
Ask HN: Book recommendations for understanding financial systems? - mx24
With all the craziness this week in the stock market I&#x27;ve become interested in learning about how money works in our society. Fiat currency, the federal reserve, the stock market, etc. Any good book recommendations?
======
maest
I have almost 10 years in the finance industry, both buyside and sellside and
my take is that, while there are some fundamental principles at play, the
world of finance is too messy and complicated for any one book to describe it.
An even stronger statement I am willing to make is that no one person
correctly and fully understands the financial system.

So, once you accept that there is no "correct" answer to how the financial
system and how markets work, what's left to do is to follow what's happening
in the world and try to build your own mental model.

One source I'm a big fan of (and has a bit of a cult following in the
financial world) is Matt Levine's "Money Stuff" blog:
[https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...](https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthew-
s-levine)

He's engaging, funny, talks about interesting topics and, most importantly,
he's _rarely_ wrong. It's a rare thing seeing a journalist talk about your
specialty subject and actually being correct.

Similar source is Felix Salmon:
[https://www.felixsalmon.com/](https://www.felixsalmon.com/)

Similar league as Levine, but I find him slightly less engaging, for whatever
reason.

~~~
fanzhang
Agreed that Money Stuff generally technically accurate. The only gripe I have
about it is that it has a bias in the direction of "everything is so messed up
/ comical". This is an irreducible bias as it's the job of the journalist to
make a topic seem engaging and interesting.

However, if you take the theme of Levine's articles too
literally/thematically, you'll think that finance is filled with quirky rules
that produces comically inefficient outcomes most of the time. You'll think
that there are easy system changes that any layperson can see that would make
the system run much better. You might even think that finance is clear swamp
ready to be drained -- this plays into the confirmation bias of readers who
come in already with the thesis that "the system is totally broken".

In fact, against this theme, 90% of the time the story is incredibly dry and
uninteresting because the system works exactly as intended. 90%+ of the time,
stock A + B bundled is worth exactly the sum of it's parts. 90%+ of the time,
the regulations do protect investors, are cheap to check off, and causes no
weird behavior. 90%+ of IPOs are textbook win-wins and not Adam Neumann
playing Softbank or a sell-side banker eating grandma.

To be constructive though, what's the solution? Start with skimming over the
most classical textbooks (Mankiw or the recommended non-heterodox textbooks
from the relevant classes by your local colleges). This is the classical
theory of both how things are supposed to work, and how 90% the value
generation actually occurs in 90% of the cases.

~~~
ksdale
I've always gotten the impression that under the jokes and sarcasm, Matt
Levine _loves_ finance, though I agree that he focuses on the interesting in a
way that might skew a layman's perception of the likelihood of various things
happening.

~~~
pgwhalen
He really does love it in an intellectual sense, which is an infectious
passion that is hard to find in an industry where many are optimizing just for
financial success.

As someone who accidentally got into finance as a software engineer, he more
than anyone has made me really fall in love with the domain.

------
nabla9
For learning I strongly recommend against almost all books mentioned in this
thread. They don't really teach how financial systems work in the society or
the underlying principles. They give you just a viewpoint. Some of them are
good read after you know the basics.

You need to pick up real college textbook (or online course) and read the
parts that interest you and skim other parts. Example: Introduction to
Finance: Markets, Investments, and Financial Management by Melicher and Norton

You can also pick up introductory undergraduate college textbook in economics
and read the parts that interest you. Greg Mankiw's books are good but the
price is off the charts, so maybe don't buy them. (Macroeconomics & Financial
Systems could be cheap if bought used)

After that some light reading for general audience with interesting viewpoints
and lessons:

\- A Random Walk Down Wall Street by Malkiel

\- Common Sense on Mutual Funds by John Bogle

\- The Alchemy of Finance by George Soros (Sorosls theory of reflexivity in
finance, nontechnical take on nonlinear dynamics in the markets)

~~~
soVeryTired
I recommend against Mankiw, and to be honest, macroeconomics as a whole. But
particularly undergrad macroeconomics.

Undergrad macro textbooks are more or less designed to teach you how to work a
model, and how to prove theorems about a model. But when all is said and done,
macro tends not to go the distance and demonstrate how the model relates to
the real world. They also get important details wrong. Most of the west
doesn’t work on a fractional reserve system anymore, and the main constraint
for money creation is not the reserve ratio.

Honestly you’d be better off learning very basic accounting, then learning
about bank balance sheets, then learning about basic financial plumbing like
the repo market, money market funds, and the fed’s operations.

I like Bruce Tuckman’s book ‘fixed income securities’ for the latter. It’s
very practical, without any of the theoretical nonsense you sometimes
encounter in advanced texts.

~~~
magicroot75
How is Tyler Cowen's textbook? I figured that'd be better.

~~~
soVeryTired
Jesus fuck I’d stay away from anything that man writes. Honestly my advice is
not to bother with academic macro at all. Or if you must, read it like a
scientist. Demand evidence for every statement. Ask how one would actually
measure whatever quantity is in question (e.g. a supply curve, when most of
the time only price is observable).

There are a few financial journos that I have time for though. Matt Levine is
good, though he has a particular domain of expertise and tends not to stray
from it. Michael Pettis is good on all things China. But as others in the
thread have also noted, the industry is so full of bullshit that it’s hard to
separate the good from the bad.

------
mitchelldeacon9
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.

~~~
rupert1234
Good list.

------
misrab
This is an online course, not a book, but it changed my understanding of
finance. I studied Economics (initially) at university, and never found
anything close to as useful as this class:

[https://www.coursera.org/learn/money-
banking](https://www.coursera.org/learn/money-banking)

~~~
mtrycz2
Videos of one year's lectures are available on youtube, with links at here:
[https://www.ineteconomics.org/education/courses/the-
economic...](https://www.ineteconomics.org/education/courses/the-economics-of-
money-banking)

I'm halfway through, and I'm really impressed not only by the prof's
preparation but methods. Very clear.

------
majos
Somewhat meta comment, when I read all the conflicting recommendations here
(seriously, for almost all recommendations there’s an anti-recommendation
somewhere in this thread), it makes me question the value to me in really
trying to understand the financial system.

I mean, I’m not completely financially illiterate. I understand compound
interest. I stick with sinking most of my money into passive investing, saving
x months of expenses in checking for surprises, and not accumulating any debt.

Every now and then I think about getting back into value investing (it was fun
in high school) which is a little more active, but the effort required to
understand this system seems enormous/impossible. There are simplified
expositions of how to read a balance sheet, but then I run into weird edge
cases of financial trickery that I’d never be aware of. So I figure I can’t
compete with pros and passive investing seems like a reasonable enough
approximation in the long run.

When I compare it to all of the other stuff I could learn or skills I could
acquire in the same time, so far “learning about the financial system” is so
_messy_ and uncertain to me that I never really pursue it.

