The Seven Pillars of Statistical Wisdom - Stephen M. Stigler (Harvard University Press, 2016)

An eminent statistician and historian of the field examines the seven key concepts that form the basis of the modern theory of statistical inference and analysis.   [519.5]

Stephen Stigler of the University of Chicago has written extensively on the historical development of the discipline of statistics.  This book examines the history of the seven key concepts of statistical theory.  These are the concepts that underlie our understanding of what it is that we are doing when we accept statistics as the reflection of reality and when we use statistics to guide our judgements. 

For many of these concepts, Stigler finds their origins in the 17th century or earlier.  This should not be surprising: the intellectual questions that are addressed have, most likely, been at the core of our thinking about the world.  But, the full mathematical development and elaboration of the methods is surprisingly modern.  Most of these can be traced to sources such as Galton (1880s) or Laplace (1770s) for the first clear realization of what would be required.  The final development had to await the work of such moderns as Sir Ronald Fisher at the agricultural laboratory at Rothamsted (1920s) or Jerzy Neyman in the 1940s.  Suddenly, statistics, which likes to trace its lineage to the 18th century, is seen as an exceptionally new science.

The keys to statistics lie in these discoveries:

• Aggregation. What is necessary to summarize a collection of observations?  What may now be called sufficient statistics, think of the mean and variance, pose a puzzle; this reduced set of information may reveal as much about the parent population as the full record of observations. 
• Information.  How much do additional observations add to our knowledge?  A critical rule in statistics, under standard assumptions, is that doubling the sample size does not double the information content.  Information is found to increase with the square root of the number of observations; to double the information in a sample, one must quadruple the size.  This situation means that sampling must balance economy with information.
• Likelihood.  What do the observations tell us about the underlying probability distribution, among all possible distributions, that was most likely to be the source of the data?  Likelihood methods become our tool for making inferences about how the world works.
• Intercomparison.  How can observations be meaningful without reference to an external standard?  The variability within the samples can provide a basis for judging whether subsamples are from the same parent or not.   
• Regression.  How does one explain the tendency of populations to remain clustered around central values rather than spreading out continuously?  The issues were critical for the survival of Darwin's theory of evolution; they are the basis of our model building today. 
• Design.  How can experiments be planned to yield the sharpest distinction among factors influencing the outcome?  How can randomization strengthen our conclusions?  The pioneer work of Sir Ronald Fisher in agricultural experiments blossomed into the field of experimental design that guides marketing and medical research.  
• Residual.  How are complicated phenomena sorted to reveal relationships when some factors are stripped away?  

This may be a particularly difficult book to read.  Although Stigler tries to make the argument accessible to non-specialists, he is still limited in how much he can reduce the mathematics or the logic of the arguments to everyday speech.  The author also assumes that the reader may be familiar with the pioneers of statistical logic.  Still, for the reader with a basic background in statistics and probability, this may be an intriguing book.

With that qualification, the book is highly recommended.

Once in Golconda: a true drama of Wall Street 1920-1938 - John Brooks (W W Norton & Co, 1969)

A very talented writer describes the mood and the events of the 1920s boom, the crash, and the aftermath.  Brooks wrote with great clarity.  Each of his business history books deserves a look.  [332.64273]

The Wall Street crash of October 1929 stands as a milestone in American financial history that surpasses all others.  The panics and crashes that preceded it are lost in popular history; those that have followed it are constantly compared against it the way geologic events are compared with the August 1883 Krakatoa eruption or the April 1906 San Francisco earthquake.

In a similar manner, the books written about the 1929 Crash all spend some time examining the popular culture of the age.  The sense of easy money is a frequent topic; what review of the age doesn't mention John J. Raskob's "Everybody Ought to be Rich" magazine article?  The day-by-day events of that October are also popular material for these histories.   These are offered as a means of contrast with our own less frenzied or more sophisticated age.  When the 'twenties are contrasted too strongly with the present, it can lure us into a complacency; we can see how the sins of the past led to the downfall, but, as we are not guilty of such greed and passion, no such calamity awaits us.  History has proved this wrong many times.

John Brooks, however, has a more subtle eye.  His narrative does not stress the extraordinary nature of that age, although he discusses some of the major figures of the era.  His narrative encompasses the economic forces that imposed changes on the nation and the social changes that marked a permanent turning in the society's mores and viewpoint.  Further, Brooks covers the period more fully: from the 1920 bomb that exploded at lunchtime on Wall Street to the Pecora hearings and Richard Whitney entering Sing Sing in 1938.  In fact, Whitney becomes the central character in the history and his personal fall chronicles the falling away of the old elite and its replacement by a new generation.  When seen from this view, the 1920s are not extraordinary or distinct from later years, they are the time when the attitudes of our era first emerged. 

This book is very highly recommended.

