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Easy Money Trilogy #2
Easy Money: Evolution of the Global Financial system to the Great Bubble Burst
The US dollar moves the world. It makes the United States of America the world's only superpower. But things weren't always as they are now. The British pound was the world's premier international currency, much up to the first half of the twentieth century. And then things changed and the dollar became the international currency that every country in the world wanted. What made these pieces of green paper so powerful? What role did Hitler have to play in it? Why does the United States have the privilege of the dollar as the global currency? Vivek Kaul answers these and many more questions in the second book in the Easy Money series.
402 pages, Kindle Edition
First published November 29, 2013
27 people are currently reading
363 people want to read
About the author
Vivek Kaul
18 books164 followersVivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past.
Currently he works as an economic commentator. Other than Equitymaster, his writing has appeared across various other publications in India. These include The Times of India, India Today, Business Standard, Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, BBC.com, Quartz.com, DailyO.in, Business World, Huffington Post India and Wealth Insight.
In the past he has also been a regular columnist for Rediff as well as Firstpost. He has lectured at IIM Bangalore, IIM Indore, IIM Kozhikode, TA PAI Institute of Management and the Alliance University (Bangalore).
Currently he works as an economic commentator. Other than Equitymaster, his writing has appeared across various other publications in India. These include The Times of India, India Today, Business Standard, Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, BBC.com, Quartz.com, DailyO.in, Business World, Huffington Post India and Wealth Insight.
In the past he has also been a regular columnist for Rediff as well as Firstpost. He has lectured at IIM Bangalore, IIM Indore, IIM Kozhikode, TA PAI Institute of Management and the Alliance University (Bangalore).
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Displaying 1 - 11 of 11 reviews
June 5, 2024
The book is a sequel to 'Easy Money:Evolution of money from Robinson Crusoe to WW1'. The book is fitting sequel to the first part and creates the base for the 3rd and the final installation in "Easy Money" series. I found this book very interesting and helpful because the author has presented many instances which i have studied in PG but did not make sense to me then which now does. Author's language is lucid and simple to understand. The book is a revelation in itself for novice in money and finance matter. Highly recommended if someone is interested in present day monetary and economic situation around the world.The best part i liked about the book is the coherent flow of thoughts and easy read.
The book might have few boring patches but it is nothing much to complain about. The "dollar pricing of oil", "dollar as global currency" and "dumping of dollars in developing country(which is finding its way back to US again :O)" are few shocking revelation to me that the world economy faces now. Any enthusiast should purchase the complete series, its an investment :)
The book might have few boring patches but it is nothing much to complain about. The "dollar pricing of oil", "dollar as global currency" and "dumping of dollars in developing country(which is finding its way back to US again :O)" are few shocking revelation to me that the world economy faces now. Any enthusiast should purchase the complete series, its an investment :)
March 11, 2015
What an extraordinary book narrated in such an engaging style that you feel like finishing this book at one go. Mr. Kaul has done a excellent work in simplifying the great depression, OPEC Pricing the oil in Dollar terms , Japanese Real and stock market bubble that also lead to the "Tiger economies" or the so called "Asian 5" economies real estate and stock market bubble and finally the ".com" boom in The United States of America. The conclusion was an icing on the cake. An unputdownable book for all the economics and finance history lovers as this will give you a better perspective of the current economic scenario . Very informative.
This is the best book that I have read in 2015 and waiting eagerly to savour the 3rd part of the Trilogy.
This is the best book that I have read in 2015 and waiting eagerly to savour the 3rd part of the Trilogy.
August 14, 2019
Easy Money: The evolution of the Global Financial System to the Global Bubble Burst, the second book in the series of Easy Money by Vivek Kaul is a fascinating book about the evolution of the sophisticated global financial system of the 20th century post the first world war, and the development of bubbles & after effects of the bursting of the bubble on the financial system and the global economy.
American dollar as the international currency of the world
Europe was destroyed during the course of the second world war. Even countries like Britain, France were in a bad financial situation. In such a situation, American Dollar was placed at the heart of the financial system that evolved at Bretton Woods. The countries of the world came together to make one currency the leader of all others. Due to sufficient gold reserve, the United States was ready to convert Dollars into gold at the rate of $35 for one ounce (31.1 grams) of gold. It made the American Dollar, the most preferred international currency of the world as the only currency that could be converted into gold as per Bretton Woods Agreement.