Has anybody run into this issue? What did you decide?

~~~
jonahbenton
Yeah, I would make a distinction between learning about the financial system
for investment purposes- which as a non-professional in that space I think is
pointless- vs learning about to understand what's happening in the world.

Whatever domain you're in, whatever interests you have- having something of a
model of the financial machinery that basically underlies all human activity,
both in the small and in the large, I would argue is super valuable.

The space is ENORMOUS and incredibly complex and so one has to have a plan and
some kind of motivation for carving a path through it, to be sure.

Hard to engage with more specifics without more context, happy to continue the
conversation.

~~~
majos
> Whatever domain you're in, whatever interests you have- having something of
> a model of the financial machinery that basically underlies all human
> activity, both in the small and in the large, I would argue is super
> valuable.

What’s strange is I’m generally in favor of “staying informed”. But I
typically skip most financial news. For example, looking at last week’s issue
of The Economist, there are several articles in the finance section. I
summarized these below, but my reaction to most is “yup, sounds like the logic
I saw in my first-year econ class”.

Maybe my issue is that I rarely feel like I _learn_ anything from these
articles; they mostly read as applications of basic theory that might work. In
this case, my read on finance is there’s a set of basic principles that
explain most of the decisions made and then just beyond that lies an enormous
set of more complex but also controversial material.

In contrast, I think of other areas as having a lot of “basic information”
that I don’t know, with the controversial bits much further out. So if I’m
trying to accumulate useful and relatively uncontroversial info, finance is
not the best place.

(Those summaries:

1\. interest rate cuts may not suffice to avert recession, governments may add
in spending, tax cuts, and credit to banks to increase liquidity

2\. fear has led to price increases for safe haven assets like gold, bonds,
and stable currencies and drops for economic activity trackers like oil and
copper; share price changes have varied depending on debt levels and how
different companies are expected to react to societal slowdowns

3\. might be a good idea to pivot between stocks and bonds as market rises or
falls; downturns can be opportunities if your horizon is long enough

4\. if the economy slows, how should banks deal with reduced payment
abilities, especially when they may be legally required to not have too many
bad-looking liabilities?

5\. something about corporate bond trading [this one was most confusing]

6\. some special bonds offer yields to investors with the catch that if some
defined disaster strikes the investors will not get money back; these bonds
have not yet been useful to covid because of stringent conditions on duration
and impact of the disaster before payout, and complications of prevention
(countries who respond well may get paid less)

7\. covid has particularly hurt commodities markets, and by extension
economies that rely on commodities (like Saudi Arabia))

~~~
jonahbenton
Hear you- it sounds like you have a sufficiently rich mental model that the
reports "make sense"\- some semantics/meaning are conveyed. They might even
"sound obvious"\- why is X even news? Etc.

That's a tough place to be- on the usual models of learning curves for a
practitioner that's right at the edge of transitioning out of beginner. A lot
of people who are "book smart" are here.

In order to learn more, to actually get out of beginner stage, brains need to
practice. They need to DO. You would need to find a problem to work on that
causes you to _produce_ not just consume.

Does that make sense? Hope that's helpful and not offensive, all comments
intended to be positive/growth mindset/supportive.

~~~
majos
That makes sense. It’s challenging to think of a “problem to work on”. If it
was programming or math, I’d find a project to try out whatever technique I’d
picked up. There doesn’t seem to be a ready analogue for that here.

------
pembrook
First, arm yourself with the tools to figure out whether what you're reading
is bullshit or not (unfortunately a huge issue in the finance space). Read
about The Organon by Aristotle, particularly his work around logical
fallacies.

Then, for a brief overview of the history of money, currency, and markets read
the first part of William Bernstein's The Four Pillars of Investing (provides
some good historical context).

To understand financial market movements in the short term (like what is
happening now), read about crowd psychology, behavioral biases (Kahneman), and
black swans (Taleb).

To understand financial markets over the long term, read anything written by
Buffet (his annual reports) or Munger, or their intellectual precursor, Graham
and Dodd.

To understand the theories and thinking underpinning money and central
banking, read about Adam Smith, Milton Friedman, Keynes, and Hayek.

Start with a bias toward history and older works, and move towards newer works
to understand how the current zeitgeist got here and be able to think more
critically about the ideas that are currently en vogue.

Also, I agree with the comment that recommends avoiding books by journalists.
These are typically compelling narratives in search of supporting facts and
theories (the wrong way to approach thinking). You should start your learning
from the opposite position. Learn the theories and facts first, then think
critically about any good-sounding narratives you see repeated in the wild.

------
qnt
From someone working in the hedge fund world, “Big Debt Crises” by Ray Dalio
is the most useful book I have read on the topic.

The language is quite accessible and it describes how various kinds of
business cycles have played out through history. The highlight for me is an
elaborate, punch-by-punch retelling of how the 3 major financial crises played
out (1930s Germany, Great Depression and 2008). Rather than looking backward
with the benefit of hindsight as most textbooks do, this gives you a real
impression of how the events played out in real-time. There are even newspaper
headline clippings in the margins from every week or so, just to show how the
popular narrative was evolving as it happened.

~~~
markus_zhang
Yeah I always find reading financial history materials, if they are authentic,
really helps understanding a lot about the current situation. Guess our
generation might have the privilege to go through a financial crisis and a
depression. Hopefully not.

------
polskibus
This is the best online course I've ever taken:

[https://www.coursera.org/learn/money-
banking](https://www.coursera.org/learn/money-banking)

The professor explain the financial system very well using fairly recent and
historic events.

------
zanezone
Get some conflicting ideas. Two great, short books are The Mystery of Banking
by Rothbard (available for free here: [https://mises.org/library/mystery-
banking](https://mises.org/library/mystery-banking)) and Economics in One
Lesson by Hazlitt (free here: [https://fee.org/resources/economics-in-one-
lesson/](https://fee.org/resources/economics-in-one-lesson/)). They both
conflict quite substantially with the mainstream and might open up a whole new
line of inquiry for you.

~~~
PaulDavisThe1st
If you're going to read Hazlitt, do us the favor of reading John Quiggin's
recent followup "Economics in Two Lessons":

[https://www.amazon.com/Economics-Two-Lessons-Markets-
Badly-e...](https://www.amazon.com/Economics-Two-Lessons-Markets-Badly-
ebook/dp/B07JQ676JQ)

"Since 1946, Henry Hazlitt’s bestselling Economics in One Lesson has
popularized the belief that economics can be boiled down to one simple lesson:
market prices represent the true cost of everything. But one-lesson economics
tells only half the story. It can explain why markets often work so well, but
it can’t explain why they often fail so badly—or what we should do when they
stumble. As Nobel Prize–winning economist Paul Samuelson quipped, “When
someone preaches ‘Economics in one lesson,’ I advise: Go back for the second
lesson.” In Economics in Two Lessons, John Quiggin teaches both lessons,
offering a masterful introduction to the key ideas behind the successes—and
failures—of free markets."

