Investing Books - Page 10

DeMark Indicators (Bloomberg Market Essentials: Technical Analysis)

Jason Perl

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Customer Reviews:
Total reviews: 4 Average rating: 4.5 of 5

An Essential Guide to TD Indicators 5 out of 5 stars.
6 of 7 people found this review helpful.

I've been struggling for weeks now to recreate many of Demark's indicators for the Ninjatrader platform in C# - relying soley on the original explainations in Tom Demark's book. There are a lot of very detailed logic rules for these indicators that , if you blink, you'll miss a step in the procedure. Jason Perl's book is exactly what I have been looking for.
He breaks down each indicator in a top down pseudo code step by step format that makes understanding and code translation a breeze. There are also numerous Q & A's that I found extremely insighful.
HIGHLY RECOMMENDED!

Editorial Review:

Long a secret weapon of the hedge-fund elite, the DeMark indicators are now used by more than 35,000 traders. This book provides an easy-to-follow system for using the indicators to identify market turns as they happen. Author Jason Perl gives a concise introduction to thirty-nine of the indicators, and then shows how to combine the indicators and time frames to achieve a higher probabilty of trading success. Thomas R. DeMark, the creator of the DeMark indicators and one of the most well-respected practitioners of technical analysis, wrote the foreword to this book.

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets

Stan Weinstein

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Customer Reviews:
Total reviews: 82 Average rating: 4.5 of 5

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets 3 out of 5 stars.
0 of 3 people found this review helpful.

This is an old book that was hard to find (I had a photocopied version). It has sompe personal experiences in stock trading. I was pleased to find it on Amazon.

A must read if you want to learn how to read charts 5 out of 5 stars.
0 of 0 people found this review helpful.

This book educated me on understanding how a stock moves. There is healthy movement, and there is UNhealthy movement. Stan teaches you to buy stocks that will move higher. I can't stress enough that you SHOULD READ THIS BOOK. I learned a lot, and "YES" I do consistently make money in the market using what I learned from this book. I have read lots of other investing books, and for me, this was the book that put me on the path to making money.

Editorial Review:

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets reveals his successful methods for timing investments to produce consistently profitable results.

Topics include:

• Stan Weinstein's personal philosophy on investing
• The ideal time to buy
• Refining the buying process
• Knowing when to sell
• Selling Short
• Using the best long-term indicators to spot Bull and Bear markets

Odds, ends, and profits

Unconventional Success: A Fundamental Approach to Personal Investment

David F. Swensen

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Customer Reviews:
Total reviews: 89 Average rating: 4.0 of 5

Editorial Review:

The bestselling author of Pioneering Portfolio Management, the definitive template for institutional fund management, returns with a book that shows individual investors how to manage their financial assets.

In Unconventional Success, investment legend David F. Swensen offers incontrovertible evidence that the for-profit mutual-fund industry consistently fails the average investor. From excessive management fees to the frequent "churning" of portfolios, the relentless pursuit of profits by mutual-fund management companies harms individual clients. Perhaps most destructive of all are the hidden schemes that limit investor choice and reduce returns, including "pay-to-play" product-placement fees, stale-price trading scams, soft-dollar kickbacks, and 12b-1 distribution charges.

Even if investors manage to emerge unscathed from an encounter with the profit-seeking mutual-fund industry, individuals face the likelihood of self-inflicted pain. The common practice of selling losers and buying winners (and doing both too often) damages portfolio returns and increases tax liabilities, delivering a one-two punch to investor aspirations.

In short: Nearly insurmountable hurdles confront ordinary investors.

Swensen's solution? A contrarian investment alternative that promotes well-diversified, equity-oriented, "market-mimicking" portfolios that reward investors who exhibit the courage to stay the course. Swensen suggests implementing his nonconformist proposal with investor-friendly, not-for-profit investment companies such as Vanguard and TIAA-CREF. By avoiding actively managed funds and employing client-oriented mutual-fund managers, investors create the preconditions for investment success.

Bottom line? Unconventional Success provides the guidance and financial know-how for improving the personal investor's financial future.

The Little Book That Beats the Market (Little Books. Big Profits)

Joel Greenblatt

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Customer Reviews:
Total reviews: 201 Average rating: 4.0 of 5

Understanding the stock market for idiots 5 out of 5 stars.
3 of 3 people found this review helpful.

