A review of David Kauder’s recently published book, The Greatest Crash.

Details of the availability of the book are included at the end of the review.

Extracts from the book included are with grateful thanks to Sparkling Books.

Part One of this review was published yesterday which needs to be read before Part Two.

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Chapter 5 continues by examining the over-bearing consequences of excessive public spending, excessive Government regulations, substitute taxation, weakness of Treasury forecasts, and so on. While these are UK issues, there is no doubt that similar restraints of free enterprise exist in many other western nations.

In Chapter 6, ‘Group Think‘, David looks at the strange ways in which we form opinions.  It’s a topic that has been discussed and written about widely but the point behind this chapter is that people have in great part lost the ability to discern truth from fiction, with terrible implications when it comes to understanding how individuals are affected by government and bureaucratic institutions.

The chapter closes;

One of the remarkable points that I have found in writing this book is that many of the detailed errors, incorrect policies et al, have already been amply documented by others. But we never learn. The delegated society, the strength of lobby groups and vulnerability of our political system to pressure, the sheer volume of noise in the media and on the Internet, the immediacy of the demands of daily life, all combine to make our collective memory rather short.

Amen to that!

Chapter 7, ‘Academic differences of opinion‘, was surprisingly short at just 6 1/2 pages. One would have thought the subject worthy of a much longer review especially as David was exploring the fundamental differences between Keynesian and Ricardian economic theories and opportunities for alternative theories. Must say that that I laughed out loud (David’s book is a little short on humour!) at the sentence on p.127 that ran, “One correspondent writing to the Financial Times proposed that economics should be declared a failing discipline, economists as not fit for purpose, and a physicist put in charge of sorting their theories out.”

Chapter 8, ‘The dark side of capital markets‘, is the penultimate chapter and quite a technical one at that. But David manages to trip through esoteric aspects, well esoteric to the lay reader, in a manner that keeps one involved.   Here’s an example from early on in the chapter.

Capital markets follow a long cycle beyond the experience of most practitioners, detectable only by understanding history and then applying this understanding to contemporary conditions.

It didn’t mean much to me. Then the next sentence;

The principles are identical for any market where prices depend on the supply of credit: equities, bonds, property and commodities are all markets where the prices must relate to the availability of credit.

That, at least, was understood but still the penny hadn’t dropped. Then came;

Bond prices prosper when credit is lacking while the other three prosper when credit is abundant.

That then made sense to me but still only at some academic level. David then followed those sentences with these two paragraphs;

The whole market cycle consists of bull market followed by bear market, as surely as night follows day. The bull market in assets is driven by an increasing supply of credit and economic expansion, since more credit leads to higher prices. The bear market in assets is driven by less credit and economic contraction; there is no purchasing power to keep asset prices high. Only fixed interest bonds are contra-cyclical, declining in price as credit expands and rising in price as credit sinks.

There are two useful theories for analysing the whole market cycle: conversion flow and Dow theory.

So in half-a-page of text, the book effectively educated me and then showed the relevance of that learning to the world I was living in. Cleverly done!

Chapter 9, ‘The attitude change‘, is, without doubt, a clincher of a close to this fascinating book. The sentiments conveyed in this chapter are so unexpected that, forgive me, it would be wrong to explicitly refer to them.  Buy the book!

Let me just say that the last chapter fully endorsed me calling this review The End of an Era.

Overall conclusions

This is an important book from a writer who has both the academic and professional experience to enable him to form the views that he expresses. Only time will tell if the whole scenario that is envisaged by Mr. Kauders will play out as he expects. My personal view is that it will.

For individuals and business alike, reading The Greatest Crash will inform you in a manner that I would argue is critical when one notes the precarious and potentially unstable period we are living through. The decisions readers make after reading the book are beyond the remit of this review and, of course, David Kauders, but, at least, read the book!

Prof. Myddelton in the book’s introduction wrote, “But one of the things we need now is new thinking on the fundamentals.” Perhaps not new thinking on fundamentals, as the Prof. puts it, but a reinstatement of core fundamental values.

I am not alone from sensing that the world, especially the western world, is transitioning from an era of greed and materialism, seeing a world of unlimited resources, to a different societal relationship with planet Earth, the only planet we have. A transition across all layers of society towards the values of truth, integrity and compassion; values whose day has come.

The Greatest Crash reinforces immensely my notion that this truly is the end of an era.

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Want to buy The Greatest Crash?  The ebook was published in October worldwide, the  paperback published in the UK on the 1st November UK, the hardcover being released any day now in the UK.  For North America both the paperback and hardcover versions are being published on 1st February, 2012.

Full details from the Sparkling Books webpage here.

Copyright © 2011 Paul Handover