Monday, October 10, 2011

Two Books on The Federal Reserve (and how to prepare for inflation)

The Alpha Strategy

I have been sharing this link to The Alpha Strategy since 2009. It is the book that got me started in economics before I went on to study more works on free-market capitalism. It was my "gateway drug" so to speak.

As I've explained then:
This book is probably the most informative book on inflation (and how to prepare for it) than any other book available. It is written with the layman in mind. It is only 99 pages long and available in PDF form.

The book was written by John A. Pugsley in 1980. In 1981, it was on the New York Times bestseller list for about nine weeks. It contains some of the same material covered by Peter Schiff in his 2007 and 2009 "Crash Proof" series.
I go on:
The Alpha Strategy talks more about the history of inflation, its causes, and how to prepare for it.

Crash Proof seems to be tailored toward those who are already investors and includes more recent information on the housing bubble, the stock market crash, and the underlying causes of the recent financial meltdown.
To read the rest of my description, go here and then download the book.

Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion

This book should be read after you read the Alpha Strategy. It goes more into detail on the material that is covered in pages 16-21 of The Alpha Strategy (sections titled "Banking" "How Banks Create Money" "The Federal Reserve System" "Turning Federal Debt into Money").

It is an out-of-print book that was written by the Federal Reserve Bank of Chicago. It is for more advanced readers. However, it is only 50 pages.

The purpose of the book is stated in the introduction:
The purpose of this booklet is to describe the basic process of money creation in a "fractional reserve" banking system. The approach taken illustrates the changes in bank balance sheets that occur when deposits in banks change as a result of monetary action by the Federal Reserve System - the central bank of the United States. The relationships shown are based on simplifying assumptions. For the sake of simplicity, the relationships are shown as if they were mechanical, but they are not, as is described later in the booklet. Thus, they should not be interpreted to imply a close and predictable relationship between a specific central bank transaction and the quantity of money.

The introductory pages contain a brief general description of the characteristics of money and how the U.S. money system works. The illustrations in the following two sections describe two processes: first, how bank deposits expand or contract in response to changes in the amount of reserves supplied by the central bank; and second, how those reserves are affected by both Federal Reserve actions and other factors. A final section deals with some of the elements that modify, at least in the short run, the simple mechanical relationship between bank reserves and deposit money.
You can download it here.

My expectation of you as a reader is not for you to go off and study economics like I did.

My expectation of you as a reader is to become an informed citizen. That is having enough knowledge to make informed decisions in life -- and especially at the polls.

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