As someone who is not in the real savy in business and has little to no financial advisory background- this book is right up your alley if you just don't understand the complexity of the stock market but are still interested in investing.

My brother is a financial analyst for a fortune 500 company and could not get me to understand the stock market and mutual funds etc- for the life of him! He read this book and then forced me to read it as well. I am glad I did because it was easy to follow and made me excited about investing my money into avenues that will provide much higher yields that 5 to 8% a year.

The author wrote this book for his middle school children to help them understand investing in the adult world so to speak- Well he did a phenomenal job and published it for the rest of us-

A good pick for beginner investors or people who would like to invest their money in stocks and funds with little background in the field. This would also be a good "starter" book for someone who wants to get into the stock market.

Editorial Review:

Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will.

In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.

Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner

David Bach

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Customer Reviews:
Total reviews: 78 Average rating: 4.5 of 5

In my lending library 5 out of 5 stars.
0 of 0 people found this review helpful.

I am a financial advisor and I keep a copy of this in my office to lend to clients. It has excellent advice, is easy and fun to read, and helps get couples on the same page in setting goals, saving, budgeting, etc.

Lovin' it! 5 out of 5 stars.
0 of 0 people found this review helpful.

This book is one of the greatest books I have gotten my hands on. I am a newlywed and in my young adult-hood, I have decided that it is time to get my finances on track. I have taken my husband by the hand and we have now made it a ritual that every Wednesday we make time to sit down and plan our finances and our future together. We are only on the second chapter because we complete all of the exercises in the book. The author David Bach has a writing style that is simple, fun, imaginative and to the point. Every time I pick up the book I feel like I have my own personal financial advisor advising my husband and me. Getting your finances in order is a step by step process that requires the mind, patience, discipline and the willing to achieve. Check out what I have written in a year from now and I'll tell you how I am managing my millions!!!

Editorial Review:

From first-time newlyweds to people on their second or third marriage, couples face an overwhelming task when it comes to money management. Nationally renowned financial advisor and bestselling author David Bach knows that it doesn’t have to be this way. In Smart Couples Finish Rich, he provides couples with easy-to-use tools that cover everything from credit card management, to investment advice, to long-term care. You and your partner will learn how to work together as a team to identify your core values and dreams, creating a financial plan that will allow you to achieve security, provide for your family’s future financial needs, and increase your income. Together, you’ll learn why couples that plan their finances together, stay together!

What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures

Frank Gallinelli

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Customer Reviews:
Total reviews: 57 Average rating: 4.5 of 5

A must read for any real estate investor!! 5 out of 5 stars.
2 of 2 people found this review helpful.

"What Every Real Estate Investor Needs to Know about Cash Flow" is the definitive guide to understanding critical calculations that will help you to determine if a prospective acquisition target is a great deal to buy immediately or a horrible investment to avoid like the plague!

I've owned this book for years but often find myself referencing this wonderful and well-written manual.

Matthew A. Martinez
Author of "Investing in Apartment Buildings: Create a Reliable Stream of Income and Build Long-Term Wealth" and "2 Years to a Million in Real Estate"
www.matthewamartinez.com

Editorial Review:

Formulas that make the difference between making profits and losing equity

The only way to win the real estate investing game is by mastering the numbers. This revised and updated edition of the popular reference shows how to target the best investments in the present market. It answers all your real estate questions, and provides new discussions of capital accumulation and internal rate of return. This book’s basic formulas will help you measure critical aspects of real estate investments, including

• Discounted Cash Flow
• Net Present Value
• Capitalization Rate
• Cash-on-Cash Return
• Net Operating Income
• Internal Rate of Return
• Profitability Index
• Return on Equity

Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis

Mark Zandi

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Total reviews: 82 Average rating: 4.5 of 5

Editorial Review:

