Books from 2022

Here are my book readings from 2022 (earlier ones available here - 2021 , 2020 , 2019 ).

?As always, there is some tinkering at the margin, but the basic format remains the same:

1. I lead with my own thoughts and follow those with some interesting paragraphs from the book

2. I continue the system of including my own words (in brackets, like this) to add context or enable flow

3. The book names click through to Amazon US kindle versions

?What’s different this year:

1. I spent less time reading general books, and more time reading textbooks, research, memos and video transcripts

2. It is becoming increasingly clear that:

(a) The 'Selection - Reading - Retention - Utilisation' process needs to be evolutionary

(b) Real world value of functional knowledge is acceleratingly (sic) diminishing

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History

1.?Oceans of Grain - Scott Reynolds Nelson (369 pgs, 2022)

This is a history book like no other. While it is quite short, it packs in so much that every sentence is a keeper, and I could not resist the temptation of reading it once again, last week. This book frames the struggle for empire for almost 3000 years starting 800 BCE as essentially a struggle for control of grain and takes us through the Greek, Roman, Arab, Byzantine, Ottoman, Russian, European and American empires as it weaves it's tale.

And in doing so, one traverses along a wonderland of historical ideas and structures – from Marx to Lenin, from the founding fathers of America to those of Russia, from the role of dynamite to that of shipping lanes, from roots of political power to those of merchant power and of divine power, from rise of Genoa, Venice and other city states to rise of nation states, and from power-shifts driven by innovations (futures contracts, steam-based-locomotion) to those driven by social structures (slavery, serfdom, capitalism).

The book covers much ground and as always I have found it hard to retain it all. And as always. I have struggled to select paragraphs, as I cannot reproduce the whole book here and whatever I include here seems so distant from the book’s essence.

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“Ukraine has what may be the richest soil in the world.”

“In 1472, Ivan sought out Sophia, niece of deposed emperor Constantine XI, proposed marriage, and then chose the double-headed eagle (Byzantium’s symbol) as Russia’s imperial crest. The rulers assumed the name tsar—caesar in Russian. For four centuries the tsars meticulously planned their assault on Istanbul, giving the city a new aspirational title of Tsargrad: city of the tsar.”

“While French reformers defined American and Russian plans for expansion by wheat, the plan to turn national debt into currency likely came directly from capitalist traders in the Dutch Empire…in the seventeenth century the Netherlands had established a national debt, created a national bank to issue that debt, and then used debt to expand its military empire around the world. Shortly after the Dutch expansion, Great Britain (too) appropriated a deficit-based expansion strategy”

“…empires did not create trade but slowed, bounded, and taxed it…imperial origin stories often emphasize their capacity to drive out competing tax agents (commonly called robbers, highwaymen, or pirates)…The heroic Frederick the Great replaced local robbery with an even more stirring game: taxing robbers…”

“With its grip on grain, tsarist Russia soon became the biggest land empire in the world. The United States, locked into cotton for its export crop after 1820, struggled to compete.”

“Russia's imperial overreach awoke a sleeping giant across the Atlantic… the biggest threat to sending grain to Europe was not the sultan or the tsar but the growing political gulf between midwestern wheat farmers and southern cotton growers… The merchant princes of New York and New England…contributed strongly to the birth of the Republican Party…The railroad barons and grain traders would come to hold tremendous political power in the Republican Party…The fundamental interest that tied them together was the grain pathways connecting East and West by canal and railroad. Though called robber barons at the time, these people were more like what I would call boulevard barons. The medieval robber barons imposed tolls on grain passing near their fortresses. These boulevard barons sought to decrease the tollage, speeding and cheapening the delivery of western grain to European cities while charging fees for that rapid delivery”

“Before the 1850s, information and goods traveled at roughly the same speed. With the development of telegraphs…prices between buyers and sellers could be negotiated before goods arrived…”

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2.?A Short History of Russia – Mark Galeotti (201 pgs, 2021)

Oceans of Grain and the situation in present-day Ukraine had me looking to read about the origins of Russia. A nation with 1150+ years of history cannot be read about in 200 odd pages, but that is the nature of abstraction that I had time for and this book by Mark G does not disappoint. I somehow managed to re-read this too, in its entirety last week, and yearning for more have started with streaming series around Catherine the Great and Mehmed II (who ended the 1500 year Roman rule over Constantinople, and made it the capital of his Ottoman empire). Of course, video has not killed the publishing star, not yet.