It gave Dollar a privileged currency in the global economy. Countries would have to maintain their foreign exchange reserves in US dollars. The Americans could not exchange their paper dollars for gold anymore. It was only an international gold standard under which other countries could convert their dollars into gold. The United States could print dollars it needed whereas other countries had to earn these dollars to pay for commodities like oil which were priced in dollars. The countries had to maintain stable exchange rates against the dollar, within a band of 1 percent on either side. When dollars flooded into France, the French central bank had to keep buying them to ensure that the dollar did not lose its value against the franc. The system allowed the dollar to be overvalued and ensured that the US companies could buy, or set up business in Europe, rather cheaply.
The flow of easy money in the United States
The optimism created in the United States due to this easy money policy resulted in soaring of the stock market. The flow of money in the stock market increased, investors discovered the beauty of leverage using margin trading and various financial innovation to maximize gain. It was abrupted in October 1929, followed by World Wide depression i.e. the Great Depression. Between 1929 and 1933,the real GDP of the US fell by over 25%. About 13 million people became jobless. The purchasing power of American was badly hit impacting the commodity economy. People wanted to save their money rather than spend it.
The dot com bubble
The dot com bubble of the United States in the 1990s was built on the belief that usage of the web was all set to explode as Internet traffic was doubling every three months. And it was speculated that internet companies are going to hugely successful. It resulted into IPOs by many companies showcasing themselves as internet companies and getting crazy market capitalization, at times without any business model.There was too much optimism. The bursting of the dot com bubble started when Russia defaulted on its debt on 17th August 1998. The price of oil had fallen the lowest in nearly 25 years, Russia was unable to pay interest as well as repay the foreign debt it had raised in dollars. The global sell off in panic as a result of Russia’s default hurt the investors. Long Term Capital Management (LTCM), a hedge fund lost more than 15% in a day. The technology-heavy NASDAQ composite Index started falling sharply.
Implications of easy money policy in the system
John Mauldin and Jonathan Tepper aptly describes the implications of easy money policy in Endgame-The End of the Debt Supercycle and How it Changes Everything
“Global markets and economies are like forest fires.Avoiding small problems creates greater systemic problems when brush between the trees build up.Trying to micromanage small fires in central banking and fiscal policy leads to growing confidence by risk takers,so you get fewer small fires and paradoxically a greater chance of a major catastrophic fire.”
The periodic build up & flow of easy money in the system results in incentivizing careless risk-taking & speculation resulting in the creation of a bubble in the economy. The bursting of the bubble once it becomes unmanageable in the integrated global financial system has repercussions across nations. The economic history of the 20th century is filled with many bubbles and bursts propelled by flow of easy money in the system i.e. Asian Financial Crisis, dot-com collapse, Lehman crisis. But still, the seemingly easiest way to stimulate growth, GDP and economic opportunities is to increase the supply of money by printing more money. It is rightly said one of the lessons of history is that we never learn from it.
The implications of the easy flow of money in the system over a long period of time is not easy to understand,but everyone i.e. politicians and central bankers do everything that can be done to postpone bust by printing money endlessly even if it results in inflation. The short term benefits of stimulating economy is very much visible soon, but the implications of inflation and bursting of the bubble takes time. And that time cannot be predicted with accuracy, the only thing that can be done is to identify the systemic risks and make an effort to eliminate or reduce it.
Easy Money: The Evolution of the Global Financial System to the Global Bubble Burst by Vivek Kaul is a fascinating insightful book that enriches understanding of the global financial system. The book is written in a simple easy to read language unlike many financial books. The analogies used in the book to explain the financial system simplifies the understanding of the seemingly complex financial system.
American dollar as the international currency of the world
Europe was destroyed during the course of the second world war. Even countries like Britain, France were in a bad financial situation. In such a situation, American Dollar was placed at the heart of the financial system that evolved at Bretton Woods. The countries of the world came together to make one currency the leader of all others. Due to sufficient gold reserve, the United States was ready to convert Dollars into gold at the rate of $35 for one ounce (31.1 grams) of gold. It made the American Dollar, the most preferred international currency of the world as the only currency that could be converted into gold as per Bretton Woods Agreement.
