The Economics of Money, Banking, and Financial Markets

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1. nevereasonfromaJan 2022
   Scott Sumner likes Mishkin's Economics of Money, Banking, and Financial Markets. If you're in USA, looks like you can get the 7th edition for around $10.

   * https://www.themoneyillusion.com/the-league-of-monetary-cran...

   * https://www.themoneyillusion.com/mishkins-revealing-omission...

   His blog is great. Mainstream, orthodox macroeconomics. Well written, useful, and entertaining. Read the whole thing, in chronological order:

   * https://www.themoneyillusion.com/page/932/

   I graduated with a B average in economics, so I can't address this head on, but here's my understanding of the mainstream perspective:

   1. Never reason from a price change: Prices go up, therefore people buy less? To the contrary, this begs the question of, why did prices go up? The causation is backwards: demand goes up, and then prices respond.

   2. For example: "Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy." -Milton Friedman. The demand for money goes up (for whatever reason), the fed responds by increasing the supply of money, then interest rates fall.

   3. Interest rates and inflation are nominal, thus don't impact relative prices (ie price discovery). Deflation/hyperinflation do have real effects though.

   4. High/low, easy/tight is relative to market expectations. Successfully targeting the interest rate (or NGDP/aggregate demand) isn't market "stimulation" but keeping things on track, in a do no harm manner. And deviating does harm (ie business cycles).

   5. Mainstream macro says money is neutral in the long run, non neutral in the short run. This might be what you're looking for: the effect of short term non neutrality of money on relative prices across the overall economy.

   So, if the downward pressure on DCF denominators is an economy wide phenomenon (ie inflation), then it's still the same say top 10% of businesses that survive. The missing link for me is: what's pushing up the value of inefficient businesses more than efficient businesses (or apples)? What distorts prices specifically and systematically in favor of inefficient businesses, vs. against or randomly/unpredictably?

   Now, let me go off the rails a bit re: wealth inequality. I think it's mostly just technology. There's just more and more stuff every year, and that sort of accretion, mix and stir with meritocracy, kleptocracy, plain old statistical randomness, network effects, what-have-you, lead to not just more wealth inequality, but inequality in general, and really just more overall diversity.

   The space of possibilities is just expanding at an incredible rate, together with the population, so there's a lot more room. And, I think it's natural for the distribution of people to be diffuse across the space. And, more people across a wider space, it's harder to consolidate, especially upward (eg Mao moved us in the wrong direction). Markets + technology do bring up the floor (hunger, shelter, etc), but we're still a ways off from the floor or the ceiling hitting our biological limits, ie post scarcity a la Iain M Banks' The Culture.

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2. FiberBundleMar 2020
   Take a look at the Economics & Finance videos on Khan Academy [1]. I have only watched some of them, but those I watched were good.

   You could read some standard macroeconomics textbooks, but I'd advise against doing that, since they are expensive and unnecessarily formalized using elementary math, which doesn't really add anything to the material itself. There's however a good book on monetary economics by Mishkin called Economics of Money, Banking and Financial Markets, which is really good, but the Khan Academy videos on banking mostly cover the same material.

   Personally I've learned a lot from reading economic history. Some books I can recommend are: Eichengreen - Globalizing Capital: A History of the International Monetary System

   Frieden - Global Capitalism: Its Fall and Rise in the Twentieth Century

   Soros - Alchemy of Finance (skip the first couple of chapters on his reflexivity theory, but the 'diary' chapters are a gold mine)

   Ferguson - The Ascent of Money (probably a good book to start, the others might be harder to completely grasp for a beginner)

   Some other good book I can recommend (not history books) are: The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities by Baumohl

   Inside the House of Money by Drobny (mostly about global macro trading, but you would learn a lot about economics along the way, would only recommend this after having built up some basic knowledge though)

   Most importantly you should start reading the Economist, which has really high quality economics and finance articles, but is released only weekly and offers a good trade off with regards to time commitment and knowledge about what's going on in the world. Note that you will probably need to know some basics in order to understand everything, but you can look up things along the way. Economics really isn't hard to learn if you have a technical background.

   [1] https://www.youtube.com/user/khanacademy/playlists?view=50&s...

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3. mitchelldeacon9Mar 2020
   Many contributors to this thread justifiably recommend this book, which is an excellent introduction to finance:

   Graham, Benjamin and Jason Zweig (2006) The Intelligent Investor, revised ed.

   I would also suggest the following books, which offer more in-depth analysis of financial markets and securities:

   Henwood, Doug (1997) Wall Street: How It Works and for Whom

   Lynch, Peter and John Rothchild (2000) One Up on Wall Street, 2nd ed.

   Mishkin, Frederic (2018) Economics of Money, Banking and Financial Markets, 12th ed.

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4. mitchelldeacon9Mar 2020
   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 Century: Money, Power and the Origins of Our Times

   Brealey, Myers, Allen (2011) Principles of Corporate Finance, 10th ed.

   Bruck, Connie (1988) Predators' Ball: Inside Story of Drexel Burnham and Rise of Junk Bond Raiders

   Fisher, Philip (2003) Common Stocks and Uncommon Profits and Other Writings, 2nd ed.

   Fridson, Martin and Fernando Alvarez (2002) Financial Statement Analysis, 3rd ed.

   Graham, Benjamin, J. Zweig, D. Dodd (2006/08) Intelligent Investor, rev ed; Security Analysis, 6th ed.

   Greenblatt, Joel (1999) You Can Be a Stock Market Genius

   Greenwald, Kahn, Sonkin, Biema (2001) Value Investing: From Graham to Buffett and Beyond

   Henwood, Doug (1997) Wall Street: How It Works and for Whom

   Levitt, Arthur (2003) Take on the Street: How to Fight for Your Financial Future

   Lewis, Michael (2010/1989) Big Short; Liar's Poker

   Lynch, Peter and John Rothchild (2000) One Up on Wall Street, 2nd ed.

   Mishkin, Frederic (2004) Economics of Money, Banking and Financial Markets, 7th ed.

   Taleb, Nassim Nicholas (2005/10) Fooled by Randomness, 2nd ed.; Black Swan: Impact of the Highly Improbable, 2nd ed.

   Vilar, Pierre (1976) A History of Gold and Money: 1450-1920

   Tracy, John A. (2009) How to Read a Financial Report: Wringing Vital Signs out of the Numbers, 7th ed.

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