The evolution of Rus’ is truly fascinating and I noticed that each great-leap (forward or backward), except perhaps Catherine the Great’s, also shifted the capital city – Kiev (350 yrs), then Mongols (250 yrs), then Moscow (250 yrs), then St Petersberg (200 yrs) and finally Moscow (100 yrs) – the years being rounded off, and some details being abstracted away.

Sometimes, a 1000 year context is necessary to understand a 10 month old situation, and the Israel-Palestine situation is another classic example that comes to mind in this context, though there one perhaps needs to go back a few thousand years. History, as they say, is also a matter of how far you go back.

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“Russia is a country with no natural borders, no single ethnic group, no true central identity. At the crossroads of Europe and Asia, it has been subject to invasion by outsiders, from Vikings to Mongols, from Napoleon’s French to Hitler’s Germans. In order to forge an identity, it has mythologized its past to unite its people and to signal strength to outsiders.”

“988 (ACE)...Vladimir decrees conversion to Orthodox Christianity…Why did Vladimir do this? The apocryphal tale is that he sent envoys out to assess the appeal of the main faiths dominant at the time. Judaism was rejected because he believed that for the Jews to have been expelled from their homeland proved that God was not on their side. Roman Catholicism was rejected because no Grand Prince of Kiev could submit himself to the authority of the Pope. Islam was rejected because of its prohibition of alcohol, with Vladimir allegedly noting that “drinking is the joy of all Rus’. We cannot exist without that pleasure.” (Some stereotypes have a long pedigree, it seems.) Instead, it was Byzantine Orthodox Christianity that won him over, as his emissaries rhapsodized about the Eucharist in the domed nave of the immense Hagia Sophia cathedral…”

“From the Time of Troubles (1605-1613) emerged not only the new Romanov dynasty, but also a new, cohering narrative: that Russia would be prey for its many foes if it did not have a single, powerful ruler around whom all the classes and peoples of the nation could—and must—unite. This became the basis for the Russian Empire, and with it a growing national self-image as both beleaguered fortress amidst a sea of enemies and also guardian of everything that was good and proper”

“It was Lenin-the-pragmatist who seized power in 1917. Never mind that Russia hardly seemed ready for socialism, lacking a large and politically mature working class. Never mind that, in his The Eighteenth Brumaire of Louis Napoleon, Marx had warned that trying to force socialism onto a country not yet prepared for it would be counterproductive, leading to a regime with conservative instincts but all the energy of revolution. (And Stalin proved him right.)”

“The age-old Russian dilemma, after all, had been how to modernize while maintaining state power.”

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Commodities

3.?The World for Sale - Javier Blas and Jack Farchy (411 pgs, 2021)

The current economic environment and the previous two books provided inspiration enough for this one, despite its catchy title which usually makes me avoid the book. But Javier’s quality of journalistic writing tipped the scales and suddenly, all the actions of all of the commodity traders which have been headlined over the last several years, started making sense.

This book paints the commodity trading houses as swashbuckling risk-takers who are constrained by neither the spirit of law nor the spirit of morality, and are driven purely by the adrenaline of the trade and the attraction of profits. The “curse of commodities” leads to their source being largely governed by principles different from those prevalent in the developed world, and the ability to deal with such sources on the one side and to deal with the developed or emerging world demand on the other side is a very special skill that the commodity traders bring to the table. They control such a large part of each of the markets that they operate in, that it is no wonder that a few weeks back even the mighty Germany signed up Trafigura for a multi-billion dollar long term gas procurement deal (the same Trafigura that had been significantly discredited after the 2006 Ivory Coast scandal.) A super informative book, especially in current times.