It gave Dollar a privileged currency in the global economy. Countries would have to maintain their foreign exchange reserves in US dollars. The Americans could not exchange their paper dollars for gold anymore. It was only an international gold standard under which other countries could convert their dollars into gold. The United States could print dollars it needed whereas other countries had to earn these dollars to pay for commodities like oil which were priced in dollars. The countries had to maintain stable exchange rates against the dollar, within a band of 1 percent on either side. When dollars flooded into France, the French central bank had to keep buying them to ensure that the dollar did not lose its value against the franc. The system allowed the dollar to be overvalued and ensured that the US companies could buy, or set up business in Europe, rather cheaply.
The flow of easy money in the United States
The optimism created in the United States due to this easy money policy resulted in soaring of the stock market. The flow of money in the stock market increased, investors discovered the beauty of leverage using margin trading and various financial innovation to maximize gain. It was abrupted in October 1929, followed by World Wide depression i.e. the Great Depression. Between 1929 and 1933,the real GDP of the US fell by over 25%. About 13 million people became jobless. The purchasing power of American was badly hit impacting the commodity economy. People wanted to save their money rather than spend it.
The dot com bubble
The dot com bubble of the United States in the 1990s was built on the belief that usage of the web was all set to explode as Internet traffic was doubling every three months. And it was speculated that internet companies are going to hugely successful. It resulted into IPOs by many companies showcasing themselves as internet companies and getting crazy market capitalization, at times without any business model.There was too much optimism. The bursting of the dot com bubble started when Russia defaulted on its debt on 17th August 1998. The price of oil had fallen the lowest in nearly 25 years, Russia was unable to pay interest as well as repay the foreign debt it had raised in dollars. The global sell off in panic as a result of Russia’s default hurt the investors. Long Term Capital Management (LTCM), a hedge fund lost more than 15% in a day. The technology-heavy NASDAQ composite Index started falling sharply.
Implications of easy money policy in the system
John Mauldin and Jonathan Tepper aptly describes the implications of easy money policy in Endgame-The End of the Debt Supercycle and How it Changes Everything
“Global markets and economies are like forest fires.Avoiding small problems creates greater systemic problems when brush between the trees build up.Trying to micromanage small fires in central banking and fiscal policy leads to growing confidence by risk takers,so you get fewer small fires and paradoxically a greater chance of a major catastrophic fire.”
The periodic build up & flow of easy money in the system results in incentivizing careless risk-taking & speculation resulting in the creation of a bubble in the economy. The bursting of the bubble once it becomes unmanageable in the integrated global financial system has repercussions across nations. The economic history of the 20th century is filled with many bubbles and bursts propelled by flow of easy money in the system i.e. Asian Financial Crisis, dot-com collapse, Lehman crisis. But still, the seemingly easiest way to stimulate growth, GDP and economic opportunities is to increase the supply of money by printing more money. It is rightly said one of the lessons of history is that we never learn from it.
The implications of the easy flow of money in the system over a long period of time is not easy to understand,but everyone i.e. politicians and central bankers do everything that can be done to postpone bust by printing money endlessly even if it results in inflation. The short term benefits of stimulating economy is very much visible soon, but the implications of inflation and bursting of the bubble takes time. And that time cannot be predicted with accuracy, the only thing that can be done is to identify the systemic risks and make an effort to eliminate or reduce it.
Easy Money: The Evolution of the Global Financial System to the Global Bubble Burst by Vivek Kaul is a fascinating insightful book that enriches understanding of the global financial system. The book is written in a simple easy to read language unlike many financial books. The analogies used in the book to explain the financial system simplifies the understanding of the seemingly complex financial system.