------
yalooze
For a slightly different take, Fooled By Randomness and The Black Swan by
Nassim Taleb. I would read some of the more direct recommendations here and
then read Taleb to remind you that not everything is predictable or easily
explainable.

~~~
evjan
The entire Incerto book series by Taleb (which includes Fooled by Randomness
and The Black Swan) are awesome and they are talking about big catastrophic
events like the current one. This pandemic is a classic Black Swan event: it's
a surprise, it has a major impact and lots of experts will try to say that it
was easily foreseeable in hindsight.

~~~
pergadad
It's not a black swan, a pandemic was long on the horizon (think SATS, MERS,
Ebola, ...).

Just to add: I found taleb pretty opionated and had trouble distinguishing his
own opinions from facts/theories.. I'd not recommend his books.

~~~
samtechie
I think it is. Not because there were other potential Pandemics but because of
the timing of the Virus. Its comes at a time when social media is in
widespread use which means misinformation spreads rapidly which also leads to
panic. Generally, social media amplifies everything good and bad. A
combination of these factors makes it a Black Swan event.

~~~
cambalache
Instead of the expected pandemic when people were not going to use social
media because...?

------
qorrect
Surprised no one has mentioned "Trading and Exchanges: Market Microstructure
for Practitioners".

Lots of people recommending Ernie Chan - and he is very big in the space but
he uses 100 words when 10 will do its a hard time slogging through it.

De Prado is incredibly technical , if there was a De Prado cliff notes Id say
read that.

And don't forget if you are coding this stuff up, lots of people have but
those books into re-usable code on github.

~~~
FabHK
Harris’ _Trading and Exchanges_ is about types of traders and market
microstructure - it has very little to do with what OP asked for (“… how money
works in our society. Fiat currency, the federal reserve, the stock market,
etc.“)

~~~
qorrect
i embarrassingly didn’t read the body, and I am also ignorant of those things
i’ll be reading this thread again , thank you.

------
jefe_
Part one of this book really helped with my understanding of monetary policy,
very clear examples of how the price of money is expressed through Exchange
Rates, Interest Rates, and Aggregate Price Levels and the interplay between
these measures: [https://www.amazon.com/Concise-Guide-Macroeconomics-
Managers...](https://www.amazon.com/Concise-Guide-Macroeconomics-Managers-
Executives/dp/1422101797)

Here is a PDF of a diagram I made to help organize my understanding of this
content:
[https://www.lucidchart.com/publicSegments/view/e1d12ae5-a8a0...](https://www.lucidchart.com/publicSegments/view/e1d12ae5-a8a0-47cb-8e35-f9b079b8a2ab)

------
jayflux
Ascent of Money - Niall Ferguson will start you from the very beginning, and
does cover all the subjects you mentioned.

Random walk down wall street is good, but the angle is more “so you want to
get into investing?” It won’t go into too much detail of underlying systems
like fiat currency.

------
Cro_on
Debt: The First 5000 Years

[https://libcom.org/files/__Debt__The_First_5_000_Years.pdf](https://libcom.org/files/__Debt__The_First_5_000_Years.pdf)

------
jonahbenton
Huge, huge topic. You will have to pick a path through the enormous jungle.

The starting point I would recommend is bottom up, through accounting and
financial statements. Core knowledge, of both practical and intellectual
value. Tons of books here, I particularly like

Thomas Ittelson - Financial Statements

Accessible, straightforward, friendly.

After that, any of the collections of

Warren Buffett's Letters to Shareholders

are both entertaining and intellectually valuable, and provide great insight.
Read forward, eg, from his first letters in the 1960s, to now.

One of the realizations in the journey is that there are, and have been, a lot
of different kinds of money- credit money and exchange money and asset money
and so forth. A relatively abstract/intellectual but immensely useful survey
is

The Nature of Money - Geoffrey Ingham

The concept of an asset is critical to the functioning of the financial
system. New kinds of assets are created all the time. One of the best written
books I have read recently goes into venture capital and debt asset creation:

The Code Of Capital - Katharina Pistor

The role of different kinds of money in history, especially US history, is
absolutely fascinating. I am in the middle of

American Bonds - Sarah Quinn

and can recommend.

I do not especially recommend the Dalio books or Graeber's Debt or Ferguson's
books. They are fine but I did not find them helping me build understanding.
Not quite junk food, but definitely not protein.

I unfortunately have not found any of the books I have seen about the Federal
Reserve to be worthy of recommending. My wife works there and so I have
perhaps a unique perspective. But nothing conveys the challenge and the
mechanics of what they do. Still looking. The papers the various Fed banks
publish, as well as the papers published by the Bank of England, are uniformly
outstanding.

Finally, some of the bitcoin people have written about money. Tho I am a
believer in bitcoin I absolutely recommend against most of them, especially
Saifedean Ammous's book. Do not read.

Good luck!

~~~
PaulDavisThe1st
If Graeber's Debt didn't help you build understanding, then I'd respectfully
suggest that you weren't trying to build a deep enough understanding.

Debt (the book) is not about our contemporary system (much) - it's an
incredible work about the most basic elements of "financial systems" and how
debt has shaped our cultures, economies and political systems over thousands
of years.

Put differently, perhaps, it's a book about things the lie beneath what is
covered in all the books you've mentioned.

~~~
jonahbenton
Agree completely that it is an important work and enlightening- in terms of
_perspective_. The socio/anthropological history of Debt is a very useful lens
for the modern world.

That said, in terms of _understanding_ \- with all respect, I find it
insufficient (MHO). Perspective, as Alan Kay says, is worth a lot of IQ
points, but on its own is insufficient. The modern financial world is full of
_machines_ (both software and people processes). Much of what happens is a
result of mechanical inertia. The universe of sensible changes from a policy
perspective is limited by the ergonomics and sympathies of the existing
machines.

It has been a long time since I last read Debt but I remember feeling
frustrated by an absence of coverage of the machines. My perception of his
advocacy in recent years has been that he has been less effective than he
might have been had he stronger command of the machines, and not just the
policy.

One of my recs- Sarah Quinn- while like Graeber is also deep in the world of
the sociology of money, is stronger technically. Her PhD thesis is an
extremely helpful dive into the mortgage securitization world- the largest
debt market in the world other than Treasuries- and my rec (American Bonds) so
far is a popularization of that work.

