It's interesting. I'm sitting here eating some Christmas candy and doing what I do many nights, which is thinking about economic issues. I spend quite a bit of time reading what I can find. I have even tried to work my way through parts of Ludwig von Mises''s Human Action. (I splurged. Believe me when I tell you it's an absolute bear of a read). Let it known, btw, that some of this stuff is a real struggle for me, but I've made great progress.
But what I most crave at this point is a good dose of history.
Many people say things like "unprecedented economic crisis." Well, that is sort of true and it is sort of false. It may well be unprecedented in scale and scope simply because the world is so big/small and the financial system so interconnected. But our situation is not totally without precedent.
I know enough to know that there have been credit bubbles in the past. There have been lots of bubbles, and plenty of implosions, and a fair number of depressions, and quite a few hyperinflations. I want to look at how similar crises have played out in the past. I want to know how similar situations have played out on smaller scales.
I can't seem to find a book that would be a good, detailed, in-depth "History of Past Economic Crises." (I just read The Ascent of Money by Niall Ferguson, and Iit was most certainly not what I was looking for. Also, I thought it was pretty bad. It was interesting, but real surface-level mainstream stuff and full of anoying errors and dumb statements).
Does anyone know of a book -- any book -- on the subject of past economic crises?
Similarly, there is little written about historical examples of economic crises in the web literature I find. Sure, there are passing references to Weimar Germany or the Tulip Bubble or the Asian Currency Crisis, but there is little in-depth (although wikipedia has enough to whet the appetite).
Does anyone have any suggestions? Does what I am looking for exist?
Come to think of it, A Monetary History of the United States (Friedman/Schwartz) probably qualifies. Are there others?
Hi Lemony (can i call you that?)
Sorry I cant help you with your quest but perhaps you have found a gap in the market, you are obviously keen and a good researcher and not a bad writer too, you might have an opportunity there. Start of with a list of past crises and see how much you can find out about each, could you flesh that out into a book?
I would like to read it if you do, a book like that would be a valuable read and would help us all gain some perspective on what is happening now, perhaps
There is a book I read last year that might qualify. It is "Fiat Paper Money: The History and Evolution of our Currency" by Ralph T. Foster. When I got a copy he was selling it himself. His email was email@example.com and phone number 510-845-3015. He even signed the copy he sold me.
The book does what its title suggests. It is a history of fiat money from its origins in china to sweden to the rest of europe to the colonies and on into the present. It shows what has always happened to fiat currencies and puts the current crisis into perspective as not anything new (except the scale--which might really make it new, as this has not happened to the world all at once at a time where both the urban and rural population of many countries are dependent on the system to keep working and delivering food to the stores every three days at least--and the stores taking only fiat currency for the food).
"The Black Swan" by Taleb is another good book to read before anything else on the economy because it really points out the pitfalls of thinking that have and continue to occur in the financial world. I think this book may have effected my thinking in all areas of human knowledge as it is really a critique of assumptions of evidence and theory that we may not even realize that we take for granted.
I've got two for you. Both excellent.
Liar's Poker by Michael Lewis. A rip-it-open expose' of how Wall Street really works as viewed from the perspective of an early 1980's bond salesman working at Solomon Bros.
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor.
Of course, I could also recommend "The Great Crash of 1929" by John Kenneth Galbraith and "Manias Panics and Crashes" by Kindleberger.
If you buy these from Amazon, please remember to use the Amazon link from the site to navigate over. I get a few pennies if you do.
I too recommend "The Black Swan."
Just a word on it here.