“While Glencore dominates commodity trading today, in the 1980s it was Marc Rich + Co that played the dominant role, and, in the 1960s and 1970s, Philipp Brothers…Marc Rich was a senior trader at Philipp Brothers before he left to found the company that bore his name; and Marc Rich + Co was renamed Glencore when the top traders ejected Rich…Today, Glencore is the largest metals trader, a top-three oil trader, and the world’s largest wheat trader…Trafigura belongs to the same dynasty. It was started by a group of disaffected former Marc Rich employees who struck out on their own in 1993. The company, now the world’s second-largest oil and metals trader, has held on to its underdog mentality…In oil, the leading trader is Vitol, whose executives exude the confidence of the British establishment – as befits a firm whose office is just a few metres away from Buckingham Palace, and whose long-time CEO Ian Taylor was a regular visitor to 10 Downing Street…In agriculture, Cargill is king. The US company, the world’s largest trader of grains, carries itself with the quiet self-assurance of the generations of Midwest wealth on which it was built.”

“‘It’s not for the faint of heart,’ says David MacLennan, chief executive of Cargill. ‘The history of Cargill has been to go into places where other people won’t. That’s where opportunity is. Whether there’s crisis, or threat, or things that are high risk, that means there’s opportunity.’”

“At the centre of this book’s story are four developments which moulded the global economy in the commodity traders’ favour. The first was the opening up of markets that had previously been tightly controlled – above all, oil…The second was the collapse of the Soviet Union in 1991…The third was the spectacular economic growth of China in the first decade of this century…The fourth was the financialisation of the global economy and the growth of the banking sector, beginning in the 1980s”

“...Arab Light, the benchmark for Middle Eastern crude, started the 1960s at $1.90 per barrel… By 1971 (it was) $2.24…and in 1973 it was $3.29…official OPEC oil prices surged throughout 1979 and 1980, first to $18 a barrel, and then to $28…”

“In emerging markets, the commodity traders didn’t just buy and sell raw materials. Instead, they expanded into merchant banking and private equity, one day lending money to the government of Nigeria, the next investing in Peruvian anchovy factories. The commodity traders were, effectively, engaging in capital arbitrage: raising funds in the industrialised world, and investing them in emerging markets, where they enjoyed fatter returns.”

“… in 1977, the Foreign Corrupt Practices Act was passed, making it illegal for US individuals or companies to pay bribes overseas. Step by step, many other countries tightened their laws on bribery too. But some, notably Switzerland, were extremely slow to act. Paying bribes to foreign officials was not only widely accepted within the business community, but the bribes were even tax deductible. It was only in 2016 that Swiss companies stopped being able to claim a tax credit against the bribes they had paid to businesspeople abroad”

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Literature

4.?The Torrents of Spring – Ernest Hemingway (101 pgs, 1926)

Ah, Hemingway. The idea was to read everything, chronologically. And that led one to start with this book, which it has been insinuated, he wrote poorly to get out of a publishing contract. But I liked it. Hopefully, I will progress through the Hemingway oeuvre in the coming year, and while the global weather looks unsupportive, I remain hopeful. I of course cannot provide lead-commentary to a Hemingway book - that would be too conceited.

“Why shouldn’t he work with his hands? Rodin had done it. Cezanne had been a butcher. Renoir a carpenter. Picasso had worked in a cigarette-factory in his boyhood. Gilbert Stuart, who painted those famous portraits of Washington that are reproduced all over this America of ours and hang in every schoolroom-Gilbert Stuart had been a blacksmith. Then there was Emerson. Emerson had been a hod -carrier. James Russell Lowell had been, he had heard, a telegraph operator in his youth.”

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?Biography

5.?Apropos of Nothing – Woody Allen (360 pgs, 2020)

Each year, I try and read a book related to movies and the like, and in the otherwise Sahara of book-reading this year, while I was looking for Bob Dylan (inspired by the 101 page Hemingway), I found a rhyming Woody Allen, a writer, actor, comedian and hailed as one of the greatest directors in American cinema, though his later personal life events have turned him into something of a pariah. But in the spirit of separation of the message from the messenger, I delved into this biography, whose title itself held boatloads of literary promise, while also lamenting as to why did I dispose off the Woody Allen movies box set of mine, which would have made a nice reading companion. Netflix and friends (or foes), after all, would not carry the director’s cut of Annie Hall.

“People will point to my career and say it can’t be all luck, but they don’t realize how much of it has been the roll of the dice and nothing more.”