I completely forgot, another excellent book on important machines that shape
the modern financial world is

Payment Systems in the US - Carol Coye Benson

------
smarri
Ascent of Money - Niall Ferguson

The Long and Short of It - John Kay

A great place to look is the second hand study books for professional
qualifications like the CFA, Chartered Banker and so on

~~~
motohagiography
Ascent of Money is indispensable as a foundation for the whys and hows of
banking from it's origins and first principles. It's a history book.

Anything technical (mathematical finance) is really not going to provide a
foundation without the historical _why_ of the instruments creation and use.
One you have that, the most efficient way to understand it after would be with
Quantlib
([https://www.quantlib.org/docs.shtml](https://www.quantlib.org/docs.shtml))

There is a lot of middle brow commentary (krugman, piketty, reinhard/rogoff,
dalio, taleb, etc) that will be entertaining and philosophical, but only that.
The guts of economics (Keynes, Galbraith, Mises/Hayek) are very dense, and
provide a very narrow, depth first plunge into something you won't be able to
apply well without a more complete education.

Functional grasp of (re)insurance, securitization, liquidity, and the
bond/debt markets is the best royal road, I"d say.

~~~
eruditely
I disagree that Taleb is "middle-brow", check out his new technical incerto
book, from what I've heard its rather rigorous.

------
fauria
If you are looking for a shorter read, I would recommend "The money creation
paradox" paper published by ING:
[https://think.ing.com/uploads/reports/Money_paradox2.pdf](https://think.ing.com/uploads/reports/Money_paradox2.pdf)

I find fascinating that, despite the simplicity of the question, not every
economist agrees on how this happens.

~~~
dunk010
The vast majority of money is created by commercial banks. They are, largely,
free to do so to whatever degree they deem fit, and the central bank adjusts
reserves to match. Almost all money is debt, created by extending loans in
this fashion. The textbooks are for the most part wrong. The money multiplier
/ fractional reserve banking / etc. information is completely wrong.

Don't believe me? Believe the Bank of England:
[https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...](https://www.bankofengland.co.uk/-/media/boe/files/quarterly-
bulletin/2014/money-creation-in-the-modern-economy.pdf)

------
ryeguy_24
Ray Dalio - How the Economy Works
[https://youtu.be/PHe0bXAIuk0](https://youtu.be/PHe0bXAIuk0)

------
nknealk
If you’re interested in fiat currency and the fed, I highly recommend the book
Lords of Finance. The author does a really good job of showing just what
central banks do and how their responses to economic events shape outcomes.
The book entirely focuses on the Great Depression and the central banks of the
USA/Europe but it’s really well written and really helped me appreciate what
the fed does.

~~~
FabHK
> _Lords of Finance_

Oh, yes, great book! And good read.

Two things stuck in my mind:

A) How slow things were back then. The British finance minister (“Chancellor
and Under-Treasurer of Her Majesty's Exchequer”) would get on a steam ship,
incognito, for a month or so to visit his counterpart in the US, then skipper
back, and months later respond to the crisis.

B) How few people saw things coming. People thought the skirmishes that ended
up precipitating WW I would soon be over, Irvin Fisher confidently declaimed
just before the 1929 stock market crash that “stock prices have reached what
appears to be a permanently high plateau”, people didn’t pay much attention to
this obscure Adolf Hitler guy.

Every time, by the time the true dimensions became obvious, it was too late to
do something (flee, sell, ...).

With respect to the current “15 cases going down to zero, we are doing great,
we have it under control” flu, draw your own conclusions.

Edit: typos

~~~
nknealk
Those stuck with me but so did the points the author made about gold. There
was a depression. Central banks sticking to the gold standard is part of what
made it the Great Depression.

~~~
FabHK
Yes, absolutely. A return to the gold standard would be disastrous for our
modern economies, in particular in times of exogenous shocks like now. The
solution to bad central banks is not gold, but good central banks.

------
s_r_n
While I haven't read the book, the corresponding multi-part documentary "The
Ascent of Money" is a really good introduction to what money is and how it
evolved over the past centuries. It's also free on YouTube:
[https://www.youtube.com/watch?v=JAbVltqySrA](https://www.youtube.com/watch?v=JAbVltqySrA)

------
abbadadda
This video by Ray Dalio, "How the Economic Machine Works in 30 Minutes" is an
excellent primer on understanding the financial system as a whole:
[https://youtu.be/PHe0bXAIuk0](https://youtu.be/PHe0bXAIuk0)

------
chrisanthropic
I really enjoyed the graphic novel "Economix: How our economy works (and
doesn't work)" by Goodwin & Burr.

I found it informative, clear, concise, and funny at times, all uncommon for
educational economic text in my experience.

------
allie1
I started "Big Debt Crises" by Ray Dalio a while ago and so far it's proving
to be a very good introduction on what you're looking for.

------
pipogld
1.- First, understand that if we are playing head or tails, me having $10 and
you having $1,000,000 , who will end up getting the other's money?

2.- Most independents money managers I know, love this book;

Extraordinary Popular Delusions and the Madness of Crowds \- by Charles Mackay
[http://www.gutenberg.org/ebooks/24518](http://www.gutenberg.org/ebooks/24518)

