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Consider the $20 bill. It has no more value, as a simple slip of paper, than Monopoly money. Yet even children recognize that tearing one into small pieces is an act of inconceivable stupidity. What makes a $20 bill actually worth twenty dollars? In the third volume of his best-selling Naked series, Charles Wheelan uses this seemingly simple question to open the door to the Consider the $20 bill. It has no more value, as a simple slip of paper, than Monopoly money. Yet even children recognize that tearing one into small pieces is an act of inconceivable stupidity. What makes a $20 bill actually worth twenty dollars? In the third volume of his best-selling Naked series, Charles Wheelan uses this seemingly simple question to open the door to the surprisingly colorful world of money and banking. The search for an answer triggers countless other questions along the way: Why does paper money (“fiat currency” if you want to be fancy) even exist? And why do some nations, like Zimbabwe in the 1990s, print so much of it that it becomes more valuable as toilet paper than as currency? How do central banks use the power of money creation to stop financial crises? Why does most of Europe share a common currency, and why has that arrangement caused so much trouble? And will payment apps, bitcoin, or other new technologies render all of this moot? In Naked Money, Wheelan tackles all of the above and more, showing us how our banking and monetary systems should work in ideal situations and revealing the havoc and suffering caused in real situations by inflation, deflation, illiquidity, and other monetary effects. Throughout, Wheelan’s uniquely bright-eyed, whimsical style brings levity and clarity to a subject often devoid of both. With illuminating stories from Argentina, Zimbabwe, North Korea, America, China, and elsewhere around the globe, Wheelan demystifies the curious world behind the paper in our wallets and the digits in our bank accounts.


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Consider the $20 bill. It has no more value, as a simple slip of paper, than Monopoly money. Yet even children recognize that tearing one into small pieces is an act of inconceivable stupidity. What makes a $20 bill actually worth twenty dollars? In the third volume of his best-selling Naked series, Charles Wheelan uses this seemingly simple question to open the door to the Consider the $20 bill. It has no more value, as a simple slip of paper, than Monopoly money. Yet even children recognize that tearing one into small pieces is an act of inconceivable stupidity. What makes a $20 bill actually worth twenty dollars? In the third volume of his best-selling Naked series, Charles Wheelan uses this seemingly simple question to open the door to the surprisingly colorful world of money and banking. The search for an answer triggers countless other questions along the way: Why does paper money (“fiat currency” if you want to be fancy) even exist? And why do some nations, like Zimbabwe in the 1990s, print so much of it that it becomes more valuable as toilet paper than as currency? How do central banks use the power of money creation to stop financial crises? Why does most of Europe share a common currency, and why has that arrangement caused so much trouble? And will payment apps, bitcoin, or other new technologies render all of this moot? In Naked Money, Wheelan tackles all of the above and more, showing us how our banking and monetary systems should work in ideal situations and revealing the havoc and suffering caused in real situations by inflation, deflation, illiquidity, and other monetary effects. Throughout, Wheelan’s uniquely bright-eyed, whimsical style brings levity and clarity to a subject often devoid of both. With illuminating stories from Argentina, Zimbabwe, North Korea, America, China, and elsewhere around the globe, Wheelan demystifies the curious world behind the paper in our wallets and the digits in our bank accounts.

