
Another microeconomic study that I liked concerned the rates charged by transsexual prostitutes in the middle of their sexual transformation, who in some countries charge less than straightforwardly female prostitutes and in other countries charge more. The conclusion reached was that they charge more in Catholic countries. At least, that’s what I think it said, but I can’t find the reference anywhere so now I’m wondering if I imagined it.
Bailing out the banks... creates a classic form of moral hazard, because it exempts those banks from the consequences of their mistakes.
Here is my favorite money-related onion fact: onions are so important in India that the government has twice fallen, in 1980 and 1998, because of surges in their price.
Perhaps the most vivid example of the resource curse in the modern world is the Congo, which is in resource (especially mineral resource) terms one of the richest countries in the world, and where 5.4 million people have died in conflict since 1998.
rich lists: Such lists are good fun, but they shouldn’t be taken too seriously. A journalist at the Financial Times once told me, “We’d love to do one and we often talk about it, but the problem is you just can’t stand it up.” That’s a journalist’s way of saying that the facts and numbers are impossible to verify.
It’s interesting that the richest monarch in the world, who in 2011 (the last time Forbes did a rich-monarch list) was King Bhumbibol of Thailand at $30 billion, is hovering only at around the number 10 mark in the broader global rich list.
Government rhetoric is consistenly pro-saver; government policy is consistently anti-saver.
72: A useful number because you can use it to calculate how long it takes for the power of compound interest to double your money. For any given rate of interest, just divide it into 72, and that’s how long it takes: 6 percent, say, will double your money in twelve years.
Shadow banking, or the shadow banking system, is plenty of people’s candidate for the next big thing to blow up in the global financial system... The best, in the sense of most institutionally trustworthy, estimate I’ve seen of the current size of the [shadow banking] system is that given by the Bank of England’s Financial Stability Board in late 2012. That put the total size of the shadow system at $67 trillion. Not a reassuring figure: that’s about the same size as the total GDP of planet Earth. Some of the people who get points for being publicly worried about the financial system in the run-up to the credit crunch now have shadow banking at the top of their list of concerns.
The theory of shareholder value [making money only for shareholders] has failed even on its own terms, because since it became popular in the late sixties the rate of return on assets and on invested capital has fallen by 75 percent. A countervailing idea of corporations is that they have a life and a character of their own and that the best of them make money by serving customers; customers should come first, rather than shareholders; this idea has gained force as companies that have followed it, such as Apple and Amazon, have had success.
Student loans were the only kind of lending to increase during the Great Recession, and have overtaken credit card debt and car and home loans to become the biggest source of personal debt apart from mortgages.
[T]he perception that Facebook is hygienic is sustained by tens of thousands of hours of badly paid labor on the part of people in the developing world who work for companies hired to scan for offensive images and who are, according to the one Moroccan man who went on the record to complain about it, paid a dollar an hour for doing so. That’s a perfect example of surplus value: huge amounts of poorly paid menial work creating the hygienic image of a company that at the time of writing has a market capitalization of $146 billion.
When two companies merge, the first thing that analysts look at when evaluating the deal is how many jobs have been lost: the higher the number, the better.
It’s one of the deepest and most important secrets of [the financial services industry] that, as old pros say, “You make more money by selling advice than you do by following it.”
On 29 February 2012, the World Bank announced that the proportion of the planet’s population living in absolute poverty—on less than $1.25 a day—had halved from 1990 to 2010. That rate of poverty reduction, driven by economic growth across the world from China to Ghana, is unprecedented in global history.
The MDGs [Millenium Development Goals] have seen 700 million people move out of absolute poverty. In 1990, 47 percent of the population of the developing world was below this threshold, a number that by 2010 had fallen to 22 percent. The proportion of the developing world’s population living in hunger fell from 23.2 percent to 14.9 percent. That still leaves 870 million hungry people, which, on a planet with the resources to feed all of them, is 870 million more than there should be.
[T]he first global leader to mention climate change in a speech was Margaret Thatcher, who in 1989 said in an address to the UN, “We are seeing a vast increase in the amount of carbon dioxide reaching the atmosphere. . . . The result is that change in future is likely to be more fundamental and more widespread than anything we have known hitherto.” ... Thatcher was and remains the only British prime minister to have had a degree in science. She saw the question as a scientific one rather than an issue of ideology. Conversely, since globalization and trade are the single biggest factors raising GDP in the developing world, we might expect the left to be in favor of them, and the right, which historically has had a strong protectionist streak, to be against. But it didn’t work out that way: climate change is owned by the left, globalization by the right.