Taleb covers a lot of ground in a fairly kaleidoscopic way -- that some readers may find a bit annoying or even self-indulgent -- but overall he sticks to some broad themes and makes his points. Though he skewers the idea of economic predictions based upon "only what we've known up until this point," he essentially has no problem "predicting" what he believes is going to happen in terms of general trends and patterns. In this way I see similarities between Taleb and Gerald Celente in that they both look at what I call trajectories (influences) as opposed to saying this specific thing will happen on this specific day. Imagine that you're looking at a train or car riding along at 60 miles an hour. If we hit the pause button of life and then look at the image, it's not hard to see what's going to happen when we once again hit play -- the vehicle is going to continue on its current trajectory until some kind of counterforce influences its momentum. Life in general is more complex but the analogy holds for major currents. Many people confidently predict what is going to happen and get criticized for it. But an equal number with equal confidence repeat the mantra that we can never know what's going to happen as if it's some kind of excuse for not attempting to better understand the world and how it's developing and evolving.
That said, Taleb claimed recently that a couple of months ago he began waking up every night terrified by what he's pretty sure is going to happen. He sees (as well as Buffet if I'm not mistaken) the implosion of the derivatives market as the next "shot heard round the world."
My take on why the current crisis is unprecedented in the truest sense of the word:
1. Interconnectedness/co-dependency. The world has never been so interconnected before. And it's interconnected in not only financial ways but in infrastructural ways. So not only do sub-prime meltdowns in the US bankrupt individuals and institutions around the world who made the wrong investment, but essentially everyone everywhere relies considerably on all kinds of goods and services coming from far, far away. It was only a couple of centuries ago that much of the world was filled with nations and regions that had very limited contact with other nations and regions. Were people experiencing a famine in the next country over or was their currency crashing? Didn't matter. Essentially the world has become the apotheosis of non-local. This issue could also be called unprecedented vulnerability.
2. Fossil fuel dependency. Never before in history have humans relied so heavily on one product to facilitate so much in their lives. I don't really have to go into this but, you know, electricity generation, almost all travel, fertilizer for food.
3. Scarcity of said energy. Regardless of the reason for the impending scarcity -- peak oil, government bungling, big business bungling, lack of political will, etc. -- we're coming up against the base of that wall now and even if we're able to find new, abundant energy sources, scarcity and increased price is the most likely scenario over the next twenty years.
4. Lack of broad based skills. My sense as an amateur historian is that humans have never been so specialized regarding skill sets as they are today (even more so in the "advanced" nations), which creates non-resiliency in the general populace when it comes to handling emergencies where self-sufficiency will be crucial.
There's more, but I'll leave it at that for now. So is hyperinflation or deflation or depressions or debased currencies or bubbles bursting new, no. But I think the above list begins to indicate why our current situation is.
Here's one more for you.
"The Fourth Turning" by William Strauss and Neil Howe. It is an examination of human social cycles and the accompanying periodic crises that occur with some degree of correlated frequency. I'm about halfway through it now and and hooked.
I think it is a good read in that it looks at the cultural evolutions that take place in response to and coming out of various crises - financial, wars, pandemic, etc.
The selling point for the book is that all the dynamics take place in the Fourth Turning - which according to the book, started in 2005.
Has anyone else read this one - I'd be interested in other opinions.
Have you read Fourth Turning? If so, what did you think?
I like the way Strauss and Howe approach crisis response from the cultural aspect, focusing on how people and society change rather than addressing the specifics of crisis causality.
Another good one if you find the need for some decompression reading is "Year Million: Science at the Far Edge of Knowledge" by Damien Broderick. It's a collection of essays by various members of the academe addressing what things might look like in the year 1,000,000. You get a good mix of near science fiction, real forward leaning but sound scientific speculation and what ifs. Anthropology, selective evolution, sociology, energy, matroishka brain nets, quantum entangled computers, maximized intelligence, interplanetary deuterium mining, etc. are addressed.
It's not for the faint of heart as it is a challenging read, but despite the topical depth it is very entertaining.
Keep up the good work - I picked up another Martenson fan at work this week - we're up to 8 CC grads now, plus their families who are reading through the info and formulating there own ideas and plans.
Thanks a lot for all these suggestions. Keep 'em coming.