30 review for Naked Money: A Revealing Look at Our Financial System

  1. 5 out of 5

    Charles Haywood

    “Naked Money,” by Charles Wheelan, has a primary goal and two secondary goals. The primary goal, admirably accomplished, is to simply, but not simplistically, explain monetary policy. One secondary goal, also well accomplished, is to defend fiat money against those who call for going back to a currency backed by gold or some other physical asset. The other secondary goal, less well accomplished, is to justify aggressive government action, in particular by central banks, to shore up the American “Naked Money,” by Charles Wheelan, has a primary goal and two secondary goals. The primary goal, admirably accomplished, is to simply, but not simplistically, explain monetary policy. One secondary goal, also well accomplished, is to defend fiat money against those who call for going back to a currency backed by gold or some other physical asset. The other secondary goal, less well accomplished, is to justify aggressive government action, in particular by central banks, to shore up the American financial system during the 2008 crisis. Wheelan says this was a difficult book to write, and I believe him. I certainly struggle with understanding money and monetary policy. It is easy enough to say abstractly what money is, though even that is often attended with confusion. It is harder to precisely grasp how, especially in a world of fiat money that can be created or destroyed at will, money affects society, both the overall economy and individual lives. Of course, attempting to get too firm a grasp on economics concepts is a fool’s errand, since economics is not a science (despite frequent claims to the contrary), and trying to pin down a precise, linear answer to a specific question is often like grasping smoke. But Wheelan’s book occupies a middle ground—clearly explaining undisputed concepts, without making too broad claims for that knowledge. Wheelan begins, in his Introduction, by clearly laying out the topics he intends to cover. He divides the book into two major parts: Part I covers “What It Is” (money, that is) and “Why It Matters.” Thus, Part I is focused on descriptions and economic analysis; Part II is focused on history through the lens of that analysis, coupled with recommendations for the future based on that history. Naturally enough, he begins by defining money, distinguishing it from cash and assets, and noting its traditional role as unit of account, store of value, and medium of exchange. He imparts interesting facts such as that prisoners in the federal prison system use foil packs of mackerel as money, ever since smoking was banned several years ago. Wheelan notes that “modern money depends on confidence,” as well as on social customs in a given location—thus, torn notes are accepted by people in the US, but not in India, even though the banks accept them equally in both places, and in Somalia, money issued by the defunct central government is still accepted as money. It is also here that he introduces his convincing objections to the gold standard, on which he expands in later chapters. And he points out that a suggested alternative, a currency backed by a basket of commodities, is in many ways exactly what we have now—after all, you can in fact exchange your money for those commodities, and what you receive for a set amount of dollars does not fluctuate much. The next chapter covers inflation and deflation. This, like almost all of the book, consists of crystal clear exposition free of ideological cant. (Wheelan seems aligned with no particular school of economists; he says as much positive about Paul Krugman as Milton Friedman, though he says nothing about the Austrian School. Thus, the book is not at all a polemic, other than perhaps with respect to justifying government action in the 2008 crisis). Wheelan illustrates inflation and its impacts with, among other pithy examples, airline frequent flyer miles. Most importantly, to me at least, he gives a clear explanation of velocity and its impact on inflation, noting that it is poorly understood and impossible to use as a clear prediction or calculation device, which explains, perhaps, why I’ve never understood it (but I think I do now). Velocity at least in part explains why not all spending is equal; where the money ends up and how it is treated affects the economy as a whole. Finally, Wheelan notes that while mild, predictable inflation is beneficial for a variety of reasons high, unpredictable inflation is a disaster for most people. This topic anchors much of his discussion about central banking, along with its evil cousin, deflation. Wheelan then turns to price calculation, including the CPI and its variants, and its effects. Here shows up, though, the only annoying part of this book, which is that literally way more than half of the quotes, cites and attributions in the book are to the “Economist” magazine. I am not exaggerating. It is almost like this book is an advertisement for the magazine (to which, as far as I know, Wheelan has no connection). Sure, the magazine has some clever phrases, but really, so does Wheelan, and the “Economist” is not some Nobel Prize-winning authority on economics, so the reader gets tired of references to it. Anyway, here Wheelan continues his argument that a country’s goal should be to achieve mild, predictable inflation, basically because it (falsely) makes everyone feel richer and better off (the “money illusion”), it prevents slipping into deflation, and it gives central banks more room to maneuver using simple mechanisms to affect the interest rate and money supply, rather than more aggressive “quantitative easing.” Following this, Wheelan pivots to “Credit and Crashes.” He gives an excellent explanation of the mechanics of central banking, showing that the Federal Reserve’s main tasks are managing the money supply and acting as a lender of last resort. He discusses how open market operations work to affect the money supply, and therefore interest rates, as well as the mechanics of other tools such as reserve ratios for banks. Using “It’s a Wonderful Life,” he explains how financial crashes work, for banks or for the broader universe of financial firms—sometimes “people want their money now.” He distinguishes liquidity and solvency, such that a firm can be solvent but not adequately liquid—and in particular, how “In a crisis, illiquidity can turn into insolvency”—just like George Bailey’s bank would have become insolvent had depositors withdrawn their money (because banking means illiquid loans are made with theoretically liquid actual deposits, and fractional banking means loans exceed deposits, which is good when times are good and not so hot in a bank run). It is this possibility of insolvency, widespread across the system, that Wheelan fears would have occurred in 2008 absent government action. Unfettered praise for such government action is my main problem with Wheelan’s book. Wheelan feels very strongly that central bank action, in the United States and abroad, saved the world in 2008. A threshold problem is definition—Wheelan doesn’t adequately distinguish between providing liquidity in the crisis, in order to prevent illiquidity from metastasizing into insolvency (like George Bailey), and the bailouts/handouts that characterized programs such as TARP and “cash for clunkers.” In fact, he deliberately conflates the two. The former, done through lowering interest rates and then further increasing the money supply through quantitative easing, certainly risked future harms, such as massive inflation, but did not directly reward bad actors and is a traditional central banking mechanism. TARP, on the other hand, was a new tool designed to address insolvency directly while benefiting the people, equity holders, who created the problem—as well as their friends in government. These two things are very different. “Naked Money” tells us, again and again, that the entire globe would have come crashing down had the government not, through TARP, rescued firms that might become insolvent. We are told that Bernanke, advising Congress, “came in with Secretary Paulson and a couple of staff. They sat down, and without any sort of opening remarks, Chairman Bernanke simply said, “If Secretary Paulson doesn’t get what he’s asking for, and he doesn’t get it within seventy-two hours, the entire banking system of the United States will fail, and it will bring the world banking system down with it.” We are told that “Alistair Darling, British chancellor of the Exchequer at the time, has said ‘I think we came within hours of a collapse of the banking system.’” We are told that Darling’s staff told him “’Chancellor, we don’t know exactly how, but we think that there is a significant probability that every credit card in the world and every cash machine will stop working tomorrow.’” Buried in that last quote is the reality—none of these people “knew exactly how.” More accurately, they were just guessing, in a self-interested way, where the actions demanded of the politicians would cost the bankers nothing and would hugely benefit them, whereas not acting had no possible upside to them, since no reward is given for good results following from inaction, and inaction might have easily saved the financial system but still wiped them and their friends’ assets out. Wheelan endlessly compares the 2008 crisis to a fire, where to save the neighborhood we must also save the house of the fool who stored gasoline next to the furnace. But nowhere at all are we told why or how this parade of horribles would actually have happened—why the fire would have spread if not for TARP. We are assured, by way of a hypothetical rice merchant in a hypothetical village, that small individual businesses would have been “wiped out.” How is not explained, other