[T]he particularities of Chinese Communist Party–mandated capitalism are so odd that nobody on the political right is willing to claim China’s progress as evidence for the virtues of free markets. So credit for the biggest economic achievement in the history of the world is in effect lying unclaimed on the table, like a weirdly toxic form of poker winnings.
The right is embarrassed by the fact that the economic growth that it would normally boast about has taken place mainly in a communist country.
If 16,438 children died today in a single disaster, it would dominate every news media outlet in the world for weeks. The fact that they aren’t dying isn’t news.
In the next decade, 1.2 billion young people are going to enter the labor market, worldwide... Projections at the moment are that growth in the labor market and retirement of the working population will open up 300 million new jobs over that same period. That’s a huge gap, 1.2 billion workers chasing 300 million jobs.
When I was growing up in Hong Kong, top-rate tax in the UK was over 90 percent, whereas top-rate tax in Hong Kong was 15 percent, and there was no mass exodus of the rich then, just as there wouldn’t be one now.
In Denmark, a judge earns more than a cleaner: two and a half times more. How does that work out for them? The Danes report the highest level of life satisfaction of anyone in the world.
Some readers may be disappointed that I am not advocating more-explicit alternatives to capitalism. I might well advocate one if I could see one that seemed to be working. The candidate that was touted more than once in the first decade of this century was the socialist countries of Latin America, but the problem with that as a model for elsewhere is that all those countries were benefiting from gigantic commodity booms, especially in the case of Venezuela and its oil.
When people say, “It can’t go on like this,” what usually happens is that it does go on like that, more extendedly and more painfully than anyone could possibly imagine; it happens in relationships, in jobs, in entire countries. It goes way, way past the point of bearability. And then things suddenly and abruptly change. I think that’s where we are today.
September 23, 2018
330.14 LAN
eAudio
I picked from Overdrive ad. I skipped one hour part in the middle of book. It mainly explains basic economic terms: security is not safety, it is 证券. Wow! see more on evernote.
==============
Most confused terms:
--bond: 债券 coupon: A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond's issue date until it matures.
Securitization: 证券化 is the process of turning something into a security securitize. verb.
security :证券;债券;公债;股票: any financial instrument that can be traded as asset. A security is a tradable financial asset.
--p69 Assets vs. liabilities
--p82 bond market
--p96 core capital
--p112 Equities
Quantitative easing
--p155 leverage
agent 代理人 broker 中间商 principal 委托人
mortgage is a bank asset, my cash is bank liability
asset = liabilities + equity (capital, stockholder equity ) //double-entry bookkeeping system.
买bond是买债务，买stock买equity
Debit accounts vs. credit accounts
investment bank: invest security,i.e Shares and bonds,etc.
retail bank or commercial bank: deal with deposits or mortgage.
I.O.U.: Why Everyone Owes Everyone and No One Can Pay By Lanchester, John /330.90511 LAN
Capital By Lanchester, John (Novel, also has DVD)
Futher Reading
The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton (eAudio, current political and economic world order)
Economics For Dummies by Sean Masaki Flynn
Naked Economics: Undressing the Dismal Science by Charles Wheelan
The Truth About Markets: Why Some Nations are Rich But Most Remain Poor by John Kay
politics of economics:
23 Things They Don't Tell You about Capitalism by Ha-Joon Chang (criticize neoliberal economists have spun since the Age of Reagan: free market)....
Summary: everything that can be commoditized are commoditized and trade in capitalistic economy. Our dominant model is neoliberal economic which relentless pursuit the GNP growth to fix anything need to be reexamined. Government usually use inflation rate and interest rate to control economy.
1. Do bank fulfill their role? as investment tools with healthy risk or it become increase on speculation 投机买卖 with unhealthy risk
2. banks: OTC exchange, prop trading. Need more transparency.
prop trading and Volcker rule.