------
docdeek
You can't go wrong with 'The Big Short'. I saw the film a few times before I
ever bought the book, and it's still enlightening.

~~~
kortilla
Michael Lewis has a habit of... let’s say focusing on convenient facts to
emphasize a narrative that doesn’t usually match reality. His books are
entertaining (I think I’ve read them all), but they are actually a pretty bad
way to learn about how the markets work.

------
dogman144
Random Walk and Black Swan are two good reads. Even if you end up not agreeing
with the two's takes, they'll make you sufficiently skeptical of how well a
book claims to explain the industry, which is a good position to approach it
from.

My bias will show, but the industry routinely blows itself on sometimes small
or sometimes very large scales, sometimes or often through devices of its own
creation. It's important to know that the system is entirely capable of doing
this to itself, and therefore the system, and those in it, may not be able to
explain itself well.

Edit: another thing worth reading is Too Big to Fail, The Big Short, and
Greatest Trade Ever. All are engaging books, and really walk through how 2008
started and ended through different perspectives of the system. TBtF will
cover the Fed and Tier 1. BS/GTE cover the sell side. And then when you pair
GTE with what happened to it's focus, John Paulson, after 2008, in that he
didn't really have a repeat 'win,' it's a good anecdote for what I said above.

------
scirocco
This is a good start, "Money as debt". Saw it in university and since then you
will never take financial markets seriously. And all the "stimulus" we see is
just pushing the can forward. You will start to see through a lot of lies.

[https://www.youtube.com/watch?v=2nBPN-
MKefA](https://www.youtube.com/watch?v=2nBPN-MKefA)

------
montalbano
Some more heterodox takes on economics/finance:

[https://www.goodreads.com/book/show/17836526-killing-the-
hos...](https://www.goodreads.com/book/show/17836526-killing-the-host)

[https://www.goodreads.com/book/show/42515482-and-forgive-
the...](https://www.goodreads.com/book/show/42515482-and-forgive-them-their-
debts)

[https://www.goodreads.com/book/show/20655234-freakonomics-
su...](https://www.goodreads.com/book/show/20655234-freakonomics-
superfreakonomics)

[https://www.goodreads.com/book/show/6304389-the-spirit-
level](https://www.goodreads.com/book/show/6304389-the-spirit-level)

[https://www.goodreads.com/book/show/17368973-the-heretic-
s-g...](https://www.goodreads.com/book/show/17368973-the-heretic-s-guide-to-
global-finance)

More conventional investment perspectives, particularly useful if you want to
invest:

[https://www.goodreads.com/zh-
TW/book/show/11645917-a-random-...](https://www.goodreads.com/zh-
TW/book/show/11645917-a-random-walk-down-wall-street)

[https://www.goodreads.com/book/show/106835.The_Intelligent_I...](https://www.goodreads.com/book/show/106835.The_Intelligent_Investor)

[https://www.goodreads.com/book/show/25574.Common_Stocks_and_...](https://www.goodreads.com/book/show/25574.Common_Stocks_and_Uncommon_Profits_and_Other_Writings)

------
rootsudo
Actually - any college level book. There are tons, they're cheap on ebay, look
for pearson or mcgraw hill. If you're creative, you can probably find a
epub/pdf.

But even the DK Eye Witness have a good idea - how business works, how money
works.

Financial system, economics, monetary policy become very simple with pictures,
and even easier on an spreadsheet. Even more so is how many people don't know
how much the government does in collecting statistics to analyze and examine
the health of the economy - The BLS
[https://www.bls.gov/](https://www.bls.gov/) is a great resource and once you
have a basic understanding (or know healthy or "safe" numbers) you can explore
other country economic numbers and see if they make sense (or not!) e.g.
[https://psa.gov.ph/](https://psa.gov.ph/) for Philippine Statistics.

Contemporary Financial Management is great -

Accounting Princicpals are also great (can you read a PL sheet? Do you know
GAAP? How about Compliance regulations?)

Just "money" is one piece of the puzzle - money is a tool and that tool has
been transformed into different pieces that fit what we do finance in life -

A basic book would be rich dad, poor dad - it's quite cliche but it's a good
introduction to "wealth" and assets vs liability == net worth.

\---

tl;dr I ranted, I can go on - the DK Eyewitness books are a good starting
point and then you can dig deep - but mostly it really runs quite simple for
most things and then gatekeeped by interesting vocabulary.

How Money Works: The Facts Visually Explained (How Things Work) Hardcover –
March 14, 2017 by DK (Author) . How Business Works: A Graphic Guide to
Business Success Hardcover – 2015 by Dk (Author)

The Economics Book: Big Ideas Simply Explained Paperback – February 6, 2018

The Business Book: Big Ideas Simply Explained Paperback – November 20, 2018

How Business Works: The Facts Visually Explained (How Things Work) Hardcover –
April 14, 2015

DK Eyewitness Books: Money: Discover the Fascinating Story of Money from
Silver Ingots to Smart Cards Paperback – June 14, 2016

------
u40as7
I will offer that 'Where does money come from' By Josh Ryan-Collins, Tony
Greenham, Richard Werner, Andrew Jackson. Its a fantastic short book on how
money actually works in this system.

The follow up to this is Richard Werners study on central banking.

A lost century in economics: Three theories of banking and the conclusive
evidence

[https://www.sciencedirect.com/science/article/pii/S105752191...](https://www.sciencedirect.com/science/article/pii/S1057521915001477)

This is one of the first empirical tests of theories of central banking and
how money flows.

Anything by Richard Werner I think is lucid. He has lots of youtube videos
that goes into the details in the book and this study.

------
abeaulne
How The Economic Machine Works by Ray Dalio

[https://www.youtube.com/watch?v=PHe0bXAIuk0](https://www.youtube.com/watch?v=PHe0bXAIuk0)

I don't agree entirely but good signal-to-noise ratio on this content

~~~
cinquemb
"Ray Dalio says 'cash is trash' and advises investors hold a global,
diversified portfolio" \- Jan 21 2020

Had you have listened to him, you would have just been taken out back, shot,
and put in one of wuhans finest crematoriums… better off reading "Statistical
Consequences of Fat Tails"[0]

[0] [https://arxiv.org/abs/2001.10488](https://arxiv.org/abs/2001.10488)

~~~
nabla9
His advise is still sound if you are an investor and not speculator.

The part of your investment that is in stock should be determined your
investment horizon. If you don't need to sell your stock in next 15 years,
don't hold cash.

~~~
cinquemb
Yeah, would have played out very well for those top ticking n225 in 1989, esp
with every global CB's trying to follow in the footsteps of the BOJ, while
everyone is crowding into "diversification" and searching for yield…

I consider investors to be the same as speculators, just speculators who think
their beliefs will remain valid over long time frames… cause that's the
gamble.

~~~
nabla9
investor who does

\- dollar cost averaging,

\- diversification, small cost investing,

\- has sufficiently long time-horizon

has never lost money on 15 year timescale, at least past WWII.

~~~
cinquemb
Even assuming that's true, one can't say the sort of risk and investor took on
15 year look-backs since WWII has been evenly distributed to get some sort of
acceptable return, nor can one say that this will continue hold true for the
next 15 years. You may believe it hold true though, and many do… but very few
will do their homework on the risks to their "diversification" and their own
changing liquidity constraints that will occur over the "sufficiently long
time-horizon"

~~~
nabla9
> assuming that's true,

Don't assume. You can calculate it in spreadsheet.

> You may believe it hold true though,

In the long run we are all dead. We don't need to believe they hold true.
Certainty is not part of this world. Because you never know is just rhetorical
argument. Quantifying risk and going on that is good enough.

~~~
cinquemb
>Quantifying risk and going on that is good enough.

Because most people who are blindly buying indexes around the world thinking
they are diversified and DCA are certainly doing that…

------
dave333
Elliott Wave Principle by Robert Prechter and A. J Frost

[https://epdf.pub/queue/elliott-wave-principle-key-to-
market-...](https://epdf.pub/queue/elliott-wave-principle-key-to-market-
behavior.html)

This is the technical analysis method used by many market traders and it both
predicted this week's market plunge as well as described its form, and is
currently forecasting a further plunge next week.

For economics I would look for any youtube talk by Prof. Steven Keen - he
accounts for debt that most mainstream economists ignore.

~~~
santiagobasulto
Elliot Wave analysis is harmful, do not engage with it. I have friends that
have lost a lot of money trying to follow it. It has 0 scientific background,
it’s not more than astrology applied to finance. Please don’t spread these
things, be responsible.