than vague references to being unable to “get even a basic, well-collateralized loan to keep his business running.” But most small businesses do not need loans (and usually cannot get loans). The reality is that if Goldman Sachs went bankrupt, and its equity holders were vaporized, the firm’s assets would still have had the same value, just under new ownership, and there is no reason that liquidity for normal-course business loans would have dried up, for long if at all. Instead of vaporizing the equity holders, though, Congress, as demanded by Treasury and the Fed, handed them unlimited money and absorbed their bad assets so they did not have to deal with the consequences of their actions. If Goldman had been declared bankrupt, new investors (say, Warren Buffett) could just have assumed ownership of Goldman’s assets, and continued its profitable lending activities, while those who invested in now worthless assets took the consequences on the chin, sold their houses in the Hamptons to meet their personal debts, then moved to Des Moines to work at Target. Sure, there would likely have been a variety of short term disruptions to society and operating businesses. But Wheelan adduces no evidence or arguments that they would have been particularly dramatic or long term. He only give us hysterical conclusions made by people with massive personal conflicts of interest, demanding action by bankers and political leaders with their own massive personal conflicts of interest, to use the money and resources of the people at large to insulate risk takers from the consequences of their risk taking and allow them to keep their rich rewards. We should not forget that Paulson’s TARP proposal, which as we saw above he demanded be accepted right now by Congress, or else, included such gems as “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Congress didn’t bite on that, but the gall is literally unbelievable, and gives a window into the Master of the Universe thinking of men such as Paulson (that is not a compliment). Yes, Wheelan sees clearly, and fully admits, the moral hazard to future decision making resulting from the bailouts. But he ignores the moral hazards confronting the government in its 2008 decision making, and, more importantly, the overwhelming conflicts of interest. The reality is that no liquidation of financial firm equity holders would actually have destroyed value. Any value destruction had already occurred. So what if this “was an old-fashioned financial panic,” where “firms and institutional investors were demanding their cash back from financial firms like Bear Stearns, Lehman Brothers, Citibank, and the other names you’ve seen in the news.”? After all, the first two disappeared and their assets were redistributed. So what? Why not do that to everyone? It’s not just me who thinks along these lines. Take, for example, Luigi Zingales, professor at the University of Chicago’s Booth School of Business (which Wheelan loves, since he keeps citing its professors as authorities, and also it’s my own business school, so I agree with Wheelan on that) and author of “A Capitalism For The People.” He says, criticizing the bailouts, “The problem is that people who have spent their entire lives in finance have an understandable tendency to think that the interests of their industry and the interests of the country always coincide. When Treasury Secretary Paulson went to Congress in the fall of 2008 arguing that the world as we know it would end if Congress did not approve the $700 billion bailout, he was serious. And to an extent he was right: his world—the world he lived and worked in—would have ended had there not been a bailout. Goldman Sachs would have gone bankrupt, and the repercussions for everyone he knew would have been enormous. But Henry Paulson’s world is not the world in most Americans live in or even the world in which the economy as a whole exists.” Zingales also notes that all decision-makers only were able to obtain information and advice from the same insular group of people, creating self-reinforcing groupthink. In fact, Wheelan himself notes that now “Dodd-Frank requires institutions to create a ‘living will,’ which is a hypothetical bankruptcy plan showing that the institution can collapse without bringing down the rest of the financial system.” It’s pretty obvious, at least to someone not in bed with Goldman Sachs, that if this is possible now, it would have been equally possible to create a bankruptcy plan on the fly for Goldman Sachs (and other institutions) in 2008. After all, that’s what bankruptcy is for—to wipe out equity holders and replace them with new owners who will run things better. In fact, many normal course bankruptcies are done in great haste. Wheelan claims that “Bernanke reckoned . . . there was no orderly process for allowing a handful of giant troubled firms to go bankrupt in a way that would not cause the rest of the system to unravel.” Maybe. But more likely, as Zingales said, is that the cushy, insular world of Bernanke and Paulson would have unraveled, and the system would have done just fine, even in the short term—and it was that prospect of his world unraveling that, magically, made Bernanke unable to see an alternative orderly process for bankruptcy. Wheelan makes a great deal of the role of a central bank as a lender of last resort, and claims this was the role of the Fed in the crisis. But if the central bank does that, and it’s necessary (a somewhat different question than TARP as executed, but closely related) why can’t it lend in exchange for equity, wiping out the guilty and then reselling the equity to new owners? That’s how many prepackaged bankruptcies are structured. Or, as Paul Krugman suggested, equity capital could be provided to the banks directly in exchange for preferred stock, again harming common equity holders without affecting the broader financial markets. Or why couldn’t Congress place a 100% tax on equity held by stockholders in firms accepting last-resort lending, say, above a value held of $100,000? Or, as Zingales suggested at the time, we could add a new section to the bankruptcy code to simply and easily convert bank debt to equity, diluting existing equity holders involuntarily. Instead, the government simply absorbed bad assets and left the existing, responsible equity holders with the benefits of their bad acts. Why? I’ll tell you why (my background as a lawyer is largely in this world, as is my M.B.A. education, and I could probably pretty easily have worked for Goldman had I chosen to do so). The reason is because a tight, insular clique of people who all basically know each other, view the world the same way, and have parallel financial motives and incentives, made all the decisions and received all the benefit. If Ben Bernanke had wiped out equity holders, he wouldn’t have been invited to all the right parties, and his friends would have cut him off. How terrible. Much better that the little American get screwed, both now and in the future as a result of moral hazard not having any consequences. All you need to know, really, is that the man chosen to administer the 2008 TARP bailout, Neel Kashkari, was a 2002 Wharton M.B.A. (before which he was an engineer), whose only job in school and thereafter was working for Goldman Sachs, until he went to Treasury in 2006, as the hand-picked aide to the Secretary of the Treasury, Paulson. Paulson, of course, also worked for Goldman his whole life, including as CEO and chairman, and held hundreds of millions of dollars in Goldman stock until the instant he became Secretary. Paulson (surprise, surprise) brought along numerous other Goldman employees—I bet every single person in Paulson’s meeting with Congress referred to above was a former Goldman employee. And Paulson actually also hired Goldman to be his formal external advisors. To nobody’s surprise, after his TARP work, Kashkari then got a job with the investment firm Pimco, where his performance was miserable but his compensation was not. Again to nobody’s surprise, as the “New York Times” noted, “Pimco’s publicly stated strategy [during the TARP program] was to invest money in areas that would benefit from the government’s rescue efforts.” It’s almost like it’s all a nasty little circle where those outside the charmed group are milked for the benefit of the in-group. Certainly, by Ockham’s Razor (or its debased modern usage), that’s the most likely explanation. True, I’m picking on Goldman. Although it is the worst offender with the smartest people, the problem is, of course, much more widespread (though confined to a relatively small world and group of people). But Goldman is the ringleader and one should always begin with monsters by chopping off their heads. Wheelan ignores all this. (He also, in passing and without explanation, rejects that lenient government policy toward Fannie Mae and Freddie Mac, or forced lending by banks to bad credit risks as the result of the Community Reinvestment Act, had any significant role.) Moreover, by not distinguishing liquidity increases from TARP bailouts, he fails to make clear that TARP was not technically a central bank action at all. It was a Congressional action—one dictated to the people’s representatives by self-interested central bankers, screaming that the sky was falling. Furthermore, that TARP supposedly, in the long run, made a small profit is meaningless. First, it’s probably false, since that’s a self-interested government calculation where lying would involve no penalty at all and the benefits to the liars are immense. Second, any profit does not alleviate the structural and moral defects of the program. All of this passes by Wheelan in silence, doubtless with Wheelan absentmindedly rubbing the head of his brass statute of Bernanke for good luck in the future. [Review finishees as first comment.]