1. compound rate sound good, it is exponential growth in math jargon. But at the beginning, the growth is very low, only after a certain point, growth is dramatically increase. So the catch is it will take years, and bank will not go bankrupt. So do not tricked by people who play compound rate to you.
About exponential growth, there is a famous math question. A tub take 60 second to fill it up, next second will double its filling, like 1, 2,4, 8, 16, how long it does to take fill the half of tub? 59 seconds.
It is said the population growth is exponential.
2. QE: quantitative easing. Government buy back its own bonds to stimulate economy when the interest rate are too low. Implication of this, your bond is always safe, government can always print out money to buy back, the bad news it cause inflation, the your money value less.
--72: use it to calculate how long to double investment for any given rate of interest in compound interesting, just 72 / interest = years to double your invest money. e.g 6%, 72 / 6 = 12,take 12 years to double, 12% 72 /12 = 6 years.
1000 * 1.06 * 1.06 *... = 2012.20 after 50 years, 18,420.15, after 100 years, 339,302.08
1000 * 1.12 * 1.12 * 1.12 * 1.12 * 1.12 * 1.12 = 1973.82 after 50 years, 289002.19, after 100 years, 83,552,265.73
It is exponential growth, beauty of exponential function, run-away disaster. The trick in the beginning is very slow, after one turn-point, it will grow dramatically. For money, the question the bank still there to pay your money? I guess not.
there is one famous question: it takes 6o minutes to fill a tub? Suppose every minute it increase the filling by double previous amount. How long it will take to fill half of a tub? 59 minutes. This is
--commodity: fungible, 可互换的 coal is fungible, book not.
--neoliberal economic: deregulation, free trade, privatization, lower taxes (wealth trickle down), lower state involvement in economy. result: rich get richer, poor get poorer, rising level of inequality and fairness to achieve goal: GNP continue grow.
1. CEO are paid 204 times more than average employee. In Switzerland, referendum proposed 12 times multiple. 95% of the rise of total income go to top 1%.
Confused and related concepts:
--inflation: money lose values, things gain in price over time. USA and UK is 2%, euro area is close to or below 2%. By continuing of process inflation, Government eat wealth of most citizens, enriches only a few, destroy relationship between debtors and creditors, ultimate foundation of capitalism. Government have to pretend to hate inflation because it eats wealth of its citizens, at the same time like it, because it would diminish the real value of the amount they own. To some cynical observation, the likeliest outcome of the Western world's debt problems wold be a rise ion the rate of inflation.
--interest rate:
when interest rate is up, the currency will rise (higher guaranteed rates of investment will attract money into buying the coutry's debt. inflation will fall (inflation means money worth less, whereas a rise in interests rate means money is more expensive.)
bear vs. bull, inflation vs. deflation, dove vs. hawk
dove: regard to inflation dove, means economy need much stimulus and lower tax rate.
--CPI: consumer price index; only measure the change, indicator of inflation, deflation. If people spend more because they buy more goods that is not inflected in the index.
--RPI: retail price index
================
--Libor Scandal: Libor (London Interbank Offered Rate): banks manipulate for their own profits.
--Forex Scandal: foreign exchange market (forex): banks colluded for at least a decade to manipulate exchange rates for their own financial gain.
--London Whale: Bruno Iksil, at least $6.2 billion for JPMorgan Chase & Co. in 2012.
--Bernard "Bernie" Lawrence Madoff: largest Ponzi scheme (New money being paid is given directly to older customers), SIPC estimated losses to investors of $18 billion, was sentenced to 150 years in jail.
1. What is money? Where does its value come from? Marx's surplus theory is considered as dud.
2. The art of economic is to choose the right model for the given problem, and abandon it when the problem changes shape
3. Model is just a model, a guidance, not axiom.
4. Economic: the study of mankind in the ordinary business of life. - by Alfred Marshall
Economic: the dismal science - by Thomas Carlyle
Reversification: a process in which works come through a process of evolution and innovation, have a meaning that is opposite to, or at least very different from their initial sense.
Chinese wall - a invisible dividing line inside a financial institution that prevents people from sharing information across it, in order to avert conflicts of interest. In reality, it is leak wall.