Maincooncat, I too recommend The Black Swan. I love Taleb's irreverant writing style and I think he gives a lot of good advice about the importance of knowing what you don't know.
My reading of history suggests that there is nothing unique about our current economic crisis.
Except one key thing...
This is the first time in history that some form of high EROEI (inexpensive) energy does not exist to power us out and up to the next phase of growth.
Phase 1: Hunters & Gatherers thrived on large mammals until they were hunted into extinction
Phase 2: Egypt flourished with food surpluses from agriculture until they destroyed their arable land
Phase 3: Rome grew with wood until the forests were depleted
Phase 4: Britain built an empire using coal
Phase 5: U.S. was first to exploit its bounty of oil
population = available food
quantity of food produced = energy applied to agriculture
civilization sophistication = energy surplus after producing food
economic growth = energy consumption growth
total available energy is now declining
The conclusions, if you share my beliefs, are obvious.
And reinforces why applying debt (which requires growth to repay) is the worst possible thing we could be doing to solve our current crisis.
As an interesting side note, I have studied the history of slavery, which is just another form of energy. Slavery has been used throughout all of the phases (with the possible exception of phase 1 for which we have no data). I predict that slavery will return with vigor over the next 100 years due to the lack of alternate cheap energy.
I recommend chapter 3 in Thomas Sowell's book "Black Rednecks and White Liberals" if you would like to learn more about the true history of slavery.
Rob - Very interesting post. Couple of observations for you to chew on......
Loosely throwing Maslow into your Phases - at some point up the hierarchy, it would seem that once a society reaches Levels 4 and 5 there is a realization that slavery is "bad" or at the least, it is not consistent with Self Esteem and/or Self Actualization.
Clearly the Hunter Gatherers never got much past Level 2.
Egypt flourished on the backs of their slaves and selectively applied the tenets of levels 4 and higher. Once the famines hit, environmental conditions slammed them back to Levels 1 and 2.
Rome realized too late that Self Actualized citizens do not necessarily translate to a Self Actualized society. Crisis comes along and the empire crumbles - what's left is at Levels 1 and 2.
I'd put your Phases 4 and 5 together. We (UK/US) are on the brink of an impending crisis, brought on and exacerbated by the by the confluence of significant financial, environmental and energy issues. What will be interesting is to see how far we fall coming out of it - or if we have some type of social awakening that leads us out of the crisis to a new higher level of societal function.
This theme is addressed in great detail in "The Fourth Turning" - I've posted on it in this thread above. It is a great read and gives you a glimmer of hope. There are distinctly different elements that characterize subsequent generations coming out of and going into crisis. If history can be a predictor - whatever is going to happen is "bad" - but whatever and whomever comes out of if is "better".
I strongly recommend reading it - it seems like it would dovetail nicely with what you are communicating in your post.
If you haven't already seen it, a pretty enlightening documentary that addresses how we got to where we are today, specifically, is: The Century of the self (Key words: Edward Bernaise, Freud, The origin of "Public Realtions," exploiting your friends and family with a clear conscience)
Thanks for your thoughtful comments.
I think that the persistence of slavery throughout human history, except for the last 100 years when energy was plentiful (and even today there are pockets of slavery around the world), is strong proof for how central energy is to everything. And how food and energy will trump ethics and morality when TSHTF.
I can see your point that Phases 4 & 5 might be collapsed. On the other hand oil is a much higher quality energy than coal, and explains the ascent of the US over Britain.
I've found it enlightening to realize that the success of the US had little to do with its constitution, capitalist economy, or hard working people. It was mainly about resource abundance (land, water, and especially oil).
I'll bet workers in sweatshops in Asia wouldn't agree with you that slavery is no longer practiced.... sure the whips are gone, but now they use money instead. And I would go so far as to say many people in both our countries who are forced to work long hours at unsatifactory jobs in poor conditions would feel enslaved by the Matrix.
You are a slave to the government -
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