~~~
dave333
Do flocks of birds or schools of fish fly or swim in random directions? Or do
they swarm together in discernible patterns? At core we share similar brain
structures with them.

~~~
maest
There's a gargantuan step to be made between saying "there are _some_
similarities between human and fish brains" to "the stock market behaves non-
randomly like a school of fish". And an even bigger one to saying "The non-
random patterns in the stock market can be divined with TA".

------
habosa
"The End of Alchemy" by Mervyn King is a great book that explains
fiscal/monetary policy and the modern banking system from the ground up. King
was the head of the Bank of England during the last recession. This was the
book that made me "get it".

"When Genius Failed" by Roger Lowenstein is the story of the fall of Long Term
Capital Management which was basically the biggest hedge fund failure ever.
Teaches you a lot about modern high finance and systemic risk.

------
simonebrunozzi
Besides books, read what Patio11 has written in the past. [0] [1] etc.

[0]:
[https://training.kalzumeus.com/newsletters/archive/investing...](https://training.kalzumeus.com/newsletters/archive/investing-
for-geeks)

[1]: [https://www.kalzumeus.com/2019/6/26/how-brokerages-make-
mone...](https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/)

------
neural_thing
If you are looking for somebody who understands markets today - listen to Mike
Green. He doesn't write, but sometimes speaks (Hidden Forces, RealVision)

------
tracer4201
Reading Stress Test by Timothy Geithner taught me quite a bit, although it’s
not a primer on the financial system but play by play of the financial crisis.

------
SiqingYu
The Economist Guide to Financial Markets by Marc Levinson

------
lordlulent
I have been here before where I actually wanted to find out what is going on
with finance. I was amazed that its more about ideology than it was about
finance itself. It was more about psychology and the intents of human nature
than it was just about transactions and definitions.

In as much as books are good, i would urge you to follow certain men as well.

Prof. Richard Werner and all his books. Prof. Steve Keen and all his books.

List still loading ...

~~~
qorrect
It's so true, I'd say over half of 'finance/trading' books are almost entirely
about psychology and their own personal take, it's really discouraging.

------
regularfry
I've been having an interesting time working through Security Analysis by
Graham and Dodd. It's ancient, but it really gets to the heart of what bonds
and stocks _actually are_ , and gives you an insight into how everything
worked before it all got accelerated to the Nth degree. The historical
perspective of the 1928 crash being recent memory is really interesting too.

------
shgidi
I Worked as a quant for a few years, but in a certain point moved to data
science and lost interest in stock market.

Read many technical and non technical books, and I recommend this one - Berton
J Malchiel - A random walk down Wall-Street.

Simple but not simplistic, it has some great useful lifelong tips for
investment. I follow it's advice for >10 years - from 2008 crisis, until these
crazy days.

------
triggercut
If you have the time for a deep deep dive, I would recommend David Harvey's
The Limits to Capital New Edition (2006). There's always the recorded version
of his course on Reading Marx's Capital[1] which is similar.

[1][https://www.youtube.com/user/readingcapital](https://www.youtube.com/user/readingcapital)

------
tezza
“How to Read the Financial Pages” is an excellent book.

It covers most of Equities and Bonds and is often hilarious.

It covers how governments finance themselves by issuing bonds, t-bills etc

A fairly straightforward read for any HNer, should be a couple of days easy.

[https://www.amazon.co.uk/dp/B0054ZBXLG](https://www.amazon.co.uk/dp/B0054ZBXLG)

------
noufalibrahim
Money: The unauthorized biography by Felix Martin discusses money as social
technology and its history [https://www.amazon.com/Money-Unauthorized-
Biography-Coinage-...](https://www.amazon.com/Money-Unauthorized-Biography-
Coinage-Cryptocurrencies/dp/0345803558)

------
berkoab
This is a fantastic book. Written for quant wannabes but really good for
everyone.
[https://www.amazon.com/gp/aw/d/0071468293?psc=1&ref=ppx_pop_...](https://www.amazon.com/gp/aw/d/0071468293?psc=1&ref=ppx_pop_mob_b_asin_title)

------
totalZero
Oil 101 by Morgan Downey is one of the worst-edited books I've ever read, yet
the amount of knowledge contained in that book is astonishing. The petroleum
markets are vital to the financial system, as we saw on Monday when oil over-
supply catalyzed a downward move in global equity markets.

------
formercoder
If you’re interested in valuation, Damodaran’s course is available for free
online. Just google Damodaran.

------
avita1
Specifically about the stock market, Flash Boys by Michael Lewis is a fun read
and taught me a lot about what the stock market _is_. It's not the densest
book. It's more of a narrative than a teaching tool, but for what it is I
found it very informative.

------
tim333
Stuff from Warren Buffet is usually good. You could browse the shareholder
letters a bit
[https://www.berkshirehathaway.com/letters/letters.html](https://www.berkshirehathaway.com/letters/letters.html)

------
adebrincat
Check out the Wiley CFA Book suite, they are broad and explain concepts
ranging from debt to economics ;
[https://www.wiley.com/learn/cfashowcase/](https://www.wiley.com/learn/cfashowcase/)

------
akga
For understanding how money works, I’d recommend Debt: The First 5000 Years by
David Graeber.

------
jmonger
Lords of Finance: The Bankers Who Broke the World

[https://www.amazon.com/Lords-Finance-Bankers-Broke-
World/dp/...](https://www.amazon.com/Lords-Finance-Bankers-Broke-
World/dp/0143116800)

------
Rerarom
[https://www.goodreads.com/book/show/13144133-where-does-
mone...](https://www.goodreads.com/book/show/13144133-where-does-money-come-
from)

Where does Money come From

------
jason_slack
Dr Ernest Chan

Ray Dalio

Marcos Lopez de Prado

These authors are how I started. I'd be happy to list specific books if that
is helpful, but I don't want to give you a false sense that if you read books
I mention you will have the same understanding that I do.

------
cheez
Best books to understand why the financial system behaves the way it does are
Nassim Taleb's books. Take the principles there, and apply them to finance and
it explains 100% of why prices move the way they do.