Hedge fund: bet both win and lose. Bet something going up, "going long", at the same time, something going down, "going short". This is "long-short" hedge fund strategies. Created by Alfred Winslow Jones. They're expensive. a standard fee is "2 and 20", i.e., 2 percent of fee charge, 20% of any profit above an agreed benchmark. ( Jones based on Phoenician sea caption 20% of profit after a successful sea voyage). As it's used today, it means a lightly regulated pool of private capital, almost always doing something exotic.
RMBS: residential mortgage-backed security. a type of pooled debt based on people's mortgage, turned into something that investors can buy and sell. Mezzanine is the riskiest one.
credit crunch: a sudden sharp reduction in the availability of money or credit from banks and other lenders.
lever: leverage: borrow money; ratio between capital and assets.
credit: debt
bailout: injection of public money into a failing institution ( is slopping water over the side of a boat)
synergy; sacking people
inflation: money being worth less. deflation: price fall
risk: precise mathematical assessment of probability
noncore assets: garbage.
bias toward middle price
=====================
Lexicon of money p65-228.
================
Important people and their works:
--Smith, Adam (1723-1790): he said. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages."
The Wealth of Nations by Adam Smith (classical book), full title An Inquiry into the Nature & Causes of the Wealth of Nations
--Adam smith institution: aka libertarian, deregulation and free market (right wing, conservative,Republic, less welfare, not left wing liberal, democrat)
neoliberalism : believe efficient market, utility maximization, rising inequality. sees the route to the greater collective good in the empowerment of the individual.
My word: libertarian is similar to neoliberalism, neoliberal economists have spun since the Age of Reagan: free market
--Alfred Marshall, was one of the most influential economists of his time. His book, Principles of Economics(1890), was the dominant economic textbook in England for many years
--Keynes, John Maynard (1883-1946)
The General Theory of Employment, Interest, and Money d(opaque, overcompressed)
The Economic Consequences of the Peace
--J. P. Morgan (1837-1913), the panic of 1893 and panic of 1907, loan his money to American government. His band was broken up by the Glass-steagall Act of 1933 into 3 institution, bank J.P Morgan and Col, the investment house Morgan Stanley, oversees investment bank Morgan Grenfell.
--John Law (1671 – 1729) was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade. He was responsible for the Mississippi Company bubble and a chaotic economic collapse in France. He originated economic ideas such as the scarcity theory of value and the real bills doctrine. Law held that money creation will stimulate the economy, that paper money is preferable to metallic money, and that shares are a superior form of money since they pay dividends. see James Buchans's "Frozen Desire"
--Kondratiev cycle: the cycles consist of alternating intervals of high sectoral growth and intervals of relatively slow growth in the period of a wave ranges from forty to sixty years. No real proof of this cycle. A Russian was sent to the Gulag and executed in 1938 because communist ideology that capitalism would inevitably destroy itself.
--Laffer Curve; developed by Arthur Laffer in 1974 to show the relationship between tax rates and the amount of tax revenue collected by governments. Raise more money in tax by cutting tax rates. First wrote on a napkin
----chocfinger, refer to Anthony Ward, hedge fund, fails later. analogy with Bond villain Golffinger, who tried to take control of US gold reserve.
================
Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger ( be aware of certainty, recommend reading)
A Random Walk Down Wall StreetThe Time-tested Strategy for Successful Investing
By Malkiel, Burton Gordon (recommended by author)
The Big Short: Inside the Doomsday Machine by Michael Lewis
Frozen Desire: The Meaning of Money by James Buchan
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt
Life, Liberty, and Property: A Story of Conflict and a Measurement of Conflicting Rights by Alfred Winslow Jones
More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby (pro-hedge argument)
Debunking Economics: Supplement to the Naked Emperor Dethroned? by Steve Keen
Money: Whence It Came, Where It Went by John Kenneth Galbraith
Empire State of Mind: How Jay-Z Went From Street Corner to Corner Office by Zack O'Malley Greenburg (Rap focus more on money than any other kind of music)
Debt: The First 5,000 Years by David Graeber
The Bankers' New Clothes: Whats Wrong with Banking and What to Do about It by Anat Admati
Thinking, Fast and Slow by Daniel Kahneman (Behavioral economics)
The Wisdom of Crowds Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations by James Surowiecki
The Intelligent Investor by Benjamin Graham (1949)
Social Limits to Growth by Fred Hirsch
Ill Fares the Land by Tony Judt (reveals how we have arrived at our present dangerously confused moment, uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth.
Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen
The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly
Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo
The MONIAC (Monetary National Income Analogue Computer) also known as the Phillips Hydraulic Computer and the Financephalograph, was created in 1949 by the New Zealand economist Bill Phillips
eAudio
I picked from Overdrive ad. I skipped one hour part in the middle of book. It mainly explains basic economic terms: security is not safety, it is 证券. Wow! see more on evernote.
==============
Most confused terms:
--bond: 债券 coupon: A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond's issue date until it matures.
Securitization: 证券化 is the process of turning something into a security securitize. verb.
security :证券;债券;公债;股票: any financial instrument that can be traded as asset. A security is a tradable financial asset.
--p69 Assets vs. liabilities
--p82 bond market
--p96 core capital
--p112 Equities
Quantitative easing
--p155 leverage
agent 代理人 broker 中间商 principal 委托人
mortgage is a bank asset, my cash is bank liability
asset = liabilities + equity (capital, stockholder equity ) //double-entry bookkeeping system.
买bond是买债务，买stock买equity
Debit accounts vs. credit accounts
investment bank: invest security,i.e Shares and bonds,etc.
retail bank or commercial bank: deal with deposits or mortgage.
I.O.U.: Why Everyone Owes Everyone and No One Can Pay By Lanchester, John /330.90511 LAN
Capital By Lanchester, John (Novel, also has DVD)
Futher Reading
The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton (eAudio, current political and economic world order)
Economics For Dummies by Sean Masaki Flynn
Naked Economics: Undressing the Dismal Science by Charles Wheelan
The Truth About Markets: Why Some Nations are Rich But Most Remain Poor by John Kay
politics of economics:
23 Things They Don't Tell You about Capitalism by Ha-Joon Chang (criticize neoliberal economists have spun since the Age of Reagan: free market)....
Summary: everything that can be commoditized are commoditized and trade in capitalistic economy. Our dominant model is neoliberal economic which relentless pursuit the GNP growth to fix anything need to be reexamined. Government usually use inflation rate and interest rate to control economy.
1. Do bank fulfill their role? as investment tools with healthy risk or it become increase on speculation 投机买卖 with unhealthy risk
2. banks: OTC exchange, prop trading. Need more transparency.
prop trading and Volcker rule.
1. compound rate sound good, it is exponential growth in math jargon. But at the beginning, the growth is very low, only after a certain point, growth is dramatically increase. So the catch is it will take years, and bank will not go bankrupt. So do not tricked by people who play compound rate to you.
About exponential growth, there is a famous math question. A tub take 60 second to fill it up, next second will double its filling, like 1, 2,4, 8, 16, how long it does to take fill the half of tub? 59 seconds.
It is said the population growth is exponential.
2. QE: quantitative easing. Government buy back its own bonds to stimulate economy when the interest rate are too low. Implication of this, your bond is always safe, government can always print out money to buy back, the bad news it cause inflation, the your money value less.
--72: use it to calculate how long to double investment for any given rate of interest in compound interesting, just 72 / interest = years to double your invest money. e.g 6%, 72 / 6 = 12,take 12 years to double, 12% 72 /12 = 6 years.
1000 * 1.06 * 1.06 *... = 2012.20 after 50 years, 18,420.15, after 100 years, 339,302.08
1000 * 1.12 * 1.12 * 1.12 * 1.12 * 1.12 * 1.12 = 1973.82 after 50 years, 289002.19, after 100 years, 83,552,265.73
It is exponential growth, beauty of exponential function, run-away disaster. The trick in the beginning is very slow, after one turn-point, it will grow dramatically. For money, the question the bank still there to pay your money? I guess not.
there is one famous question: it takes 6o minutes to fill a tub? Suppose every minute it increase the filling by double previous amount. How long it will take to fill half of a tub? 59 minutes. This is
--commodity: fungible, 可互换的 coal is fungible, book not.
--neoliberal economic: deregulation, free trade, privatization, lower taxes (wealth trickle down), lower state involvement in economy. result: rich get richer, poor get poorer, rising level of inequality and fairness to achieve goal: GNP continue grow.