  2. 4 out of 5

    Jon Swartz

    Surprisingly enjoyable book on monetary policy. I still can't get a handle on exchange rates, but I understand much better the role of a central banking system and why moving back to the gold standard is silly/unworkable. Unfortunately lost this (physically) about 3/4 the way through... :( Might grab from the library and finish at a future date Surprisingly enjoyable book on monetary policy. I still can't get a handle on exchange rates, but I understand much better the role of a central banking system and why moving back to the gold standard is silly/unworkable. Unfortunately lost this (physically) about 3/4 the way through... :( Might grab from the library and finish at a future date

  3. 5 out of 5

    Mehrsa

    Great nutshell economic history, but not much discussion about the debates about all of these things. It's billed as an explanation, but many of these principles are hotly contested and are by no means settled principles. But it's still worth a read. Great nutshell economic history, but not much discussion about the debates about all of these things. It's billed as an explanation, but many of these principles are hotly contested and are by no means settled principles. But it's still worth a read.

  4. 5 out of 5

    Mike

    Probably 4 stars for the layperson, I get a lot of exposure to monetary policy at work. That said, author does a fine job explaining fiat money, prices/inflation, central banks, and exchange rates. His explanation of the Great Depression (France hoarded gold while the US had tight monetary policy, causing an artificial shortage of reserves) includes the example of George Bailey in "It's a Wonderful Life" which is quite relevant and accurate. In the US, there wasn't enough currency to go around, Probably 4 stars for the layperson, I get a lot of exposure to monetary policy at work. That said, author does a fine job explaining fiat money, prices/inflation, central banks, and exchange rates. His explanation of the Great Depression (France hoarded gold while the US had tight monetary policy, causing an artificial shortage of reserves) includes the example of George Bailey in "It's a Wonderful Life" which is quite relevant and accurate. In the US, there wasn't enough currency to go around, and as a result businesses, people, and even governments accepted scrip (IOUs) or even common goods. The segment on the 2008 financial crisis is strong and succinct. It is worth borrowing this book for that segment alone, and calls out how Fed Chair Bernanke had a background in the mistakes made during the depression, which guided him to make sure the Fed was ready to lend to anyone (except Lehman, I guess). My main takeaway was that central banks have a "trilemma": 1. Make the economy open to international flows of capital, allowing citizens to diversify and foreign investment to come in. 2. Use monetary policy to help stabilize the economy, using interest rates and the money supply to prod or slow the economy. 3. Maintain stability in the exchange rate. Central banks can't get all 3, so trade offs must be made.

  5. 4 out of 5

    Anna

    Excellent. This is not a personal finance book, but rather a deeply informative book about what money is and how it works, what banks are and how they work and what happens when they stop working; it even goes a little bit into why that happens. This naturally includes a lot of difficult concepts such as inflation, deflation, central banking (i.e. The Fed), Bitcoin and etc. which are explained in a fun, humorous, easy to understand way, without an obvious political bias and with a positive outlo Excellent. This is not a personal finance book, but rather a deeply informative book about what money is and how it works, what banks are and how they work and what happens when they stop working; it even goes a little bit into why that happens. This naturally includes a lot of difficult concepts such as inflation, deflation, central banking (i.e. The Fed), Bitcoin and etc. which are explained in a fun, humorous, easy to understand way, without an obvious political bias and with a positive outlook that didn't leave me cowering in fear about the future, but without downplaying the serious issues the world faces in the future such as the precarious situation between China and the U.S.

  6. 5 out of 5

    Joseph Hoehne

    This is not a get-rich-quick book. It’s a book about money - not wealth. Have you ever wondered about inflation, deflation, the federal reserve, financial crises (including the recession in 2008)? Then this book is for you. It’s fun. It’s witty. It’s concrete and easy to understand. It’s most of all just a great read. I ended up following Ben Bernanke and the Federal Reserve on Twitter because of this book. It’s because I can see how interesting money is and what role it plays in our modern lives.

  7. 5 out of 5

    Chloe

    Absolutely phenomenal! I loved Naked Statistics so much that I decided to read this book by the same author, Naked Money: A Revealing Look at Our Financial System. A great overview of modern macroeconomics, global trade, and the impact of major financial crises on today's world. Among other topics, the book covers the 2008 global financial meltdown, the euro crisis and the unique Japan situation, including recent Abenomics policies. A must read to "speak" money and understand the essence of mone Absolutely phenomenal! I loved Naked Statistics so much that I decided to read this book by the same author, Naked Money: A Revealing Look at Our Financial System. A great overview of modern macroeconomics, global trade, and the impact of major financial crises on today's world. Among other topics, the book covers the 2008 global financial meltdown, the euro crisis and the unique Japan situation, including recent Abenomics policies. A must read to "speak" money and understand the essence of monetary and fiscal policies. A humorous note from the book, attributed to Warren Buffet: "[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it [in the vaults of the Federal Reserve Bank of NY]. It has no utility."

  8. 5 out of 5

    Maya

    I struggled to get into this book. I didn't enjoy it from the beginning, as I did Naked Economics, and considered abandoning it, but I'm glad I didn't! I learned so much about money, currency, banking, central banks and the Fed specifically. I have a much better understanding and greater appreciation for all these topics now. I enjoyed the second half much more (with specifics about the US, Japan, China and the Eurozone) than the first half (general knowledge about currency, banks, central banks I struggled to get into this book. I didn't enjoy it from the beginning, as I did Naked Economics, and considered abandoning it, but I'm glad I didn't! I learned so much about money, currency, banking, central banks and the Fed specifically. I have a much better understanding and greater appreciation for all these topics now. I enjoyed the second half much more (with specifics about the US, Japan, China and the Eurozone) than the first half (general knowledge about currency, banks, central banks), but of course you can't understand the second half without the foundation of the first half. I really appreciated how the author understood the challenging task of making these topics readable and understandable. He constantly gave relatable examples and repeated those a lot - and this is one book where repetition is a huge plus! I also appreciated his references to pop culture and little jokes sprinkled throughout - I actually laughed out loud a few times. Overall, if someone is trying to understand the topics discussed in the book, I would definitely recommend it!