“Yes, I liked the girls. What am I supposed to like, the multiplication tables?”

“Great straight lines make great punch lines”

“The writer in me suggested I could just go out and read my material. The jokes are strong. What’s the difference? Jack explained patiently, “If they like the man. That’s it. If they connect with you, they will like your jokes. If they don’t, the best gags in the world won’t get you there.””

“Artistic power in a movie has to reside with the director, not the star. Not any star.”

“I protested, but authors in Hollywood were one step beneath the caterer.”

“And that’s how I got into making movies. Hard work, some talent, much luck, major contributions from others.”

“The fun of making a movie is making the movie, the creative act. The plaudits mean zilch. Even with the highest praise, you still get arthritis and shingles. And is it so terrible that some people are not thrilled with your work? That someone might not like your movie? The universe is flying apart at the speed of light and you’re worried some guy in Sheboygan quibbles with your pacing? Or some lady in Tuscaloosa writes you’re a genius and you believe her opinion makes you the equal of Rembrandt or Chopin? Stop hondling with trivia.”

“My theory, after years of being in the movies, is that the problem is almost always the script. It’s much harder to write than direct, and a mediocre director can make a good movie from a fine script but a great director cannot make a lousy script into a good movie.”

“…but I decided on Annie Hall, using Keaton’s birth name. The movie opened and soon became everyone’s favorite. People were in love with it. This instantly made an old cynic like me suspect of its quality.”

“The whole awards thing is so out of control. Award shows are obviously fun for people to watch. And of course, they can be very lucrative for the ones who produce them, though they pay nothing to the stars who get honored. I’m thinking of the Golden Globes or the Kennedy Center. Even the Oscars. At least for a Nobel, you realize a couple of shekels. But many awards are given only if the winner agrees to show up live to accept it. If not, they give it to someone who will show up. Obviously, it has nothing to do with genuine achievement and everything to do with exploiting a big name who wants an ego massage. Is it any wonder in his later years if you wanted to honor Orson Welles, he’d charge you?”

“I always liked Jeff Katzenberg, got along well with him, and found him to be a film executive of his word, usually an oxymoron in Hollywood.”

“And so I flew to California on the Disney Gulfstream, a G-2 if I’m not mistaken, and all the flight safety instructions regarding seat belts and life vests came over the loudspeaker from Mickey Mouse. How unsettling, I thought, there’s a rodent at the controls.”

“Then, in an effort to top my lowest box office record and alienate as many fans as possible, I decided I wanted to make a one act play of mine called Kleinman’s Function into a movie called Shadows and Fog, a black-and-white existential little tale that takes place in Germany one night during the 1920s. Everything would be shot indoors on a set, even the many exteriors. One only has to study the fundamentals of bankruptcy law to envision the box office potential.”

“I never see my movies after I finish them”

“Soon-Yi will be the first to tell you in over twenty years of marriage, and the many disagreements we’ve had, I have never once been right on a single issue.”

“Streetcar (A Streetcar Named Desire) is the finest work of art in my lifetime, and I never miss it when it’s on.”

“By now you probably guessed, as a filmmaker I am an imperfectionist. I have no patience to shoot scenes over and over and get coverage from various angles, however invaluable it is later when editing. I like to shoot a scene, go on to the next, finish up, and get the hell out of there...I like making movies, but I lack the dedication of a Spielberg or Scorsese, not to mention their other gifts.”

“It’s fascinating how various cultures respond to the same material. One movie will do great in Argentina but not great in England. Another is big in Germany but death in Australia. One scores in Japan but dies in Brazil. It’s observations like these that have kept my dinner invitations to a minimum.”

“…why is it when attacked I rarely spoke out or seemed overly upset? Well, given the malignant chaos of a purposeless universe, what’s one little false allegation in the scheme of things? Second, being a misanthropist has its saving grace—people can never disappoint you.”

“And really, no interest in a legacy? I’ve been quoted before on this, and I’ll leave it this way: Rather than live on in the hearts and mind of the public, I prefer to live on in my apartment.”

