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Ask HN: Book recommendations for understanding financial systems?

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Re: Ask HN: Book recommendations for understanding financial systems?

#161

Post by dunk010 »

fauria wrote: post #67

If you are looking for a shorter read, I would recommend "The money creation paradox" paper published by ING: https://think.ing.com/uploads/reports/Money_paradox2.pdf I find fascinating that, despite the simplicity of the question, not every economist agrees on how this happens.

The vast majority of money is created by commercial banks. They are, largely, free to do so to whatever degree they deem fit, and the central bank adjusts reserves to match. Almost all money is debt, created by extending loans in this fashion. The textbooks are for the most part wrong. The money multiplier / fractional reserve banking / etc. information is completely wrong.

Don't believe me? Believe the Bank of England: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Re: Ask HN: Book recommendations for understanding financial systems?

#162

Post by 6gvONxR4sf7o »

baby wrote: post #160
6gvONxR4sf7o wrote: post #143

Earlier quoted context omitted.

You can say the same about any field. Nobody understands all of physics. Or biology. Or finance. That shouldn't prevent us from giving them clear places to start and giving them overviews.

As an outsider to economics, I feel like there's much more science in physics/biology, and too many factors in economics for people to make accurate prediction at the moment.

Biology is the ultimate horribly complex poorly understood set of systems.

Re: Ask HN: Book recommendations for understanding financial systems?

#163

Post by ksdale »

fanzhang wrote: post #110
maest wrote: post #64

I have almost 10 years in the finance industry, both buyside and sellside and my take is that, while there are some fundamental principles at play, the world of finance is too messy and complicated for any one book to describe it. An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system. So, once you accept that there is no "correct" answer to how the…

Agreed that Money Stuff generally technically accurate. The only gripe I have about it is that it has a bias in the direction of "everything is so messed up / comical". This is an irreducible bias as it's the job of the journalist to make a topic seem engaging and interesting. However, if you take the theme of Levine's articles too literally/thematically, you'll think that finance is filled with quirky rules that pro…

I've always gotten the impression that under the jokes and sarcasm, Matt Levine loves finance, though I agree that he focuses on the interesting in a way that might skew a layman's perception of the likelihood of various things happening.

Re: Ask HN: Book recommendations for understanding financial systems?

#164

Post by ianai »

soVeryTired wrote: post #72
nabla9 wrote: post #45

For learning I strongly recommend against almost all books mentioned in this thread. They don't really teach how financial systems work in the society or the underlying principles. They give you just a viewpoint. Some of them are good read after you know the basics. You need to pick up real college textbook (or online course) and read the parts that interest you and skim other parts. Example: Introduction to Finance:…

I recommend against Mankiw, and to be honest, macroeconomics as a whole. But particularly undergrad macroeconomics. Undergrad macro textbooks are more or less designed to teach you how to work a model, and how to prove theorems about a model. But when all is said and done, macro tends not to go the distance and demonstrate how the model relates to the real world. They also get important details wrong. Most of the wes…

I think macroeconomics helps learn about what’s going on in general, but it’s important to keep in mind it’s dealing with very complicated systems and largely not directed to fully explain three systems involved. It’s too far to discount the whole discipline and too open for political spinning.

Galbraith’s book on 1929 is still considered a great account of what went wrong in 1929. It surely has lessons to be learned today.

The way the news cycle runs though we no longer need to hem and haw over whether policies that benefit business over individuals do better or more for the economy. Yesterday (March 13 2020) the Fed dumped 1.5 trillion in easy funding into the stock and financial market. The SP 500 saw historic increases for one day of trading. And people are still facing the trade off between going to work sick or failing to be able to pay rent. The 1.5T sent to the financial sector had no impact and is expected to not have any impact to help the individual households living paycheck to paycheck.

Edit-the hospitality industry has companies laying off employees because of diminished business. This is after the 1.5T from the fed. Probably at least one of those companies will benefit from the fed decision and buy back stocks to increase their valuations. Won’t do a lick of good for any of the former employees out of work and pay.

Re: Ask HN: Book recommendations for understanding financial systems?