  9. 4 out of 5

    Kevin Keating

    Really good book. Explains some difficult concepts more easily than elsewhere. Still can't figure out the bitcoin stuff, but it gave it a shot. Good information as recently as 2018. I'll read his other stuff. Has a good sense of humor. Really good book. Explains some difficult concepts more easily than elsewhere. Still can't figure out the bitcoin stuff, but it gave it a shot. Good information as recently as 2018. I'll read his other stuff. Has a good sense of humor.

  10. 4 out of 5

    Satish

    I like the book for its neat overview on multiple fronts which include but not limited to Inflation, Euro, US-China and Bitcoin. Most of the book was interesting with the help of analogies, I liked the way he explains things in a simple way because this is a dry subject to some and it can get bland easily. I, however, have to disagree with his assessment on Bitcoin, I think Bitcoin is here to stay and thrive as it is decentralized and valuable.

  11. 4 out of 5

    Xiaodan Sun

    Good structure and organization and the author is very good at explaining complicated things in a simple way.

  12. 5 out of 5

    Eimantas

    Keynesian economics in a nutshell. I admire the authors attempt to present both sides of the argument, but mostly, the book turned out to be 100% orthodox with limited presentation of contrarian views. The current monetary policy is still a colossal experiment best summarized in the final chapter with a line "we're going to figure that one out." Other than that, I liked the explanations from the viewpoint of current policymakers. It's truly educational and eye-opening, and it's definitely not al Keynesian economics in a nutshell. I admire the authors attempt to present both sides of the argument, but mostly, the book turned out to be 100% orthodox with limited presentation of contrarian views. The current monetary policy is still a colossal experiment best summarized in the final chapter with a line "we're going to figure that one out." Other than that, I liked the explanations from the viewpoint of current policymakers. It's truly educational and eye-opening, and it's definitely not all sunshine and rainbows out there. People are trying to do their best. However, I don't believe in radical government interventions, and "trust the FED" narrative just doesn't do it for me. Tl;Dr: Good educational resource on the current state of finance but a poor representation of it's broader implications and alternative views.

  13. 5 out of 5

    victor harris

    One of the better books on economics. The author brings some wit to the dreary jargon associated with international trade, banking, and Wall St. machinations. Excellent commentary on why the once worshipped gold standard has fallen by the wayside and why it would not be practical to revive it. Very good analysis on the U.S.-China trade and currency relationship and the perils for both should it hit turbulent times. Also extensive coverage on why mild inflation is good (mostly) and why deflation One of the better books on economics. The author brings some wit to the dreary jargon associated with international trade, banking, and Wall St. machinations. Excellent commentary on why the once worshipped gold standard has fallen by the wayside and why it would not be practical to revive it. Very good analysis on the U.S.-China trade and currency relationship and the perils for both should it hit turbulent times. Also extensive coverage on why mild inflation is good (mostly) and why deflation and contraction of economies is bad (mostly). Breaks down the terminology and complexity of transactions in a readable manner and shows good analogies to illustrate the points. Well worth reading and I will investigate some of his other works.

  14. 5 out of 5

    Carlos Gaitán

    I really enjoyed listening to this. Not only the author does a great job at explaining the role of currencies throughout history and in modern days, it also covers modern issues, such as the dependency relationship between the U.S. and China and the financial crisis of 2008. The amount of material covered by this book and its importance to understanding modern economic and financial systems make it worth reading more than once.

  15. 5 out of 5

    A Young Philosopher

    Wheelan is a great author, and Naked Money is an informative, introductory read on money and how to think using incentives. He does a great job with examples and makes understanding the monetary system very simple. I would pair this book with his other one, Naked Economics, if you have little understanding of economics and would like to learn about it.

  16. 5 out of 5

    Adam Thai

    It's funny and thanks to Charles Wheelan and his witty but insightful explanation, money has become much clearer to me. I've read the book a year ago but I find myself keep reading it, again and again, every few months Don't worry about lingos and jargons, Charles Wheelan will dumb it down and find relevant (and witty) examples to illustrate it effectively for you. It's funny and thanks to Charles Wheelan and his witty but insightful explanation, money has become much clearer to me. I've read the book a year ago but I find myself keep reading it, again and again, every few months Don't worry about lingos and jargons, Charles Wheelan will dumb it down and find relevant (and witty) examples to illustrate it effectively for you.

  17. 5 out of 5

    Candace Dorn

    Great overview of modern day financials systems. Serves as a reminder of how organic our monetary system truly is. The writing is both informative and entertaining. Right on theme with the series. Naked Economics and Naked Statistics are also must-reads.

  18. 5 out of 5

    Alex Kolb

    This book is a great introduction into monetary policy and why it is important. It is simple enough for most people to get through it and has enough detail to keep everyone entertained.