January 11, 2025
The second book in the Easy Money series captures the evolution of the financial system post first world war to the dot com bubble in 2000s. US evolved as a super power post the second world war because of the weak economies of the European countries and they were a net exporter and a mediator which positioned itself to act as a reserve currency for trade between nations which was pegged to gold. During the 1970s, the rapid expansion of military bases and running a huge budget deficit caused the US to drop from the gold standard which positioned itself as a free float currency not pegged to anything which meant it had the power of being the printing press of the world. The remaining events captured are based on evolution of economic philosophies and the government interventions at the slightest hint of trouble. Though, the US ran budget deficits for decades, the influx of money from countries which ran a trade surplus like China, Saudi Arabia etc in the form of subscription of US government bonds helped keep interest rates very low which benefitted their economy and established itself as a superpower is an another interesting insight
Read
November 15, 2020Book 2 of the trilogy. Great read.
This volume essentially deals with post second world war economies. How US acquired dominance over world trade. The Bretton Woods agreement and how the fixed exchange rate between gold and dollar effected the economies of the countries and the untenability and abrogation of gold standard came about is discussed. How dollar has become the heart of international finance with the help of OECD ( agreeing to sell oil only for dollars) is discussed. The credit expansion resulted due to trade surplus in Japan leading to similar consequences in east asian countries ending in the collapse of their economies. Finally how credit expansion in the US due to cheap Chinese imports, low interest rates lead to dot com bubble and burst. Very interesting read if you want to make sense international trade and monetary policies.
I have to read the third volume.
Mr Kaul makes the complex subject appear so easy.
This volume essentially deals with post second world war economies. How US acquired dominance over world trade. The Bretton Woods agreement and how the fixed exchange rate between gold and dollar effected the economies of the countries and the untenability and abrogation of gold standard came about is discussed. How dollar has become the heart of international finance with the help of OECD ( agreeing to sell oil only for dollars) is discussed. The credit expansion resulted due to trade surplus in Japan leading to similar consequences in east asian countries ending in the collapse of their economies. Finally how credit expansion in the US due to cheap Chinese imports, low interest rates lead to dot com bubble and burst. Very interesting read if you want to make sense international trade and monetary policies.
I have to read the third volume.
Mr Kaul makes the complex subject appear so easy.
July 18, 2022
This book is about the modern history of money, how the dollar replaced the gold as an international trade currency, how the US turned from an exporting to an importing country, how it is important for the current financial system to keep the oil trade in dollars, and how the US has to support the monarchy in Saudi Arabia to ensure that.
It's about the irrational behavior of the markets, and how the central banks take measures to ensure it's under control by manipulating the interes rates.
The book is giving a very good idea on what has been going on with the world's economy in the last century, and what can be expected in the future.
It's about the irrational behavior of the markets, and how the central banks take measures to ensure it's under control by manipulating the interes rates.
The book is giving a very good idea on what has been going on with the world's economy in the last century, and what can be expected in the future.
June 27, 2020
Detailed Yet Engaging!!!
The book beautifully describes the Economy of the 20th century, from the Great Depression to the Oil Price Crash and Hike. It's a page turner for those interested to know these details.
You would be mighty impressed by the effort put in by the author to present each and every detail but you'd never feel that it is too much, you'll relish it.
The book beautifully describes the Economy of the 20th century, from the Great Depression to the Oil Price Crash and Hike. It's a page turner for those interested to know these details.
You would be mighty impressed by the effort put in by the author to present each and every detail but you'd never feel that it is too much, you'll relish it.
February 23, 2020
A book, very well written and engaging, for the average reader (non-finance and non-economists) narrating the evolution of the financial system, rise of the American Dollar as the global currency, Great Depression, 2008 financial crisis, etc.....A must read!
April 6, 2020
The best economics/financial history book I have read so far. The historical events have been vividly articulated and also complex terminology/jargons have been clarified with distinct examples.
A pretty knowledgeable read!
A pretty knowledgeable read!
June 15, 2021
The book gives a great deal of how current day banking system evolved. How the risk taking investment of bank, led to the various recessions and how central banking solved those things.
March 23, 2015
This book relives the journey of money through the 20th century. It helps us understand how money has been used and misused by society and countries, and how these have led to series of crises around the world. This book helps connect the dots between a lot of major events that happened in the world and helps us understand 'WHY' they happened. This, inturn, helps us see the method to all the madness that revolves around money and economies. Apart from being insightful, it's quite engaging and we don't need a prior degree in economics to understand it. It's a must read.
Displaying 1 - 11 of 11 reviews