------
igorkraw
Since I'm mainly interested in risk and volatility, this list might be a bit
biased but here we go:

A random walk down Wallstreet

Options and volatility pricing, by Natenberg

Why stock markets crash, by Didier sornette

Manias, panics and Crashes by Aliber and Kindleberger

Debt: the first 5000 years

~~~
harry8
I studied it, got the cfa designation, worked in the field.

Yet to see a better, more accurate or more succinct treatment than "A Random
Walk Down Wall St" by Malkiel. Can't recommend it enough. Readable. Required
knowledge.

------
notomorrow
Nick Nick Szabo's long essay: Shelling Out: The Origins of Money

[https://nakamotoinstitute.org/shelling-
out/](https://nakamotoinstitute.org/shelling-out/)

------
hogFeast
Stigum's Money Markets will tell you about the financial system specifically.

Something like The Economist's Guide to Financial Markets will give you a good
general overview.

Some of the recommendations on here are truly awful.

------
anaphor
"Borrow: The American Way of Debt" by Louis Hyman

It's basically a historical study of debt in the United States over the past
100 years or so. Very interesting and educational.

------
pcvarmint
_Meltdown_ by Thomas E. Woods

 _The Great Deformation_ by David Stockman

 _The Fed Flunks: My Speech at the New York Federal Reserve Bank_ by Robert
Wenzel

 _Economics in One Lesson_ by Henry Hazlitt

------
nodemaker
I recommend a different approach. Start with a little bit of money in the
stock market with a portfolio that you are allowed to change every Sunday.
Then slowly understand what caused the value of your portfolio to go down or
up and how you can hedge against your risks.(Once you lose or gain money you
will get the motivation to read fat books dont worry) In the end its all a
risk calculation and the faster you get into doing it the better. I am not
rich or with a finance background but this is the approach I am following now.

------
codecamper
What is there to know?

Make massively risky bets on things that rarely break, but when they do they
break so epically that the government will bail you out.

------
matt_fmz
At Finimize, we offer a selection of products designed to help with exactly
this: [https://www.finimize.com/](https://www.finimize.com/)

Disclaimer: I work there!

Aside from that, I'd also recommend the previously mentioned Ray Dalio
economic machine video, Benjamin Graham's Intelligent Investor (for
understanding value investing) and Black Swan (for an alternative insight into
tail risks such as the one we're going through)

------
apeescape
I wrote my Master's thesis on cryptocurrencies, and had to do some background
research on how the monetary system works. I found that Bernard Lietaer's
"Money and Sustainability - The Missing Link" was easily approachable and had
a lot of good stuff in it. Another of my staples was David Graeber's "Debt:
The First 5,000 Years" which has a lot of good and interesting content, but is
very very heavy to read.

~~~
apeescape
Also, this article by Bank of England is a very good introduction on how money
is created in practice nowadays

[https://www.bankofengland.co.uk/quarterly-
bulletin/2014/q1/m...](https://www.bankofengland.co.uk/quarterly-
bulletin/2014/q1/money-creation-in-the-modern-economy)

------
unixhero
Any book on International Finance, to start. And then maybe a Banking 101 to
understand how banking works. Then Macro Economics, to know how economics of
markets and countries work.

There's no quick fix to learning this stuff.

However you might still want to; so take this biased Internet-clip with a
grain of salt and enjoy:
[https://www.youtube.com/watch?v=mII9NZ8MMVM](https://www.youtube.com/watch?v=mII9NZ8MMVM)

~~~
FabHK
There is no quick fix, indeed.

International finance is secondary to what the OP is requesting though. I
think a history of banking, and the events that led to the current regulatory
framework, would be suitable. Can’t think of a good book though (except the
_Bankers’ New Clothes_ I recommended below).

------
thulecitizen
The architect of the Euro, Bernard Lietaer, wrote a book called The Future of
Money that I’m reading now.

------
ozim
Where are the customers yachts? - but basically if you get the title you don't
have to read it :)

------
codekilla
I recommend: ‘The Origins of Economic Disorder’ by Fred Block, and ‘The Vega
Factor’ by Kent Moors.

~~~
codekilla
I’ll also add ‘Financial Market Rates and Flows’ by James C. Van Horne’.

------
petrocrat
reddit.com/r/mmt_economics

Not a book, I know but there are a lot of articles and resources in the
sidebar, including a list of academic papers on the inner workings of
money/monetary systems. Search for "MMT Foundations" within that subreddit to
find those.

------
Merrill
Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of
Derivatives by Satyajit Das

------
PaulDavisThe1st
Got to put in a plug for a book my mother read shortly before she died last
year. The author is insanely smart, the book is really good, the message is
incredibly important:

[https://marianamazzucato.com/publications/books/value-of-
eve...](https://marianamazzucato.com/publications/books/value-of-everything/)

Blurb:

"Modern economies reward activities that extract value rather than create it.
This must change to insure a capitalism that works for us all.

In this scathing indictment of our current global financial system, The Value
of Everything rigorously scrutinizes the way in which economic value has been
determined and reveals how the difference between value creation and value
extraction has become increasingly blurry. Mariana Mazzucato argues that this
blurriness allowed certain actors in the economy to portray themselves as
value creators, while in reality they were just moving existing value around
or, even worse, destroying it.

The book uses case studies–from Silicon Valley to the financial sector to big
pharma–to show how the foggy notions of value create confusion between rents
and profits, a difference that distorts the measurements of growth and GDP. "

------
horsemessiah
Marx's Capital, despite being old, is pretty prescient for the modern day.

------
AlphaGeekZulu
Unfortunately only in German language:

Bernard A. Lietaer: Das Geld der Zukunft

Bernard A. Lietaer: Mysterium Geld

------
danidiaz
I'm not knowledgeable enough to properly recommend a book on the subject so
take this with a grain of salt, but I thought the historical (and opinionated)
overview of the evolution of English money in Christine Desan's "Making Money:
Coin, Currency, and the Coming of Capitalism" was interesting
[https://www.goodreads.com/book/show/21492062-making-
money](https://www.goodreads.com/book/show/21492062-making-money)

I like this quote about how financial institutions evolved:

"It happened improvisationally, indeed probably unintentionally. Participants
solved one problem and created others; they reacted as often as they acted
affirmatively; they moved by experience and intuition, without an overarching
theory; and the whole affair took decades, involved many different actors, and
coheres largely in retrospect."

------
goodcanadian
I think the best way to understand it all is to understand the history of how
it came to be. I would start with something like:

Money: Whence it Came, Where it Went by John Kenneth Galbraith

The Ascent of Money: A Financial History of the World by Niall Ferguson

------
WalterBright
"Monetary History of the United States" by Milton Friedman.

It's tough sledding, but worth it. And by giving the history, one comes to
understand how we got to where we are.

"Capitalism" by Reisman gives a solid theoretical foundation on topics like
rent control, inflation, etc. I especially found illuminating its coverage of
the 1970's oil crisis and how the root cause of it was price controls.

I'd avoid economics books written by journalists and politicians, as all I've
run across are dominated by ignorance, bias, and agendas. Ones by economists
often have agendas, too, but they aren't nearly as ignorant. Just imagine a
technical book about electronics written by a journalist, and you'll know what
I mean.

------
auxym
Highly recommend Naked Economics by Charles Wheelan.

------
cryptozeus
Youtube how economic machine works by ray dalio.