  19. 4 out of 5

    Will

    This review has been hidden because it contains spoilers. To view it, click here. While Naked Money focuses on an incredibly dry topic, Charles Wheelan did a masterful job of making it both informative and entertaining. With the impending collapse of the Euro, the trade war with China, and the rise of cryptocurrency, this was the perfect time to read this book. Here are a few takeaways I found especially interesting: - If you can swap something easily and predictably for goods and services, it’s money. It doesn’t matter if it’s counterfeit or the issuing government is no long While Naked Money focuses on an incredibly dry topic, Charles Wheelan did a masterful job of making it both informative and entertaining. With the impending collapse of the Euro, the trade war with China, and the rise of cryptocurrency, this was the perfect time to read this book. Here are a few takeaways I found especially interesting: - If you can swap something easily and predictably for goods and services, it’s money. It doesn’t matter if it’s counterfeit or the issuing government is no longer in power (like Somalia in the early 2000s), as long as people will accept it, people will take it. - Money serves as a unit of account (way to value goods and services), store of value (generally stable), and medium of exchange (can conduct transactions with relative ease) - People who like deflation: anyone on a fixed nominal income or lenders, provided the deflation was unexpected, and debtors pay. - People who like inflation: debtors, because they give less real value when paying off debts - Bankers can create money. Not in the high inflation, Zimbabwe-esque money printing, but if I have capital I’m not using, and I loan it via a bank, both myself and my borrower have that money as an asset, and it has been effectively doubled. This effective allocation of capital is what enables our world to do just about everything it does. - According to Ben Bernanke, the crisis of 2008 had the makings to be worth the Great Depression, whether that danger is behind us or not is another question. - A strong dollar can be good or bad; what matters is why it’s strong (U.S. budget deficits or American innovation). When the economy is running at full capacity, what’s not to love about a strong dollar: cheap imports from abroad. Simply put, exports are the price we pay for imports. - The gold standard had two advantages: hyperinflation was impossible as there is a constrained supply, and it could fix exchange rates between countries in a predictable way. However, there are some distinct disadvantages: (1) If a large quantity of gold is discovered, there is a surge of inflation. And, if production slows, deflation is inevitable. Additionally, there is not enough of it to serve as an effective medium of exchange. (2) Countries like China, Russia, and South Africa with large gold production can dictate the way the U.S. economy flows, this could be disastrous. (3) It earns no return as a store of value. - According to Wheelan, the gold standard was largely to thank for America’s inability to get out of the financial crisis. By sticking to the gold standard, the U.S. could not print new money as they required gold to back it. And they could not lower interest rates because gold would flow out of the economy to other countries. In fact, the countries that did not adhere to the gold standard (China), were barely affected by the Depression. Countries like Britain that were the first to leave the gold standard, were the first to recover. And countries that stuck to the gold standard until the bitter end, the U.S. and Germany, were the hardest hit. - Another reason the gold standard doesn’t work is it forces countries’ hand in economic policy. Countries were forced to match America’s high interest rates before the Depression because otherwise, gold would flow to the U.S. If enough gold left a country’s stores, they could be forced off the gold standard. - A 1907 financial crisis was stopped because J.P. Morgan and John D. Rockefeller served as lenders of last resort. The Fed did so in 2008, but we need to be sure there is no capacity for moral hazard among those who are “too big to fail.” - Quantitative Easing was a strategy used to help us out of the financial crisis: The Fed purchases long-term bonds, with higher demand, the Treasury can offer bonds with lower interest rates, banks borrow at lower rates. - The advantage of the Euro is lower transaction costs – i.e., no need to change money when trading within the Union. This makes transactions easier, more transparent, and more predictable. - Unfortunately, there are more disadvantages. Countries in the EU must share a common monetary policy. When comparing Germany with the PIGS, this can be incredibly disastrous. PIGS countries need higher interest rates to attract capital and rejuvenate their economy, but Germany wants to keep rates low, so they don’t overheat. Additionally, countries can’t use monetary policy to induce trade with other countries - China and the U.S. are at each other’s mercy – both of us incredibly dependent on the other. - The reason exchange rates haven’t balanced is because Chinese companies deposit profits in USD to the People’s Bank. Instead of spending that money on American goods, it is used to buy U.S. treasury bonds, in effect, loaning that money back to the U.S. This allows the Chinese to keep the yuan artificially low relative to the U.S. dollar—this use of currency favors an export heavy economy and has helped them grow into the monstrous economy they are now.

  20. 5 out of 5

    Mark

    Just about ten years ago, the U.S. (and the world) was in the midst of the financial crisis. The stock market had plummeted, unemployment was soaring, and phrases like "looking into the abyss" and "possibility of a second Great Depression" were flying around. I remember thinking back then that phrases like those were irresponsible and possibly even making a bad thing worse. It wasn't until I read this book that I understood that those phrases were not the hyperbole I had originally believed. Her Just about ten years ago, the U.S. (and the world) was in the midst of the financial crisis. The stock market had plummeted, unemployment was soaring, and phrases like "looking into the abyss" and "possibility of a second Great Depression" were flying around. I remember thinking back then that phrases like those were irresponsible and possibly even making a bad thing worse. It wasn't until I read this book that I understood that those phrases were not the hyperbole I had originally believed. Here, for example, is one U.S. senator describing a meeting that took place right before the crisis exploded: [Federal Reserve] Chairman Bernanke came in with [Treasury] Secretary Paulson and a couple of staff, not many. They sat down, and without any sort of opening remarks, Chairman Bernanke simply said, "If Secretary Paulson doesn't get what he's asking for, and he doesn't get it within seventy-two hours, the entire banking system of the United States will fail, and it will bring the world banking system down with it." And that wasn't just American spin. Across the pond, the Brits were getting similar assessments: David "Danny" Blanchflower, a member of the Bank of England rate setting committee during the crisis, recalls a conversation in which [British Chancellor of the Exchequer] Alistair Darling described those crucial hours: "He's told me that he asked the staff, 'What happens if I don't rescue them [the Royal Bank of Scotland]?' And they said, 'Chancellor, we don't exactly know, but we think there is a significant probability that every credit card in the world and every cash machine will stop working tomorrow.'" In other words, as bad as the financial crisis and the ensuing Great Recession were, it could have been a whole, whole lot worse. The fact that it didn't become a second Great Depression is a testament to how well the Federal Reserve learned from the mistakes of the past and applied those lessons when managing the crisis of 2008. It might not be the sexiest thing to talk about, but, yeah, monetary policy matters. A lot. And when it's done badly, as it was in the late 1920s and into the 1930s, you can get things like the Great Depression, angry, out-of-work populations voting for fascists, and globe-spanning war. That's what this book is largely about: the importance of monetary policy. And while I'm not particularly well read in this area, I can't imagine a better first book on the subject than this one. It's written for the layperson and it is genuinely both engaging and fun -- yes, fun -- to read. Here are some questions this book explores: * What IS money, anyway? (One of those simple-at-first questions that become increasingly fascinating the more you dig into them.) * Does currency need to be backed by something intrinsically valuable like a shiny metal? (And is shiny metal really intrinsically valuable?) * What are the consequences of inflation and deflation? * What do central banks like the Federal Reserve actually do? * What went wrong in 1929 (and how did a stock market crash trigger the Great Depression when hardly anyone owned stocks back then?) and what went right in 2008? * Why did Japan go into a multi-decade slump? * Is Ron Paul an idiot for thinking we'd be better off returning to the gold standard? (Short answer: yes.) * Will Bitcoin ever really be used as everyday money? All that and, as they say, more. Read this book. You'll have fun and by the end, you'll understand a bit more about the world.