"In Financial Shock, Mr. Zandi provides a concise and lucid account of the economic, political and regulatory forces behind this binge." --The Wall Street Journal "Aggressive builders, greedy lenders, optimistic home buyers: Zandi succinctly dissects the mortgage mess from start to (one hopes) finish." --U.S. News and World Report "If you wonder how it could be possible for a subprime mortgage loan to bring the global financial system and the U.S. economy to its knees, you should read this book. No one is better qualified to provide this insight and advice than Mark Zandi." -- Larry Kudlow, Host, CNBC's Kudlow & Company "Every once in a while a book comes along that's so important, it commands recognition. This is one of them. Zandi provides a rilliant blow-by-blow account of how greed, stupidity, and recklessness brought the first major economic crises of the 21st entury and the most serious since the Great Depression." --Bernard Baumohl,Managing Director, The Economic Outlook Group and best-selling author, The Secrets of Economic Indicators "Throughout the financial crisis Mark Zandi has played two important roles.He has insightfully analyzed its causes and thoughtfully recommended steps to alleviate it. This book continues those tasks and adds a third--providing a comprehensive and comprehensible explanation of the issues that is accessible to the general public and extremely useful to those who specialize in the area." --Barney Frank, Chairman, House Financial Services Committee The subprime crisis created a gigantic financial catastrophe. What happened? How did it happen? How can we prevent similar crises from happening again? Mark Zandi answers all these critical questions--systematically, carefully, and in plain English. Zandi begins with a fast-paced overview and then illuminates the deepest causes, from the psychology of homeownership to Alan Greenspan's missteps. You'll see the home "flippers" at work and the real estate agents who cheered them on. You'll learn how Internet technology and access to global capital transformed the mortgage industry, helping irresponsible lenders drive out good ones.Zandi demystifies the complex financial engineering that enabled lenders to hide deepening risks, shows how global investors eagerly bought in, and explains how flummoxed regulators failed to prevent disaster, despite crucial warning signs. Most important, Zandi offers indispensable advice for investors who must recognize emerging bubbles, policymakers who must improve oversight, and citizens who must survive whatever comes next. *Liar's loans, flippers, predatory lenders, delusional homebuilders How the housing market came unhinged, and the whirlwind came together*Alan Greenspan's trillion-dollar bet Betting on the boom, ignoring the bubble*The subprime market goes global Worldwide investors get a piece of the action--and reap the results*Wall Street's alchemists: conjuring up Frankenstein New financial instruments and their hidden contents*Back to the future: risk management for the 21st century Respecting the "animal spirits" that drive even the most sophisticated markets

Trade Your Way to Financial Freedom

Van K. Tharp

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Customer Reviews:
Total reviews: 163 Average rating: 4.0 of 5

Not a recipies book 5 out of 5 stars.
0 of 0 people found this review helpful.

If you are looking for trading recipies, this is NOT the book for you. This books describes the trading process in an open approach, whithout selling speaches, trading formulas or magical enchaments. It describes the importance of risk management of your trades, and the pshycology and biases that are part of every system. Though general, the offered information serves both from what someone would call academic understanding, and the practical side of trading. The book is not academic though, as you will not see tons of equations, proofs, or algorithms.
I think it is a must for everone that does not want to jump into trading someone elses formulas, but to understand the mechanics and the psycology of trading. It contains references to other books that will help you understand the trade reciepies.
So if you want to understand what you are doing, or at least what you are supposed to do and the biases associated to your decisions, buy the book. If you want to trade like a maniatic daredevil who is told what to do by following nonsense schemes, you dont need this book.
No wonder why some readers were dissapointed. My impression, its the readers fault not to aim to higher goals while buying and reading a trading book.

Editorial Review:

The bestselling holy grail of trading information-now brought completely up to date to give traders an edge in the marketplace

“Sound trading advice and lots of ideas you can use to develop your own trading methodology.”-Jack Schwager, author of Market Wizards and The New Market Wizards

This trading masterpiece has been fully updated to address all the concerns of today's market environment. With substantial new material, this second edition features Tharp's new 17-step trading model. Trade Your Way to Financial Freedom also addresses reward to risk multiples, as well as insightful new interviews with top traders, and features updated examples and charts.

Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron

Bethany McLean, Peter Elkind

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Total reviews: 129 Average rating: 4.5 of 5

Editorial Review:

The definitive volume on Enron's amazing rise and scandalous fall, from an award-winning team of Fortune investigative reporters.

There were dozens of books about Watergate, but only All the President's Men gave readers the full story, with all the drama and nuance and exclusive reporting. And thirty years later, if you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein.

Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before Fortune published an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it.