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Science

6.?Vaxxers - Sarah Gilbert and Catherine Green (304 pgs, 2021)

I read this book on the first day of this year, not knowing then that what is starting as a good general-book-reading year will end as more of an academic-stuff-reading year. Vaxxers broke several myths about diseases and vaccines that had been cosying up in my mind for the last several years and I was stunned to know that the actual science to design a corona-virus vaccine took less than a week and the rest of the usual 10-year vaccine development process is, well, not rooted in pure science, and mostly rooted in money and bureaucracy. Astounding.

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“At the beginning lots of people were asking ‘why did we not see this coming?’ The answer is that we did see it coming, and we had started preparing, but we had not been able to persuade anyone to spend the money that we needed to do what was required.”

“ChAdOx1 is what is called a ‘platform technology’ meaning that it can be used to make many different vaccines. The great advantage of this is that you don’t need to repeat every one of the many aspects of vaccine development for each new vaccine that is made. Knowledge of how to manufacture the vaccine, how to store it, and what dose to give, can be built up and applied to every vaccine that is made using the same platform.”

“But even with the time saved by using a platform technology, the development process remained painfully slow…This was largely because…A funding application could easily take a year to go through…The whole process…usually took at least three years. And that’s just to get you 100 ml or so of starting material.”

“Part of successfully winning funding in these competitive situations is knowing how much of the total pot to bid for… I knew that if I asked for much over 10% of the total pot I was unlikely to get it.”

“I had included in the UKRI application the cost of manufacturing the vaccine at Advent in Italy. But to reserve the precious time in Advent’s clean room, there needed to be a contract. Usually it would simply be unthinkable to ask the university to sign a contract before we had official confirmation of the funding. However, this was a pandemic. Without the contract, we would lose the manufacturing slot we had lined up at Advent. Without the slot, our clinical trials would be delayed. There had to be a way. Going against normal protocol, the university agreed to take the risk and underwrite the contract. If no funding came through, the university would cover the costs.”

“Vaccines are not found. Even the world’s first vaccine, against smallpox, was the result of a carefully thought-out line of reasoning, not a happy accident.”

“It can be hard to shift someone’s long-held view even if it is wrong.”

“The two regulators worked in different ways. The FDA approach was more process-driven, whereas the MHRA’s approach was more interactive, and more focused on gathering the evidence needed to assess the risks and answer the scientific questions.”

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Finance and Economics

7.?The Money Illusion – Scott Sumner (414 pgs, 2021)

One could spend a lifetime reading all the various schools of thoughts on micro and macroeconomics, and the modelling therein, and then opinions thereof, and then opinions on opinions, and not only can it be quite exhausting, but also one would still be unaware whether one is lost in the sandy dunes of the Sahara or the Atacama. Scott Sumner has been deploying a sort of a guerilla approach to this problem, in his blog, wherein he writes scathing pieces against some generally prevalent 'truths' of economics, so when he wrote a book, it just had to be read.

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“I’m going to argue that the housing bubble and financial crisis did not cause the Great Recession… (but)…in a sense, the Federal Reserve was to blame…(as, while) the Fed did far better in 2008–2009 than in 1929–1933, and far better than the European Central Bank did…yet despite the policy of low interest rates and quantitative easing, monetary policy was still effectively tight, and this contributed greatly to an unnecessarily severe recession.”

“…currencies almost always depreciate sharply during a severe financial crisis…The rare examples when a currency appreciated during a financial crisis (e.g., the US in 1931–1932, Japan in the early 1990s, Argentina in 1998–2001) are cases that we now know involved excessively contractionary monetary policy”

“Commodities such as gold and silver had been anchoring the price level for centuries…the price level was determined by the supply and demand for 1/20.67 of an ounce of gold, or 1/35th of an ounce after 1934… After 1968, however, it wasn’t at all clear what determined the price level…even today economists don’t fully agree about how to model fiat money”

“Fed controls the nominal quantity of money in the US economy… But the public determines the real demand for money”

“The early Keynesians thought that inflation was caused by a booming economy, whereas Hume had shown that booms are actually deflationary… a boom that results from increased aggregate supply (holding M * V fixed) is actually deflationary. Higher inflation will occur only if the boom is caused by higher aggregate demand.”

“Rather than reasoning from a price change, we want to first ask, “Are the higher prices caused by less supply or by more demand?””