#165

Post by ramblenode »

PaulDavisThe1st wrote: post #154
jonahbenton wrote: post #93

Huge, huge topic. You will have to pick a path through the enormous jungle. The starting point I would recommend is bottom up, through accounting and financial statements. Core knowledge, of both practical and intellectual value. Tons of books here, I particularly like Thomas Ittelson - Financial Statements Accessible, straightforward, friendly. After that, any of the collections of Warren Buffett's Letters to Shareh…

If Graeber's Debt didn't help you build understanding, then I'd respectfully suggest that you weren't trying to build a deep enough understanding. Debt (the book) is not about our contemporary system (much) - it's an incredible work about the most basic elements of "financial systems" and how debt has shaped our cultures, economies and political systems over thousands of years. Put differently, perhaps, it's a book a…

Debt makes some particularly interesting observations about currency before fractional reserve banking, which I imagine most other books treat as a starting point. The hypothesized relationships between minting precious metals, war, slavery, and mining were thought-provoking.

Re: Ask HN: Book recommendations for understanding financial systems?

#166

Post by beefield »

maest wrote: post #64

I have almost 10 years in the finance industry, both buyside and sellside and my take is that, while there are some fundamental principles at play, the world of finance is too messy and complicated for any one book to describe it. An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system. So, once you accept that there is no "correct" answer to how the…

> An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system.

This.

> So, once you accept that there is no "correct" answer to how the financial system and how markets work,

And this.

If someone tells you simple truths that you think make intuitively sense, just run away.

Money/Finance is a damn slippery concept and when you dig into it, you find that everything turns out super abstract and answer to almost everything is "It depends."

But to the very original question, here are some quick/dirty pointers what to look for:

1. A Classic economics approach book. Money is unit of measure, store of value, and medium of exchange etc.

2. A discussion about how (modern) money actually is debt. In a very fundamental sense.

3. History of money/banking. How things got from barter (questionable, agreed) to metal money to gold standard to Bretton Woods to free floating fiat currencies. History of financial crises.

4. Some coprorate finance. Equity, debt, derivatives. Why/how banks are really weird corporations from the balance sheet point of view (massive leverage, that is). What is arbitrage, how you price options.

5. Practical finance, ie. interesting stories. E.g. Nick Leeson, Michael Lewis, Satyajit Das.

After all that you may start to have a hunch how little you actually understand so far, but then you start to have tools to build your own mental model.

What you really should not read is goldbugs and cryptofolks stories. They are just one massive Dunning-Kruger bunch and will waste your time.

Re: Ask HN: Book recommendations for understanding financial systems?

#167

Post by mtrycz2 »

misrab wrote: post #32

This is an online course, not a book, but it changed my understanding of finance. I studied Economics (initially) at university, and never found anything close to as useful as this class: https://www.coursera.org/learn/money-banking

Videos of one year's lectures are available on youtube, with links at here: https://www.ineteconomics.org/education/courses/the-economic...

I'm halfway through, and I'm really impressed not only by the prof's preparation but methods. Very clear.

Re: Ask HN: Book recommendations for understanding financial systems?

#168

Post by rupert1234 »

6gvONxR4sf7o wrote: post #143
maest wrote: post #64

I have almost 10 years in the finance industry, both buyside and sellside and my take is that, while there are some fundamental principles at play, the world of finance is too messy and complicated for any one book to describe it. An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system. So, once you accept that there is no "correct" answer to how the…

You can say the same about any field. Nobody understands all of physics. Or biology. Or finance. That shouldn't prevent us from giving them clear places to start and giving them overviews.

This is wrong. Just spend some time in finance, then spend some time in a field which is closer to a hard science and you'll realize it. As an example, most theories in physics are pretty darn good - ie you can use them to predict the outcome of something. Most theories in finance and economics are pretty darn bad - ie you can't use them to do anything useful.

Re: Ask HN: Book recommendations for understanding financial systems?

#169

Post by rupert1234 »

mitchelldeacon9 wrote: post #84

I studied economics in college, then I worked for a few years as a business journalist before I finally switched careers to IT systems engineering. The following is a list of my favorite books on financial securities, banking and investment theory. These books are generally comprehensible to anyone with an interest in the subject, regardless of their educational background. Arrighi, Giovanni (1994) The Long Twentieth…

Good list.

Re: Ask HN: Book recommendations for understanding financial systems?

#170

Post by peisistratos »

mrpickels wrote: post #69
anticodon wrote: post #68

Why there's no suggestions for Karl Marx? He predicted these crises and that they're unavoidable in capitalism and all only get worse with the time.

because we live in the real world and deal with real humans. Karl Marx never worked a single day in his life and created an ideology for people who believe in unicorns. His work is a criticism of Adam Smith's theories, not a self-sustainable solution.

> His work is a criticism of Adam Smith's theories

Marx's work is a continuation of Adam Smith that the subject of inquiry was political economy (not "economics"), that value derived from labor and so on.

Modern establishment economics is a criticism of Adam Smith in that value comes from labor, that the study of the economy is political, etc.

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