Meticulously researched and character driven, Smartest Guys in the Room takes the reader deep into Enron's past-and behind the closed doors of private meetings. Drawing on a wide range of unique sources, the book follows Enron's rise from obscurity to the top of the business world to its disastrous demise. It reveals as never before major characters such as Ken Lay, Jeff Skilling, and Andy Fastow, as well as lesser known players like Cliff Baxter and Rebecca Mark. Smartest Guys in the Room is a story of greed, arrogance, and deceit-a microcosm of all that is wrong with American business today. Above all, it's a fascinating human drama that will prove to be the authoritative account of the Enron scandal.

America's Great Depression

Murray N. Rothbard

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Total reviews: 28 Average rating: 4.0 of 5

Economics is not a fact-free science 1 out of 5 stars.
18 of 52 people found this review helpful.

Murray Rothbard's book, America's Great Depression, is really two books in one. One is a very bad book. It purports to use economic tools to explain how the Great Depression came to be. The other is a potentially very good book. What is suggests is that Herbert Hoover, although well intended, engineered a bad situation into a catastrophe. Overall, I do not recommend the book to the general public as having a good explanation of why events of the 1920s led to the Great Depression, nor would I recommend it to the general public as an exemplar of good economic thinking. But I do recommend it to my fellow economists as an exemplar of how not to do economics.

The bad book occupies the introductions to each of Rothbard's five editions of the book (the last published posthumously, and with an introduction by Paul Johnson), and then the first six chapters. From those introductions, it is apparent that Rothbard was a follower of Ludwig von Mises' Austrian school of economic "thinking," a school that apparently believes, economics can be a fact-free science. That can be seen in Rothbard's Introduction to the First Edition where he wrote (xxxix f.): "... I make no pretense of using the historical facts to "test" the theory. On the contrary, I contend that economic theories cannot be 'tested' by historical or statistical fact. ... The only test of a theory is the correctness of the premises and the logical chain of reasoning." If that is indeed the Misesian-school's thinking, I question what kind of theory and what kind of economics can be produced by its fact-free science. Unlike Athena and Zeus, truth cannot spring from von Mises' head unvarnished by observation, and it cannot do so from anyone else's head for that matter. After all, how did von Mises first get to the theory he proposed, and Rothbard used, without actually having observed facts on the ground. In the end, truth needs recourse to facts and observations, and to refutable hypotheses. It is the scientist's task to tease the evidence, or lack thereof, from recalcitrant facts and observations for the hypothesis or theory being proposed. Absent that, all one is left with is fact-free science, which is no science at all. It is simply assertion papered over by an ideological just-so story. In that regard, the Misesian-school appears to be no better than the Marxian school (although ideologically, the polar opposite). If Rothbard represented the Misesian-school accurately, I would dismiss that school's approach as being theory without measurement, in the same way, as in my graduate days, that we dismissed measurement without theory.

To show how misleading fact-free science can be, I recall a famous story about Albert Einstein and quantum mechanics. Einstein, using a thought experiment in 1935 (the so-called EPR paradox) had proposed a seemingly irrefutable test about particles in quantum mechanics. The paradox was impossible to test with the equipment available at the time, and so stood for quite a while. Only in the 1970s and later, with the advent of high-energy cyclotrons, did the paradox become testable and indeed was refuted.

Of course, Rothbard's book is not entirely fact-free. He did use some historical facts to 'test' the theory, or at a minimum, to demonstrate its validity. He did that despite his contention that economic theories cannot be "tested" by historical or statistical fact. I find the difference between what he said he would not do and what he did to be most puzzling.

Rothbard's book, in its first part, contains much that was ill defined, seemingly inconsistently defined, or downright misleading. Also, there seems to have been too narrow a focus on component parts, coupled with a unwillingness to look at larger and possibly more pertinent aggregates. The book has other areas of confusion as well, but those are of less import, and I will skip them in the interest of brevity.