1. CEO are paid 204 times more than average employee. In Switzerland, referendum proposed 12 times multiple. 95% of the rise of total income go to top 1%.
Confused and related concepts:
--inflation: money lose values, things gain in price over time. USA and UK is 2%, euro area is close to or below 2%. By continuing of process inflation, Government eat wealth of most citizens, enriches only a few, destroy relationship between debtors and creditors, ultimate foundation of capitalism. Government have to pretend to hate inflation because it eats wealth of its citizens, at the same time like it, because it would diminish the real value of the amount they own. To some cynical observation, the likeliest outcome of the Western world's debt problems wold be a rise ion the rate of inflation.
--interest rate:
when interest rate is up, the currency will rise (higher guaranteed rates of investment will attract money into buying the coutry's debt. inflation will fall (inflation means money worth less, whereas a rise in interests rate means money is more expensive.)
bear vs. bull, inflation vs. deflation, dove vs. hawk
dove: regard to inflation dove, means economy need much stimulus and lower tax rate.
--CPI: consumer price index; only measure the change, indicator of inflation, deflation. If people spend more because they buy more goods that is not inflected in the index.
--RPI: retail price index
================
--Libor Scandal: Libor (London Interbank Offered Rate): banks manipulate for their own profits.
--Forex Scandal: foreign exchange market (forex): banks colluded for at least a decade to manipulate exchange rates for their own financial gain.
--London Whale: Bruno Iksil, at least $6.2 billion for JPMorgan Chase & Co. in 2012.
--Bernard "Bernie" Lawrence Madoff: largest Ponzi scheme (New money being paid is given directly to older customers), SIPC estimated losses to investors of $18 billion, was sentenced to 150 years in jail.
1. What is money? Where does its value come from? Marx's surplus theory is considered as dud.
2. The art of economic is to choose the right model for the given problem, and abandon it when the problem changes shape
3. Model is just a model, a guidance, not axiom.
4. Economic: the study of mankind in the ordinary business of life. - by Alfred Marshall
Economic: the dismal science - by Thomas Carlyle
Reversification: a process in which works come through a process of evolution and innovation, have a meaning that is opposite to, or at least very different from their initial sense.
Chinese wall - a invisible dividing line inside a financial institution that prevents people from sharing information across it, in order to avert conflicts of interest. In reality, it is leak wall.
Hedge fund: bet both win and lose. Bet something going up, "going long", at the same time, something going down, "going short". This is "long-short" hedge fund strategies. Created by Alfred Winslow Jones. They're expensive. a standard fee is "2 and 20", i.e., 2 percent of fee charge, 20% of any profit above an agreed benchmark. ( Jones based on Phoenician sea caption 20% of profit after a successful sea voyage). As it's used today, it means a lightly regulated pool of private capital, almost always doing something exotic.
RMBS: residential mortgage-backed security. a type of pooled debt based on people's mortgage, turned into something that investors can buy and sell. Mezzanine is the riskiest one.
credit crunch: a sudden sharp reduction in the availability of money or credit from banks and other lenders.
lever: leverage: borrow money; ratio between capital and assets.
credit: debt
bailout: injection of public money into a failing institution ( is slopping water over the side of a boat)
synergy; sacking people
inflation: money being worth less. deflation: price fall
risk: precise mathematical assessment of probability
noncore assets: garbage.
bias toward middle price
=====================
Lexicon of money p65-228.
================
Important people and their works:
--Smith, Adam (1723-1790): he said. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages."
The Wealth of Nations by Adam Smith (classical book), full title An Inquiry into the Nature & Causes of the Wealth of Nations
--Adam smith institution: aka libertarian, deregulation and free market (right wing, conservative,Republic, less welfare, not left wing liberal, democrat)
neoliberalism : believe efficient market, utility maximization, rising inequality. sees the route to the greater collective good in the empowerment of the individual.
My word: libertarian is similar to neoliberalism, neoliberal economists have spun since the Age of Reagan: free market
--Alfred Marshall, was one of the most influential economists of his time. His book, Principles of Economics(1890), was the dominant economic textbook in England for many years
--Keynes, John Maynard (1883-1946)
The General Theory of Employment, Interest, and Money d(opaque, overcompressed)
The Economic Consequences of the Peace
--J. P. Morgan (1837-1913), the panic of 1893 and panic of 1907, loan his money to American government. His band was broken up by the Glass-steagall Act of 1933 into 3 institution, bank J.P Morgan and Col, the investment house Morgan Stanley, oversees investment bank Morgan Grenfell.