“In other fields, such as physics, the discovery of new theories does not change the way the world works. This is not the case in economics.”

“Economists in the 1960s had very little experience with a pure fiat money regime…Just as fish don’t realize they are wet, economists never recognized that they had mostly lived under monetary regimes with commodity anchors… commodity anchor usually led to near-zero inflation expectations”

“Monetary injections, even printing paper money, was not inflationary if the money was backed by sufficient assets.”

“One could argue that liberals always win in the end, because liberalism is the name given to the winning ideology, whatever it is… In macroeconomics Keynesian is the analogy to liberal in the world of politics. Keynesian is the name given to the winning ideas.”

“Ben Bernanke: The imperfect reliability of money growth as an indicator of monetary policy is unfortunate, because we don’t really have anything satisfactory to replace it. As emphasized by Friedman . . . nominal interest rates are not good indicators of the stance of policy. . . . The real short-term interest rate . . . is also imperfect. . . . Ultimately, it appears, one can check to see if an economy has a stable monetary background only by looking at macroeconomic indicators such as nominal GDP growth and inflation.”

“Sometimes printing lots of money indicates easy money; at other times it indicates tight money.”

“M2 went out of favor as a policy indicator during the 1980s precisely because its correlation with the economy seemed to weaken over time.”

“Inflation rate is affected by two factors: shifts in the supply of money and shifts in the demand for money. When the money demand curve is stable, the quantity theory of money holds true. Prices move in proportion to the money supply. When money demand changes, things get more complicated.”

“By the end of this book I hope to convince you to ignore what the Fed is doing to the current money supply, or to its interest rate target, and instead focus on market expectations of inflation, or—better yet—NGDP growth.”

“Even today, there is no consensus about why money seems to be highly nonneutral in the short run and roughly neutral in the long run… So money affects prices only in the long run, but during a transition period before prices have adjusted, changes in the money stock also affect real output”

“In the popular media, and even among many economists, high interest rates represent tight money and low rates are taken as evidence of easy money. This definition is extremely misleading. It is so misleading that a new school of thought has recently arisen with the exact opposite view. The “Neo-Fisherians” claim that low interest rates represent tight money and high interest rates represent easy money. I hope it’s obvious that this is a deeply embarrassing state of affairs.”

“The central problem in monetary policy is that the variables that a central bank can easily control on a day-to-day basis, such as the fed-funds rate, the monetary base, and the price of gold, do not reliably correlate with the things we really care about, such as the CPI, unemployment, and nominal GDP”

“Many people wrongly believe that easy money boosts stock prices because a given future cash flow has more value at a lower level of interest rates. That’s very misleading, as the January 2001 and September 2007 market responses show. In both cases, longer-term interest rates (which are the rates that matter when discounting future cash flows) actually rose. Thus, the dramatic rallies in stock prices occurred despite rising interest rates. In fact, easier money boosts stocks (if at all) only to the extent that it leads to expectations of faster economic growth.”

“When I ask these people…to explain what they mean by easy money, the responses are all over the map. Let’s look at six plausible definitions of easy money: 1. Low nominal interest rates (vulgar Keynesian) 2. Low real interest rates (sophisticated Keynesian) 3. A fast-rising monetary base (crude monetarist) 4. Interest rates below the natural rate (New Keynesian) 5. Rising asset prices (Frederic Mishkin) 6. High inflation and NGDP growth (Ben Bernanke)”

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8.?The Asian Financial Crisis – Russel Napier (391 pgs, 2021)

Russel Napier’s combines his Scottish charm with his deep knowledge of financial history to enlighten and educate in a manner very few can. I try to read everything that he has to say and it is always worth it. This book is unique in that it looks at the 1990s Asian financial crisis in a forward looking fashion, i.e. he references his research writings from that time as the starting point of what he and the market expected to happen in the near term, and connects that with what actually happened. That is a very unique way to consider history, and perhaps also a very powerful way. I am currently reading this book for the second time as I write this.

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“In many societies the new form of capitalism spreading from the US was incompatible with local societal beliefs and structures. Each society in Asia was different in its own way, but in north Asia in particular there was a much more communal approach to societal organisation that could not and has not been reconciled with financial capitalism (which was) a form of capitalism that combined individualism with the aggressive use of balance sheet management for primarily personal profit”

“Historians know what happened next and this informs, often wrongly, their interpretation of events and decisions at the time.”