In Chapter 1 of the book, we come across the first of Rothbard's confusing and ill-defined terms. It is in the context of the hypothesis he sets as to the economic theory behind what caused the Great Depression. According to Rothbard, the hypothesis depends on von Mises' view that bank credit expansion will lead to a series of investment errors that turn out to be "malinvestment in higher-orders of production." One can ask, what are "higher-order of production"? Rothbard definition was: investment in capital-goods "most remote from the consumer"(10). What does that mean? Can one consider investment in farmland, a form of capital, as investment in a higher-order of production, insofar as farmland can be pretty remote from the consumer? I doubt that is what Rothbard had in mind. The next question is, what is "malinvestment," and how does it lead to a downturn in the economy? As to the question's first part, what is the definition of malinvestment, frankly, it was never clear to me, being based on the already ill-defined notion of "higher-orders of production." As to the question's second part, Rothbard's reasoning there seems to fail his "logical chain of reasoning." Rothbard's reasoning was that the decline in demand for higher-orders of production is accompanied by an increase in demand for lower-orders of production (whatever that means) and that is what leads to an economic downturn. But that is not logical. When one component of demand is increasing while another is decreasing, why should demand in the aggregate decline? Only a decline in aggregate demand will lead to an overall decline in profits and employment. Otherwise, all we are talking about is a change in the composition of demand, not a change in its total. Rothbard's focus on that component of demand he called, "malinvestment," to the exclusion of other components does not logically explain why the total should decline. If the Misesian hypothesis is that a single component's decline reduces total demand, the burden of proof is on Rothbard, or members of the Misesian-school, to provide first, a tight definitions of terms and then observable evidence to support the hypothesis. Otherwise, all they have done is engage in just-so fables.

Another definition Rothbard used, one that I think is highly misleading, was his definition of "inflation." When I first skimmed through the book, I thought Rothbard had used it as it has been historically used, to mean price inflation. So, I then wondered, what inflation was he talking about? That's because the 1920s was a period of mild deflation in most prices, except for farm land prices, which declined significantly, and for stock prices, which increased significantly. Only upon reading the book carefully did I discover the peculiar meaning Rothbard attached to the term, "inflation." It can be found on p. 12, n.8: " 'Inflation' is here defined as an increase in the money supply not consisting of an increase in the money metal." So, any increase in non-metallic money was for Rothbard, by definition, "inflation." (Some of the reviewers, I observed, do not seem to have noticed Rothbard's odd definition of the term.) Rothbard's terminology was and is downright confusing. The term, inflation, first came into use in the US in the late 1830s when it meant what it means today. (The precise definition is in: Online Etymology Dictionary, © 2001 Douglas Harper: "Monetary sense of, enlargement of prices - originally by an increase in the amount of money in circulation.") In contemporary terminology, it means an increase in the price of good in services. In the 1920s and 1930s, it seemed to have meant an increase in stock prices. (See Amity Shlaes' The Forgotten Man, p. 4.) No twentieth-century economist I know of has ever used the term as Rothbard did.

The meaning Rothbard assigned to the term "inflation" may have in part stemmed from the Misesian thought that bank credit expansion leads to business cycles. But I think the primary reason he used the term was his animus to fractional-reserve banking in general, and to central banks in particular. Specifically, Rothbard saw fractional-reserve banking as being "fraudulent" (25). He would have had the government outlaw fractional-reserve banking by imposing 100% gold reserves on deposits. I find it odd that Rothbard, who professed to be a libertarian, saw no contradiction here between his recommending the use of the heavy-hand of the government to override the people's own decision-making and his own libertarian principles. What I have to conclude is that he viewed depositors as incapable of making decisions in their own best interests. Of course, one can ask, why stop with having government imposing its will in this area? Go the whole hog and become a true Marxist. Have government impose its will in all areas by making all the decisions for the public. I, though, take the opposite view. People have to be considered as capable of making their own decisions and as having responsibility for them. In the field of banking, depositors have to be considered as knowing what's going on, and as being willing participants in fractional-reserve banking. That's because they benefit immensely from fractional reserve banking, with the primary benefit being the reduction in the costs of holding and using money. As a contrafactual, suppose depositors don't want to use fractional-reserve banking. They could always hold cash balances in a vault in their homes or offices or factories. For transactions needing checks, they could go to the bank for cashiers' checks. All that, though, is expensive and inconvenient, which is why depositors use banks whose reserves are just a fraction of deposits. I would also have to conclude here that, not only was Rothbard apparently an ideologue, he was an elitist. Because he thought he knew better, he wanted to make people toe the line for what is good for them. Again, that is not very different from Marxism wherein the leaders supposedly know just the right kind of goods and services to produce for the people (who, though, never seem to concur).

