The Origin of Financial Crises

A masterclass covering quite a lot of material in the form of intuitive logic statements. Cooper begins with a surprisingly complete history of money itself from the beginning of human society to the present, showing how the superstructure of the modern macroeconomy we inhabit today was built.

It is from this base that he launches his argument — a fierce attack on the academic community’s perpetuation of efficient market theory that Cooper believes continues to win over major players and institutions the world over, was the core cause of the 2008 financial crisis (which happened as he was writing this book) and will continue to plague the American and global economies until it is addressed.

It is a plea for a deeper understanding, consensus and embrace of the fact that markets are inherently unstable (that not all economic crises can be attributed to exogenous shocks, and many are in fact due to internal conditions) that drives Cooper throughout the book. He elegantly introduces and details the concept of central banks and the fact that they are dangerously misunderstood (or in some cases not understood at all) by politicians, the general public, and even some of the people working for them. After, he provides what reads to me as an eminently reasonable and nuanced endorsement of the central banking system, with the right caveats.

The best part of this book besides its ability to explain such a complex and misunderstood subject in a short amount of time is Cooper’s inclusion of William Edward Maxwell’s governor theory, and how it applies to the correct management of central banking policy.

Even among other brilliant authors I have read, who have been able to take disperse topics and apply them to a field I have not considered yet, Cooper’s example here was especially brilliant. He introduces Maxwell’s governor theory through the example of the breakthrough mechanical construction of 21st century self-balancing European fighter jets, which correct from their inherently unstable base with minute adjustments that happen quicker than the human intuition, and applies the same reasoning to how we should consider governing central banks in the 21st century. And I promise the book itself does a far better job than my summary here makes it seem!