“That there is no connection between levels of economic growth and returns from equities is a key conclusion from financial history, but it was the dominant belief among investors in Asia in the mid-1990s.”

“the Asian financial crisis taught me that equity investors need to be very aware of what is happening in credit markets and particularly foreign currency borrowing by the local private and government sector…”

“I found morning meetings to be a painful affair because I held a different opinion from most of the other participants. However, the main reason I found them painful was because I thought it was stupid to have to come up with our best ideas on a daily basis… I could think of no greater oxymoron than ‘daily strategy’”

“The Asian financial crisis set the scene for an age of debt in the developed world and this brought crises that have forced developed governments to confront financial capitalism in their own backyards. The result is that the age of financial capitalism is ending and something more akin to the social capitalism of Asia is being created.”

“While financial textbooks teach that capital flows react to reflect the fundamentals, it was not a new idea that, in certain conditions, they could actually change the fundamentals. In The Alchemy of Finance, published in 1987, George Soros put forward his theory of reflexivity in which capital flows themselves could create the better fundamentals that would in turn attract even more capital flows to that particular asset.”

“From its high of 80 yen to the US dollar in April 1995, the Japanese currency was to decline to 147 yen to the US dollar by August 1998. The rise of the US dollar and the decline of the yen were key triggers for the chaos to come in Asia.”

“Due to high levels of local ownership, the Thai market is not an efficient discounter”

“Investments funded with debt are investments weakly held, given the consequences for profits and ultimately solvency should their prices decline”

“There has to be a reason why we constantly forget the investment lessons of the past. One of those reasons is that we are always keen to believe that we are not as stupid as our ancestors. While it is true that the sum of human knowledge is always advancing, albeit with some detours into intellectual cul-de-sacs, the human psyche is strongly influenced by greed and fear”

“The focus of investors remained on the belief that high economic growth would produce high returns from investment in equities. That economic growth had been dangerously funded was something that investors were yet to focus upon.”

“Many foreign investors had invested in companies that were controlled by families that were ethnically Chinese and some were also Christian. Few investors ever considered that the ethnicity and religion of a company’s controlling family were relevant in assessing the likely return from investing in its shares. However, if Indonesian society blamed such businesspeople for their economic woes, could they continue to control their lucrative local franchises? What would a change in control mean for minority shareholders?...Failure to understand societal reactions to extreme economic pressures cost investors dear in Asia in this period and regularly resulted in large losses in Latin America.”

“Portfolio investors in particular rely upon the continuation of a rule of law that allows them to enforce their property rights in a court before an independent judiciary. If an economic contraction threatens the continuation of the rule of law, then investors can, and have, lost everything.”

“In the 1980s, in the United States, the central bank kept short-term interest rates low and the steep yield curve that ensued allowed banks to borrow short and lend long at great profit. This was a form of surreptitious recapitalisation that met with little political backlash, required limited government capital and did not need to force strong banks to bail out weak banks.”

“Institutional investors were bringing the same skill sets to investment in Asia that they had long employed in the developed markets. These were not skills that allowed anyone to assess the geopolitics that proved so important in assessing the correct value for Taiwanese equities in 1995 and early 1996.”

“I suggested to him that the eradication of what he and economists liked to call ‘inefficiencies’ would mean eradicating what many people in Europe referred to as their culture.”

?“Distress in the banking system has always been part and parcel of why a recession risks tipping into a depression”

“Private bankers are best placed to understand how local savers are reacting to economic changes. Their clients are often very well connected and understand the economic/political nexus much better than foreign analysts. In my experience they often have tales that would make your hair turn white about the degrees of risk their clients are prepared to take in bull markets. They also can tell you about shifts in local capital that the institutional fund managers and stockbrokers simply miss.”

“Governments rarely understand how the measures they take to shore up certainty, usually by fixing the price of something, actually create the uncertainty for the investor that repels capital. The administrative measures that were implemented during the Asian financial crisis acted more to repel than attract capital”

“There was plenty of guidance as to what would probably happen, but it was all hidden in history books and not economic textbooks.”