  21. 5 out of 5

    Roy

    After reading the author's earlier books (Naked Economics: Undressing the Dismal Science and Naked Statistics: Stripping the Dread from the Data), I looked forward to reading this one, and was certainly not disappointed. The author is a master of presenting dry, complicated (but important) topics in a very lucid, relatable, and entertaining fashion that non-academic readers can readily appreciate, and this book is the latest proof. Other than sometimes hearing economic and financial jargons from After reading the author's earlier books (Naked Economics: Undressing the Dismal Science and Naked Statistics: Stripping the Dread from the Data), I looked forward to reading this one, and was certainly not disappointed. The author is a master of presenting dry, complicated (but important) topics in a very lucid, relatable, and entertaining fashion that non-academic readers can readily appreciate, and this book is the latest proof. Other than sometimes hearing economic and financial jargons from the media, most people probably don't think too much about why and how the colorful printed papers inside their wallets function so well as a medium of exchange. It's usually only when the monetary system shows signs of breakdown due to some banking/financial/economic crisis that people begin to notice the critical role money play in facilitating the economy. This book provides an excellent layman guide to many of the most fundamental concepts in today's capitalist economy, such as inflation, deflation, exchange rates, central banking, credit crisis, etc. The chapter on the 2008 Financial Crisis also presents a balanced overview of what actually happened and what we should learn from the calamity.

  22. 5 out of 5

    Tim Johnson

    Being in charge of monetary policy is a lot like using a stinky gas station bathroom. The worst part isn't trying to hold your breath whilst you take care of business and try not to touch anything. The worst part is that whoever you meet on your way out is going to blame for the foul smell in there whether you added to it or not. So it goes with monetary policy. The current Fed Director is lambasted for things done by their predecessors and so on and so forth. And of course they make mistakes bu Being in charge of monetary policy is a lot like using a stinky gas station bathroom. The worst part isn't trying to hold your breath whilst you take care of business and try not to touch anything. The worst part is that whoever you meet on your way out is going to blame for the foul smell in there whether you added to it or not. So it goes with monetary policy. The current Fed Director is lambasted for things done by their predecessors and so on and so forth. And of course they make mistakes but the important thing we need to remember is that we'd be a lot worse off with out them. It took me just over a month to slog through Wheelan's treatise on money and central banking but I am really glad I did. It gave me a much better understanding of a variety of things: deflation, inflation, the gold standard (and why we don't use it anymore), the consumer price index, the euro (and why it has so much trouble and Greece's role in the 2008 crisis), and the role of central banks in general (price stability in most countries and yes they are necessary in modern economies). I also felt like many of my fears based around the rise of bitcoin were both verified and better defined in the last couple chapters. And no, I still haven't watched It's a Wonderful Life but it's on my to do list. So if you come across a Zimbabwe trillion dollar bill, don't feel bad using it to buy a pack of gum so you can get the restroom key. They probably have change for it. Just remember not to use said change as TP be cause it tends to clog the sewers. Just remember to set some aside to get a copy of Naked Money and after you've read it this whole review will start to make some sense.

  23. 4 out of 5

    Adler

    I read quite a lot of stuff about investing, monetary policy, financial industry, and money in general. This is one of the best reads I've ever stumbled upon with regards to money. Every chapter is a real page-turner. I particularly liked how strongly opinionated Charles is when it comes to being against the gold standard and bitcoin, while making a compelling case why central banking offers far more benefits (often under-appreciated by the public and those nasty know-it-all politicians) that wou I read quite a lot of stuff about investing, monetary policy, financial industry, and money in general. This is one of the best reads I've ever stumbled upon with regards to money. Every chapter is a real page-turner. I particularly liked how strongly opinionated Charles is when it comes to being against the gold standard and bitcoin, while making a compelling case why central banking offers far more benefits (often under-appreciated by the public and those nasty know-it-all politicians) that would otherwise result in a complete meltdown (plus "unguided" recovery) of our financial system. In fact, I personally agree with all he has to say with regards to these topics. One cannot really talk about financial systems without doing a discourse on its historical crises and issues. Charles dives well into the Great Depression, the 2008 global financial crisis, the rise and fall of the Euro, the decades of deflation experienced by Japan starting from the 1980's, and the US-China trade tensions. The chapters on these are truly noteworthy reads. I'd say the book is an educational masterpiece. If one really wants to gain a clear understanding of money and how it all plays out in the global perspective, this is the book to get!

  24. 4 out of 5

    CODY LUCKENBACH

    I really enjoyed this book. Charles does not write political books. He writes books to educate the common person. He does a good job making it simple without political bias. Naked money focus the basics of how money work,, how it gets its value, how we use it, how we manipulate it and how it flows through our financial system. Chapters include: What is money, inflation/deflation, science of prices, credit and crashes, central banking, exchange rates/global financial system, gold, America Montere I really enjoyed this book. Charles does not write political books. He writes books to educate the common person. He does a good job making it simple without political bias. Naked money focus the basics of how money work,, how it gets its value, how we use it, how we manipulate it and how it flows through our financial system. Chapters include: What is money, inflation/deflation, science of prices, credit and crashes, central banking, exchange rates/global financial system, gold, America Monterey history, 1929 and 2008, Japan, Euro, future of money, central banking done better. I have been able to have more educated discussions with co-workers, especially during these times with a recession and intense discussions in Washington. I think this book should be required for any civics class. It gives you the basic idea of how money works and moves in our financial system. It does not focus on any specific political ideas or persons. Its a pretty easy read. I think high school and above can understand it. I would recommend this book to any person who just wants to learn the basic idea of money and how it works. I will say this book does paint a picture of how the government influences our financial system.