--John Law (1671 – 1729) was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade. He was responsible for the Mississippi Company bubble and a chaotic economic collapse in France. He originated economic ideas such as the scarcity theory of value and the real bills doctrine. Law held that money creation will stimulate the economy, that paper money is preferable to metallic money, and that shares are a superior form of money since they pay dividends. see James Buchans's "Frozen Desire"
--Kondratiev cycle: the cycles consist of alternating intervals of high sectoral growth and intervals of relatively slow growth in the period of a wave ranges from forty to sixty years. No real proof of this cycle. A Russian was sent to the Gulag and executed in 1938 because communist ideology that capitalism would inevitably destroy itself.
--Laffer Curve; developed by Arthur Laffer in 1974 to show the relationship between tax rates and the amount of tax revenue collected by governments. Raise more money in tax by cutting tax rates. First wrote on a napkin
----chocfinger, refer to Anthony Ward, hedge fund, fails later. analogy with Bond villain Golffinger, who tried to take control of US gold reserve.
================
Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger ( be aware of certainty, recommend reading)
A Random Walk Down Wall StreetThe Time-tested Strategy for Successful Investing
By Malkiel, Burton Gordon (recommended by author)
The Big Short: Inside the Doomsday Machine by Michael Lewis
Frozen Desire: The Meaning of Money by James Buchan
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt
Life, Liberty, and Property: A Story of Conflict and a Measurement of Conflicting Rights by Alfred Winslow Jones
More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby (pro-hedge argument)
Debunking Economics: Supplement to the Naked Emperor Dethroned? by Steve Keen
Money: Whence It Came, Where It Went by John Kenneth Galbraith
Empire State of Mind: How Jay-Z Went From Street Corner to Corner Office by Zack O'Malley Greenburg (Rap focus more on money than any other kind of music)
Debt: The First 5,000 Years by David Graeber
The Bankers' New Clothes: Whats Wrong with Banking and What to Do about It by Anat Admati
Thinking, Fast and Slow by Daniel Kahneman (Behavioral economics)
The Wisdom of Crowds Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations by James Surowiecki
The Intelligent Investor by Benjamin Graham (1949)
Social Limits to Growth by Fred Hirsch
Ill Fares the Land by Tony Judt (reveals how we have arrived at our present dangerously confused moment, uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth.
Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen
The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly
Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo
The MONIAC (Monetary National Income Analogue Computer) also known as the Phillips Hydraulic Computer and the Financephalograph, was created in 1949 by the New Zealand economist Bill Phillips
June 9, 2017
Best lexicon I have ever read on any subject. A number of the entries are fantastically good. Take "bail-in", for instance: "The opposite, you might have thought, of a bailout, but it’s a bit more complicated than that. Instead of money being given to a troubled company to keep it in business, which is a bailout, the money is taken from people who have lent money to that company. In the case of banks (because the current examples tend to involve banks) that means that bondholders or depositors are at risk of losing money when the bank goes broke. Money they had thought was their asset, one they were free to take back and spend elsewhere, is taken from them instead. The highest-profile recent example of a bail-in was in Cyprus, where bank depositors with more than €100,000 in certain Cypriot banks lost most of their capital.19 The European Union is planning on introducing compulsory bail-ins for bankrupt banks, to affect bondholders and larger depositors, from 2018. Some people are treating bail-ins as if they are the end of life as we know it, but the principle is a simple and fairly well-understood one that if you lend money to somebody who goes broke, you don’t get all of it back. If lenders have to think about the risk they’re taking when they lend money to a bank, they will want better levels of return for their risk, which will reduce the bank’s profits. Banks would prefer not to be treated this way: for them it’s much more pleasant and profitable if, when they go broke, the taxpayer bails them out instead."
Other particularly remarkable entries are the ones on the difference between bullshit and nonsense ("In everything to do with money, and in many other areas too, it’s important to keep an eye out for those moments that are not just (relatively) harmless bullshit but the much more actively dangerous nonsense."), the reference to the "hot waitress index", the arguably best explanation available of what is a "credit default swap (CDS)" and the role of the "Greater Fool theory".
