Although this book may be intended for a general audience, it was a difficult read for a non-economist like me. It is always hard to tell in these situations if the problem is with the reader or writer, but many parts were lost on me. However, I did come away with some understanding.
Motianey looks through financial history and finds repeated patterns of a cycle. They begin with governments achieving price stability through policies such as the Gold Exchange Standard. This is followed by a collapse in commodity prices which causes a mismatch between prices of inputs (commodities) and outputs (finished goods). This leads to excess investment chasing the available profits, excess credit satisfying the demand from manufacturers, and then excess capacity. This situation cannot continue indefinitely, and the result is a bust.
One particularly interesting part was a table that broke out investment returns since 1929 in the US by periods of high or low GDP growth and high or low inflation:
Real Yearly Returns Since 1929
|Low GDP growth, low inflation||14.0%||9.3%||2.9%||0.4%|
|High GDP growth, low inflation||10.6%||5.2%||1.3%||-0.8%|
|High GDP growth, high inflation||8.4%||-1.4%||-1.0%||21.7%|
|Low GDP growth, high inflation||-1.9%||-5.0%||-1.7%||13.7%|
It seems that stocks like anything other than low GDP growth with high inflation, bonds and T-bills like low inflation, and commodities like high inflation.
Instead of the usual book giveaway I often run, the publisher, McGraw-Hill, has decided to run their own. While I don’t use your email addresses for any other purposes, the McGraw-Hill Privacy Statement says “We may also make your contact information available to other divisions of the McGraw-Hill family of companies or to other reputable business information companies, so that they can inform you about other products and services that may interest you.”
Decide for yourself if you want to enter the draw. Here is the free draw link I was given.