  25. 4 out of 5

    Angelica

    I love Charles Whelan. Picking up Naked Economics: Undressing the Dismal Science my sophomore year of high school opened my eyes to the beauty and challenges of the discipline. Whelan's writing is accessible, whimsical, and helps illuminate the fundamentals of his craft. From rai stones to pouches of mackerel to the good old-fashioned dollar, Whelan reminds us that monetary systems come in all shapes and sizes, and, like all free markets, are predicated on the belief of its users. I appreciated h I love Charles Whelan. Picking up Naked Economics: Undressing the Dismal Science my sophomore year of high school opened my eyes to the beauty and challenges of the discipline. Whelan's writing is accessible, whimsical, and helps illuminate the fundamentals of his craft. From rai stones to pouches of mackerel to the good old-fashioned dollar, Whelan reminds us that monetary systems come in all shapes and sizes, and, like all free markets, are predicated on the belief of its users. I appreciated his historical discussions of monetary policy and the Fed, together with his overview of bitcoin. As in Naked Economics, he's so good at delivering a comprehensive and entertaining primer on his chosen subject. Can't wait to round out the trilogy and read Naked Statistics: Stripping the Dread from the Data next.

  26. 4 out of 5

    Ivo Fernandes

    I already read the naked economics before this book, it's a pretty advanced book about the nature of money. It goes from the supply of money and interest rates, to the exchange rates, I feel like it goes always from basic to advanced in each chapter. The stuff of the business cycle, that is very unpleasant to decrease salaries in crisis, is easier to increase the supply of money and create inflation. I liked specially the chapters about the economic powers of nowadays, have the insight that China I already read the naked economics before this book, it's a pretty advanced book about the nature of money. It goes from the supply of money and interest rates, to the exchange rates, I feel like it goes always from basic to advanced in each chapter. The stuff of the business cycle, that is very unpleasant to decrease salaries in crisis, is easier to increase the supply of money and create inflation. I liked specially the chapters about the economic powers of nowadays, have the insight that China centralizes the exchanges of money, being the only legal channel that chinese exporter have to convert their dollar (USD) in yuan (CNY), and so, the chinese communist party have total control in the exchange rate between USD and CNY, and decided to use the USD t0 buy USA government bonds so the CNY did not raise in relation to USD and keep USA citizens able to import stuff from China. The problem of the euro that don't let poor countries like Portugal and Greece create inflation and let them with the only option of decreasing salaries, and prepare for huge complaints from people and unions.

  27. 4 out of 5

    Charles Franklin

    This was a incredibly interesting book to read about money (notwithstanding the title), Charles Wheelan does an absolutely incredible job of breaking down what I considered boring and dry economic terms like stagflation, inflation, and deflation into an incredible look at what money is and what it takes to keep money flowing in a healthy economy. Honestly, I didn't know that so much was involved, especially from the perspective of the Federal Reserve, which is what the book tends to focus on. Cha This was a incredibly interesting book to read about money (notwithstanding the title), Charles Wheelan does an absolutely incredible job of breaking down what I considered boring and dry economic terms like stagflation, inflation, and deflation into an incredible look at what money is and what it takes to keep money flowing in a healthy economy. Honestly, I didn't know that so much was involved, especially from the perspective of the Federal Reserve, which is what the book tends to focus on. Charles Wheelan has a great sense of humor and knows exactly when to drop in a pop culture reference (in case you might be going to sleep). He also does an absolutely incredible job of providing real-life examples that break down economics into concepts that the ordinary person can really understand. Great book that I would recommend for anybody interested in learning more about money, how the Great Recession happened, and what could prevent us (or push) us from going into a recession or panic in the future. Highly recommended as a supplement for economics students!

  28. 5 out of 5

    Mehmet

    It's a nice resource to learn the details of the monetary policy. One thing that disturbed me was his approach to the 2007-08 crisis. He talked about it as if it was ought to happen. Yes, when he goes into the details he mentions some agencies at fault but whenever he talks about the general picture he pretends as if the crisis was a natural disaster, and mostly focuses on the actions of FED after the crash. How about the actions giving birth to this crisis? There were many culprits for the cris It's a nice resource to learn the details of the monetary policy. One thing that disturbed me was his approach to the 2007-08 crisis. He talked about it as if it was ought to happen. Yes, when he goes into the details he mentions some agencies at fault but whenever he talks about the general picture he pretends as if the crisis was a natural disaster, and mostly focuses on the actions of FED after the crash. How about the actions giving birth to this crisis? There were many culprits for the crisis and most importantly they knew what they were doing. This is clearly visible from the Financial Crisis Inquiry Commission hearings, also in the documentary Inside Job. All in all, it's a good book to learn about the technical side of central banking, the gold standard, interests rates etc. but kind of misleading about the social/political side of economics.

  29. 4 out of 5

    May Woo

    Like Naked Statistics, this was an entertaining book on what I'd normally think of as a really dry topic (monetary policy - how the fed works, interest rates, quantitative easing etc). It was embarrassing to me that after half a century of being alive, I still didn't know anything about these things. But, I didn't like this book as much as Naked Statistics and found his assessments of the financial crisis in 2008 and deflation in Japan unconvincing (if living standards for the average Japanese p Like Naked Statistics, this was an entertaining book on what I'd normally think of as a really dry topic (monetary policy - how the fed works, interest rates, quantitative easing etc). It was embarrassing to me that after half a century of being alive, I still didn't know anything about these things. But, I didn't like this book as much as Naked Statistics and found his assessments of the financial crisis in 2008 and deflation in Japan unconvincing (if living standards for the average Japanese person is still much higher than anywhere else in the world, then it really doesn't seem to make sense to consider their economy a failure because they're not meeting their "potential") That said, he is a funny writer (not easy when the topic is interest rates) and I'd recommend the book to anyone else who has never taken basic economics and wants an easy though somewhat simplistic intro

  30. 5 out of 5

    Vallabh

    This is not a book about investments. Its about macroeconomics and how government decides its monitory policies. Its a nice book with information about what exactly is money, how is it created and how it affects prices of various good and services and affects our life in the end. Author is able to take us with him through amazing journey of right from primitive form of money to federal system. At times it does become repetitive and technical (esp inflation indexes are explained in too much detai This is not a book about investments. Its about macroeconomics and how government decides its monitory policies. Its a nice book with information about what exactly is money, how is it created and how it affects prices of various good and services and affects our life in the end. Author is able to take us with him through amazing journey of right from primitive form of money to federal system. At times it does become repetitive and technical (esp inflation indexes are explained in too much detail). But being from non economics background I actually needed repetition. Book is a must read for all the people as we all should be able to understand how monitory policies of our country is likely to affect our lives.

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