Book Reviews

Book Review: "THE ORIGIN OF FINANCIAL CRISES" by George Cooper
With a series of well-thought and simple fundamental arguments, George Cooper debunks the core principles of modern investment theories, and challenges the credit expansionary approaches taken by Central Banks like the US FED as the fuel for future damaging bust and boom cycles and more asset bubbles.

Most finance and banking students are taught the Efficient Market Hypothesis (EMH) which gave rise to the Modern Portfolio Theory (MPT), from which is derived portfolio contruction, risk management and a slew of other statistical methods in the financial world. The foundations of which MPT is built upon is that (1) Markets are Efficient (2) when left alone, will converge to a steady equilibrium state (3) asset prices are unpredictable and has no memory, much like a coin toss thus (4) can be "predictable" and described in terms of statistical distributions. According to George Cooper, all this is a false and dangerous assumption.

In this book George disproves EMH and MPT by sharp and intelligent arguments, illustrating with real life facts. He goes on to offer alternative views like the Financial Instability Hypothesis developed by an American economist, Hyman P Minsky. Also uncovered is John Keynes comprehensive refutation of the idea of efficient markets. Other than bashing EMH, he also cautions the dangers of credit inflation of "at-all-cost" deflation prevention measures by Central Banks. As an investor, this book offers a "other-side-of-the-coin" view about a very complex financial world, and come to terms about fallacies of EMH.It also points to recognizable patterns of Central bank inflation that's going to make your bank deposits look smaller and smaller, so you can take actions to beat inflation at it's own game. Next time when some investment guy spouts some grand textbook theories, you'll know if he is just a book-worm. If someone mentions the Efficient Frontier to you (another off-shoot of MPT), shake your head in disgust, as recent and past events have disproved investing methods putting too much hope into old school Finance.