Important book, yes, much more than that: Essential.
"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency."
Other particularly remarkable entries are the ones on the difference between bullshit and nonsense ("In everything to do with money, and in many other areas too, it’s important to keep an eye out for those moments that are not just (relatively) harmless bullshit but the much more actively dangerous nonsense."), the reference to the "hot waitress index", the arguably best explanation available of what is a "credit default swap (CDS)" and the role of the "Greater Fool theory".
Important book, yes, much more than that: Essential.
"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency."
September 5, 2017
What is the book really about? It is a consideration of why economics is so hard to understand today, what it is that economists seem to be trying to do, and why there continues to be so much uncertainty about why the economy moves as it does. Lanchester tries to be as clear-eyed and skeptical as he can be as he first discusses briefly the major issues facing economists, the different theoretical approaches currently in circulation, and why those theories are deficient (they are abstract, they refuse to consider the variability of human needs, actions and reactions, and they are exclusive, refusing to consider other ideas once their minds are made up.
How did you react to the book? Read the lexicon as bedtime reading – short entries that could be put down at any time and picked up again. Read the introduction last, and ignored the conclusion, which seemed especially pie-in-the-sky. Excellent explanations of technical terms, often with a considerably jaundiced interpretation of many terms, especially those that try to obfuscate the idea of firing people so the company can make more money. He is pretty straightforward in considering the gap between the pretty logical conclusions of the theorists and the messy actuality of how people actually regard the economy, and themselves as agents in that economy.
What will you remember about the book? I hope I will remember as many explanations of esoteric terms as I can, and I well certainly remember his quoting of the economist who simply states that economists simply cannot agree on the answers to the basic questions about how to manage the economy.
How did you react to the book? Read the lexicon as bedtime reading – short entries that could be put down at any time and picked up again. Read the introduction last, and ignored the conclusion, which seemed especially pie-in-the-sky. Excellent explanations of technical terms, often with a considerably jaundiced interpretation of many terms, especially those that try to obfuscate the idea of firing people so the company can make more money. He is pretty straightforward in considering the gap between the pretty logical conclusions of the theorists and the messy actuality of how people actually regard the economy, and themselves as agents in that economy.
What will you remember about the book? I hope I will remember as many explanations of esoteric terms as I can, and I well certainly remember his quoting of the economist who simply states that economists simply cannot agree on the answers to the basic questions about how to manage the economy.
September 4, 2018
This month, I am challenging myself to read/listen to more personal finance books! YAY!
I’ve been out of school and working full-time for over a year now (#adulting, yay again!) and am looking into buying my own place (preferably an apartment but a house would be nice too). Unfortunately for me, I don’t know much about finance. Or saving up for retirement now that I’m working...
Hence my sudden impulse to download every personal finance book I can find on OverDrive.
I’m not sure if listening How to Speak Money was the best idea. Don’t get me wrong, this was a surprisingly good book with a lot of very helpful explanations. I will definitely want a hardcopy version of this book to read and refer to. The reason why I’m only giving the audiobook version of this book three stars is because it’s kind of like listening to someone reading the dictionary (albeit a relatively fun dictionary). I suppose it’s kind of implied in the title of the book…
How to Speak Money is essentially a lexicon of financial terminologies (but with fun and understandable examples). It’s great for someone (like myself) who knows next to nothing about money.
I’ve been out of school and working full-time for over a year now (#adulting, yay again!) and am looking into buying my own place (preferably an apartment but a house would be nice too). Unfortunately for me, I don’t know much about finance. Or saving up for retirement now that I’m working...
Hence my sudden impulse to download every personal finance book I can find on OverDrive.
I’m not sure if listening How to Speak Money was the best idea. Don’t get me wrong, this was a surprisingly good book with a lot of very helpful explanations. I will definitely want a hardcopy version of this book to read and refer to. The reason why I’m only giving the audiobook version of this book three stars is because it’s kind of like listening to someone reading the dictionary (albeit a relatively fun dictionary). I suppose it’s kind of implied in the title of the book…
How to Speak Money is essentially a lexicon of financial terminologies (but with fun and understandable examples). It’s great for someone (like myself) who knows next to nothing about money.
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