"The Origin of Financial Crises" by George Cooper

This is a small book, about 200 pages paperback format, but it was a required reading for one of my MBA classes.  As nobody has time to really read the textbooks during a rigorous MBA, I re-read this book over several months, on paper, one of the only such in recent years.  It feels good to feel the paper of a good book when one gets used to pixels and AMOLEDs. The paper book also smells and the fingers can feel the texture, two more channels for communication of message, set and setting.

Mr. Cooper is an investment analyst and former employee of Goldman Sachs.  He has built a fortune for himself and lives in London.  This should indicate that Mr. Cooper knows his stuff.  It is so, however the book concentrates primarily on a handful of concepts.  The author is a firm proponent of Keynesian economy and the intellectual successor in thought Minsky.  Mr. Cooper uses several interesting metaphors like "The Inflation Monster" to make the abstract financial concepts more palpable for the lay reader, but it looks that most of the effort went into the first third of the book, less into the second third, and not that much in the rest.

The author spends the first third of the book mostly making fun of the Efficient Markets Hypothesis, which is mostly accepted as the background of most economic activity around the world today.  Mr. Cooper would like to see it replace by his own concoction of Minsky for the thought, Maxwell for the engineering principles and Mandelbrot for the mathematics.  The man proof of the broken-ness of the Efficient Markets theory is given as the constantly occurring bust and boom cycles, which occur even when market players are rational and the market forces are operating.  Mr. Cooper sees this as the intrinsic flaw of the Efficient Markets camp, assuming that the markets will always operate at the highest efficiency and self-correct.  Mr. Cooper supports a minimal intervention approach that would "burst" the bubbles as they form and would level the valleys as they form.  He sees this as being the charge of the Central Bank of each country, which institution is seen as essential.

There are many good arguments, and the book is very readable at first, however it gets very confusing towards the end.  The inclusion of the mechanical essay by Maxwell in the appendix did not help, although it is obvious that it was some kind of epiphany for the author.  The book makes a pretty strong argument for some control and regulation of the financial markets at all times in order to produce optimal results.  It presents a good overview and insight about how inflation came to be and why it is inevitable in today's modern economy.  The examples with the kings recalling the gold coins from the subject and then re-coining them to steal gold is very striking.  The book is a good read and a good insight into modern market economy.