Written in a comfortable conversational style, (with many entertaining apropos quotes from mainstream pop culture as well as eminent economists and philosophers from the past) Code Red exposes what makes the current situation unique in the history of fiat currencies. The new and somewhat scary methods of central bank economic influence, Quantitative Easing (QE) and long-term zero interest rate policy, (ZIRP) have never been tried before.
So far it has worked, staving off what would have certainly been a crippling deflation. But once you start QE it isn't clear how you stop. And the longer it goes on, the bigger the potential problem becomes. As long as QE continues (and it's not clear it will ever stop):
* The bigger the tinder box of low velocity reserves on bank balance sheets will become. The authors point out that just because this money hasn't been lent out to chase goods and service prices higher in an inflationary spiral for the past three years doesn't mean it can't. Just because gunpowder hasn't exploded, doesn't mean it won't, doesn't make it safe.
* The steady climb in asset prices engendered by central banks has been orderly, but is inherently destabilizing. Their analogy of a tall sand-pile, built ever higher grain by grain... The taller it becomes, the less stable it is. Sure it looks stable, standing there stationary as can be, but when perturbed by another grain of sand it is very difficult to estimate how big the avalanche might be. But one thing we can predict, the taller the sand-pile, the more the central bank policy pumps up asset prices, the better the chances are that we will see large disruptive avalanches.
* The central bankers cannot acknowledge this instability. In large measure their job is to engender confidence. So when they say with 100% certainty all is 100% under control we'd be wise to take their assurances with more than a grain of salt.
Also new is the shift of central banks moving away from their historical short-term counter cyclical role into a long-term one sided financing of government debt and deficits. In the U.S. and around the world, esp. Japan, central banks are straying from their mandates. Engaging in de facto long term fiscal policy stimulus. Dealing with unsustainable debt by printing money (or by more debt depending on how you look at it). All this against the back drop of globalization, currency wars, and deflationary population and inequality of income trends. Lots of new moving parts. No one knows how this will work out. But it obviously has the potential to be messy.
Finally the book offers a sensible approach to investing in the current environment. Which frankly is not all that different than in more typical circumstances... a diversified portfolio consciously avoiding the typical wealth destroying behaviors of trading without expertise, home bias, etc.. The main difference is an investor would be prudent to be more conscious of inflation risks and volatility than typical. Despite strongly discouraging non-professionals from trading rather than long term portfolio construction, he also talks about investing opportunistically in the aftermath of crises, keep some cash as dry powder and buy assets that are irrationally reviled when there is blood in the streets. He also likes gold but didn't harp on it in a way that was tangential or distracting to the general theme of the book. I like his approach. He discourages the masses from trading, but then gives them some good advice, if they must.
A couple of peccadillos... I felt he was a little hard on central bankers and economists whom he portrayed as generally clueless. But that sort of invective has become de rigueur in pop-economics and much of the audience expects and enjoys it. Also the implication that rising interest rates causes higher money velocity instead of having merely been historically correlated IMHO seems tenuous.
As a former hedge fund CEO and CFA charter holder, most of the material was already broadly familiar to me. But the well researched detail and readability made the book a pleasure to read and learn from.
Gave four stars instead of five because the title "Code Red: How to Protect Your Savings From the Coming Crisis" is misleading. It really isn't about that. More accurate would be the less catchy "Code Red: Why Current Central Bank Policies are Different and Dangerous".
- 语种： 英语
- ISBN: 1118783727
- 条形码: 9781118783726
- 商品尺寸: 16 x 2.8 x 23.1 cm
- 商品重量: 585 g
- 品牌: Wiley
- ASIN: 1118783727
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