Chapter 4, titled, "The Inflationary Factors," is the heart of the bad part of the book. Rothbard opened the chapter by describing what he thought would happen in the absence of fractional-reserve banking. Specifically, he said (86): "For a hallmark of the inflationary boom is that prices are higher than they would have been in a free and unhampered market." (He of course revealed there that he misunderstood the difference between the level, and the rate of increase of prices. Interpreting a free and unhampered market to mean a market with 100 percent gold reserves for deposits, prices would indeed be higher with fractional-reserve banking, but in an inflationary boom - meaning one where the money supply increases rapidly and relative to gold reserves - prices would not only be higher, they would be increasing faster than they otherwise would have.) But even before the advent of the US current central bank, the Federal Reserve, there never was a period in US history without fractional-reserve banking and with the market being totally free and unhampered. Below I will compare the period 1899-1912, when the market was more free and less hampered, with the period of the 1920s. That is because the first period was prior to the Federal Reserve's establishment, and the second was afterwards when the market was, supposedly, less free and more hampered.

The inflation (of the money supply) of the 1920s on which Rothbard dwelled can be found in Table 1 of chapter 4 (p. 92). To measure inflation of the money supply, Rothbard used a very broad definition of money that included life insurance net policy reserves. While I have seen many definitions of money, I have never seen one like that. Of course, one is free to use any definition one wants, but it has to be grounded in some observable relationship. But Rothbard's approach, that hypotheses and definitions "cannot be 'tested' by historical or statistical fact," precluded his doing so. If we stick with the usual definitions of money for that period, either M2 or M2 + S&L deposits, we find that the money supply grew respectively by 45 to 43 percent in the 1920s. (Rothbard's inclusion of life insurance net policy reserves and S&L capital rather than deposits, increases that number to about 63 percent.) Of course, one could ask, what was the increase in the period 1899-1912, prior to the Federal Reserve's establishment? The respective increases turn out to be, 149 and 132 percent. At a compound annual rate, the numbers for the 1920s are respectively, 4.5 and 4.8 percent, while for the period 1899-1912, they are, respectively, 7.3 and 6.7 percent. (For consistency, I would have compared Rothbard's definition that included life insurance but I did not have data on life insurance for the earlier period; also, again, for purposes of consistency, the data I used were from Table A-1 pp. 704-711 of Friedman and Schwartz's, A Monetary History of the United States, 1867-1960.) Clearly, there is nothing outlandishly large about the money supply growth of the 1920s to get very exercised about. Again Rothbard's narrow focus on a particular datum for a short period turns out, on the surface, not to have any explanatory power.

In both periods, one contributing factor to money supply growth was that both banks and depositors chose to increase the ratio of deposits to reserve money each held (currency plus bank reserves, also called, high-powered money or the monetary base). The difference in the two periods is that reserve money grew more rapidly in the first period than in the second period. In the first period, reserve money grew at a 4.8% annual compound rate while in the second period, it grew at a compound annual rate of slightly more than 1%. Not surprisingly, prices in the first period rose faster in than in the 1920s. (Specifically, from 1899 to 1912 wholesale prices rose 32 percent while from 1921 through 1929 they fell 2.5%!) What we see here is that the 1920s, being less free and more hampered can, sometimes bring about a modest deflation compared to a period that was more free and less hampered. One can see what happens when fact-free science comes to face to face with pesky little facts.

If chapter 4 is the heart of the bad book, Table 7 on p. 109 is the heart of chapter 4. It was from the data in that table, that Rothbard argued (108): "...the inflation [in money] was clearly precipitated deliberately by the Federal Reserve. The plea that the 1920s was simply a 'gold inflation' that the Federal Reserve did not counter actively is finally exploded." His reasoning was that "controlled reserves increased by $1.79 billion for the entire period and that exceeded the monetary gold stock's increase of $1 billion." The problematic aspect with the 'controlled reserves' in Table 7 is that Rothbard's never provided a definition for controlled reserves. While he did provide some computations pertinent to controlled reserves on p. 113, when those computations are applied consistently throughout Table 7, the figures do not add to the amounts he termed there, controlled reserves.