------
talolard
I liked Trading and Exchanges by Larry Harris

~~~
haileris
Seconding this. It's a fantastic book, a little outdated but easy to fill in
the gaps.

I think the best route is to read this, skip all of the books marketed to
retail traders. Read the things the professionals read like the CFA study
materials.

Mark Meldrum also has a comprehensive coverage of the CFA body of knowledge on
YouTube.

------
known
Internship in a Wall Street Firm is better;

------
JacobDotVI
House of Morgan - biography of JO Morgan and kin

Snowball - biography of Warren Buffet

The Good Earth - novel about Chinese farmer

Fortune’s Children - the rise and fall of the Vanderbilts

~~~
FabHK
These might be good books, but I doubt they’ll answer OP’s questions.

------
INTPenis
Web of Debt by Ellen Hodgson Brown.

------
ccarpenterg
Corporate Finance - Stephen Ross

------
kriro
I think the first question that you will face is if you agree with the
Efficient Market Hypothesis (EMH) and the random walk. Basically they say that
prices reflect all available information and that you cannot "beat" the market
(there's a subtle difference between EMH and random walk). The return on an
investment is a direct reflection of the risk. Good reading to get an
understanding for this are "A Random Walk Down Wall Street" and papers by
Eugene Fama (EMH will be covered by any intro to finance book as well). For a
good overview of EMH, I like this paper:
[http://www.cs.ucl.ac.uk/fileadmin/UCL-
CS/images/Research_Stu...](http://www.cs.ucl.ac.uk/fileadmin/UCL-
CS/images/Research_Student_Information/RN_11_04.pdf)

The investment takeaway is that you should invest in passive index funds with
low management cost (typically ETFs).

There's different contrasting points of view most notably behavioral finance.
The EMH argument is basically the market is an aggregation of all available
information. Due to the power of averaging it is going to be correct (if one
person overestimates, another will underestimate and it will all cancel out).
The behavioral counterargument is that there are certain human biases that
lead to all parties being wrong in the same direction (such as risk aversion).
Another POV that is aligned with the behavioral view is that the theory of
evolution provides a good framework for thinking about markets. I like the
book "Adaptive Markets" which also gives a good overview of EMH and behavioral
finance so I'll recommend that as a reference. I think together with "A Random
Walk Down Wall Street" you're set for "general framework of thought" material.

Personally, I am a value investor so I can only recommend books from that
school of thought. The basic idea is that you look at the fundamentals of a
company and the stock market can misprice them. The holy grail is finding a
company where the sum of (current) assets is worth more than the current
market valuation via the stock price because in essence that means if the
company would be liquidated and everything would be sold off, you'd still walk
away with a profit. In essence, you're trying to buy 1$ for < 1$. This is
Buffett's philosophy and he has done really well with it. I'd recommend "Value
Investing" by Greenwald, Kahn, Sonkin and van Biema as a good intro book that
summarizes everything and has some easy to follow examples (because you can't
usually just take the assets face value but have to discount them etc.). The
classics are "The Intelligent Investor" and "Security Analysis" (more academic
but for me this is the gold standard). If you need a quick "how to read
balance sheets/income statement/cash flow statements" I'd recommend "Warren
Buffett Accounting Book"

I think the best essay that describes what markets are good for is "The use of
Knowledge in Society" by Hayek. At least it makes sense for me that they serve
the function of aggregating local and specialized information. If you're
interested, it's also a decent idea to research the different theories of the
business cycle. Keynesian, Real Business Cycle, Austrian etc.

tl;dr:

\- A Random Walk Down Wall Street

\- Adaptive Markets

\- Value Investing (+ Warren Buffett Accounting Book)

Edit: I'm assuming you want a "quick overview". Otherwise, get some mainstream
Finance and Behavioral Finance textbooks :D

------
jokull
1\. People’s QE (modern monetary policy, some great explain-to-me-like-I’m 5
sections) 2\. Doing Capitalism by Bill Janeway (innovation economy) 3\.
Crashed by Adam Tooze (some financial history)

------
schemathings
I listened to the audiobook version of 3 books by Adam Tooze in the past year
and found them to be excellent for understanding how finance works, through 3
separate case studies/examples if you will ..

1\. The Deluge: The Great War, America and the Remaking of the Global Order
describes how most of the current global financial structures were formed,
through the lens of WW1 policy

2\. The Wages of Destruction: The Making and Breaking of the Nazi Economy ..
moves you forward to WW2/post-depression economy

3\. Crashed: How a Decade of Financial Crises Changed the World (recommended
elsewhere in this thread) .. brings things up to current times

------
anticodon
Why there's no suggestions for Karl Marx? He predicted these crises and that
they're unavoidable in capitalism and all only get worse with the time.

~~~
mrpickels
because we live in the real world and deal with real humans. Karl Marx never
worked a single day in his life and created an ideology for people who believe
in unicorns. His work is a criticism of Adam Smith's theories, not a self-
sustainable solution.

~~~
anticodon
He was the first person to prove that capitalism is not a self-sustainable
solution either. Everything he said about capitalism was true and remains
true. E.g. the current crisis could be predicted and it will be a super-
crisis, because there're no new markets in the world. No more countries left
to plunder. There's no way of solving the current crisis without starting a
3rd world war.

~~~
mrpickels
The capitalism that we have rn is actually a form of socialism :) I don't want
to be that pessimistic about 3rd world war, a horrible solution to a big
problem. I think humanity has a chance to have abundance, we need to be united
and don't trust governments and banks and medical institutions, I can see that
a lot of people are going through a healing phase of their mental state, they
giving up all of the brainwashings and taking a red pill. Question is - will
everybody use his chance on time? We will see. Peace.

------
redis_mlc
The short answer is this.

Wall Street exists to profit by skimming money off society, like a predator
waiting for gazelle to approach a watering hole.

The Chinese government produced an excellent short film on this that was shown
on airlines about 5 years ago. At the end was a warning to the USA not to
devalue the dollar (to wipe out Chinese holdings.) :)

Silicon Valley VC's also do that, by skimming 2/20 (or more) from
institutional investors with no downside risk to the VC.

The long answer - it will take you decades to study and learn. Do some reading
and watch NBR.

------
gargarplex
Why would you ever read a book on financial systems by someone who isn’t
absurdly rich

~~~
kortilla
Why would you ever read a book on aeronautical engineering from someone who
isn’t a million miler?

~~~
gargarplex
Inappropriate metaphor

~~~
kortilla
I know one of the people who literally wrote a chunk of the matching engine on
one of the larger exchanges. He’s not absurdly rich but a book from him on
high performance order book management at scale would absolutely worth a read.

The metaphor is appropriate because quite frequently people who use things to
the greatest effect know very little about the implementation or how it
_actually works_.

~~~
gargarplex
That's a reasonable argument then, and now I appreciate the metaphor.

If one is interested in the technical details of implementation for technical
reasons, I would agree that a brilliant and interesting engineer wouldn't
necessarily be in line to profit from their value creation although would be
available to discuss mechanics of implementation.

