Archive for November, 2012

Date: November 7th, 2012
Cate: Finance

Casual reading: The Power of Gold and Cartoon Guide to Macro-economics

Power of Gold Peter L. BernsteinThe Power of Gold by Peter L. Bernstein is a great read for its scholarly research and Bernstein’s understanding of monetary theory. The book gets interesting as Bernstein explains that one of the reasons gold functions as money so well is that it is inherently useless. Money plays three economic roles, means of exchange, store of value and unit of account. Value is subjective and so the endless pursuit of a store value is a mirage which Bernstein explores as a narrative across thousands of years.  Bernstein does a great job explaining how the US left the Gold standard and what that meant for monetary policy as a means of explaining how money works.

I won’t go into monetary theory in-depth in this post, but the need for a depreciable currency becomes quite evident as Bernstein highlights the suffering caused by severe deflations instilled via high interest rates put in place to attract gold to maintain issued currency gold parity in earlier times.

The late Bernstein had a rich background including roles at the FED during many critical times.  The role that gold plays in the necessary money illusion is highlighted here and Bernstein correctly hints at the requirements for monetary regimes to be as malleable as the metal without fixed ratios in order to minimize deflation based debt crises. The monetary component for maximizing economic growth is to maintain the money illusion with minimal value loss (inflation) and minimal volatility for extended periods.


As a sometimes teacher and perpetual student, I have a great respect for the ability to communicate clearly. The Cartoon Introduction to Economics is fantastic for this. It is like a comic book version of the Dummies Guide to series. The cartoon series of books includes micro and macro economics, statistics , calculus and physics with a clear and clean method. The graphic novel approach forces jargon reduction and clear communication. As an economics geek, I finished this in an hour, but found it a great way to brush up on familiar concepts. It also provided some novel ways of showing and explaining concepts to others.

If knowledge is the light banishing ignorance to darkness, then the Cartoon introduction series shines brightly opening many fields to offer knowledge for people who may be intimidated. I sincerely hope the author and publisher extend this series. As the saying goes, if you think education is expensive, try ignorance.