Another way of looking at what Rothbard was describing can be found Chart 25 on p. 282 of Friedman and Schwartz's Monetary History. The chart demonstrates the opposite of Rothbard's claim. It makes it quite clear that what the Fed was attempting to do was to use Federal Reserve credit to offset changes in monetary gold stocks that were occurring at the time. Based on the modest growth of reserve money, we would have to say they were somewhat successful.

Another problematic aspect raised by Table 7 is its narrow focus on reserves held at the Federal Reserve by banks that are members of the Federal Reserve system. He did not account for the vault cash of the members or the reserves of the non-members. By focusing just on those reserves, he gave a skewed accounting of the increase in bank reserves. By Rothbard's accounting, reserves increased by 47.5 percent from June 1921 through June 1929. (See his Table 6, 102.) When all bank reserves are taken into account, though, the increase comes to 27.5%; and when all reserve money is taken into account, the increase is just 8.4 percent. (See, respectively, Table A-2, 738f., and Table B-3, 802f., of the Monetary History.) Again Rothbard's focus on a specific component, rather than on the total, presents results that can be viewed as misleading.

A slightly different explanation of what happened is that individuals had a greater preference for bank money than currency in the 1920s, and so they converted their currency into bank money. Comparably, the banks had a greater preference for reserves at the Federal Reserve then they did for vault cash, so they, in effect, transferred any new funds received from the public into reserves at the Federal Reserve. The increase, than, in reserves held at the Federal Reserve was not so much an increase engendered by the Federal Reserve, but simply the workings of banks and depositors preferring one form of money to another.

After chapter 6, we enter into Rothbard's discussion of Hoover's actions. Although he did occasionally discuss actions by the Federal Reserve in those chapters, his primary focus was on Hoover. This part of the book is potentially very good. It provided me with a good deal more insight into what could have made the Great Depression, great. Unfortunately, Rothbard, in accordance with his school's thinking, did not do a full analysis of Hoover. More statistical work would have been necessary, and that is why this part remains only potentially very good.

Rothbard's description of Hoover painted him as an interventionist, a Roosevelt-lite character. According to Rothbard, Hoover attempted to prevent prices and wages from falling. When demand declines, though, both attempts are futile and just stave off the day of reckoning. Hoover may have been partially successful in preventing prices from falling far enough and fast enough. From 1929 to 1933, wholesale prices fell by about 25%. By comparison, in the previous recession in 1920, wholesale prices fell by 37% in the course of one year. Hoover's success on keeping wages from declining is less clear (especially because good wage indexes do not exist for that time). From 1929 to 1933, average hourly earnings in all industries fell by 25% while in the two years from 1920 to 1922 they fell by 15%. For both periods, the compound annual decline is amazingly close, about 7% per year. Hoover's intentions may have been noble, but all he did was to engineer the economy so it could not adjust to the decline in demand

What about the Smoot-Hawley tariff, which many today blame for the Great Depression? The ostensible reason for the tariff was to help farmers, but if US imports are reduced, it becomes harder for farmers to sell products overseas. (Foreign importers won't have the foreign exchange available to buy the farm products.) Rothbard thought it contributed mightily to the Depression. His evidence was the opposition of almost all the economists and the fact that the market broke after the tariff was signed into law (241f.). That though does not constitute evidence. The market's having sunk is by itself not evidence. The old saw of, correlation is not causation is at work here. The fact that many economists opposed the tariff is also not evidence. Indeed, Rothbard did not accept stable prices as being a beneficial goal of monetary policy despite many economists having recommended it as policy. Moreover, there was an earlier tariff, the Fordney-McCumber Tariff, which went into effect in 1922, and was just as onerous as Smoot-Hawley. Yet, it seems not to have caused any lasting real effects. Rothbard, without having done any of the heavy lifting with regard to analyzing the costs of the Smoot-Hawley, then stated (241)" ... it was at a precarious time of depression that the Hoover administration chose to hobble international trade, injure the American consumer, and cripple the American farmers' export markets by raising tariffs higher than their already high levels." This is economics by assertion. It proves nothing.

Editorial Review:

This staple of modern economic literature explains how the American Great Depression was not a crisis for capitalism but merely a downturn in the business cycle, generated by government intervention in the economy.