The Money Game - 'Adam Smith' (Random House, 1967)

A witty exploration of the psychology of Wall Street - why people play the game and how they do it.  This is not another investment guide; it is brilliant sociology.  [332.678]

How is the investment world of 50 years ago different from today?  Maybe there are fewer brokers that the client calls to see how the market is doing.  There are fewer old-line investment houses functioning as banks for wealthy clients.  Along with that, the old fixed commission system is gone that supported so many of those old houses.  There are more investment products available, even as some industries (e.g., aluminum) offer fewer companies to choose among.  Certainly, there is more information about prices and markets within easy reach.  The author would argue, however, that one thing has not changed: the underlying motivation for many participants in the market.  Taking a comment from Lord Keynes, the author argues that it is the game aspect itself of speculative investment that draws many players.  Yes, money is useful for keeping score, but it may not be the end in itself that is being pursued.   

George J. W. Goodman, writing under the pseudonym Adam Smith, draws a series of portraits of the players and in sketching them highlights their inner workings.  The cast includes Odd-Lot Robert who is the small investor who always thinks the "Big Boys" are planning something; Charley and Poor Grenville, and the Kids, all fund managers; the professional gang hanging around Oscar's who could have walked off the set for Mad Men; several investors who are patients of Harold the Psychiatrist who reveal all the ways in which money and the market fit into their lives and it usually isn't in the ways economists assume money fits into a rational individual.  They are Chartists, analysts, small investors (in odd lots), irredeemable speculators, and guys who just like to trade information.   One key that the author finds is how many players just want to be in on the game; they want to be where there is action.

For a light diversion, there is a chapter on The Cocoa Game to warn against the very different world of commodity trading.  For a darker chapter, the Gnome of Zurich appears to present speculations about the dollar and trade and gold that a dozen years later would all prove true. 

The writing is bright and clever.  The humor is subtle yet rich like the clubs that Goodman describes.  This is a book to read when one wants to be reminded that the world continues in a great cycle of rising markets, hot prospects, disillusionment, and gloom...and that it always has been that way.

This book is highly recommended.   

Military Misfortunes: The Anatomy of Failure in War - Eliot A Cohen and John Gooch (Vintage Books, 1991)

An insightful analysis of the sources of failure in wars, although the approach holds promise for more general application to management in business.  [355.480904]

Forget for the moment all the business literature that tried to appear deep and subtle by applying writings of Sun Tzu or Alexander the Great to business management.  Their focus on the enemy - that is, the competition - and exploiting his weaknesses to gain victory seemed to appeal to business fantasy  rather than the mundane challenges of keeping everything running smoothly.  Is military strategy even appropriate to apply to business?  It is clear that war and military management present great challenges because the risk of failure involves much more than simply the financial health of the enterprise itself.  At the same time, military management can, or should be able to, rely on tighter chains of command and an ability to marshal resources if they are needed.

Yet, business does present questions that need some innovative answers.  How, for example, could the Edsel be explained? or New Coke? why did money center banks allow themselves to be stuck in the collapse of the market for CDOs? why did the domestic auto industry nearly die?  Not all of these can be explained by costs structures or market forces.  At times, it is necessary to look at the decision-making style of the people leading the organization.  

The authors analyze military collapses form the last 75 years.  After first rejecting analyses based on the psychological or temperamental profile of the man in charge (a variation of the Great Man approach), analysis of the institutional culture, or even the society that failed, they present three principal sources of failure.  These are:

 - Failure to learn.  This is the refusal to look at lessons learned in analogous situations.  Their example is American antisubmarine warfare in 1942.  The horrific losses within the U.S. Merchant Marine fleet in the Battle for the Atlantic were costly in lives and materiel.  The British had developed an effective strategy for convoys and for antisubmarine warfare during their years in the war.  Their success, the authors contend, was not the result of new technology, but of developing an organizational structure that allowed the RAF to make use of all intelligence available and to disseminate it immediately to units that needed it.  It would take some months before the U.S. could do the same with its antisubmarine air patrols.

 - Failure to anticipate.  This is not failure to foresee an unknown future, but the failure to take reasonable precautions against a known hazard.  The authors analyze the failure of Israeli forces to anticipate the Yom Kippur War.  This was not a failure alone of intelligence, that is, a misreading of the facts at hand and a lack of curiosity among Israeli senior officers concerning the data available, but also a failure to comprehend the strategic views of the adversaries.  It could be summarized as overconfidence in understanding the situation confronting the IDF.

 - Failure to adapt.  As events unfold, little can be expected to continue as planned; opportunities present themselves or new information becomes available.  The authors analyze the British generals' failure to adjust their plans in the terrible Gallipoli campaign of 1915.  In the landings on Suvla Bay on April 25, British command failed to recognize a critical opportunity of light resistance on one of the three beaches in comparison to that on the other two.  There was no command to press forward in the area of no resistance.  Troops eventually drifted back to the beach.  The British forces on "Y" beach at Suvla Bay failed to exploit the situation and became part of the forces pinned down in their trenches above the beach.  A similar opportunity would not come again.  Compare this with the landing on Utah beach in 1944, when it became clear that U.S. forces had landed at the wrong place on a lightly defended area.  To quote their commanding officer, BG Theodore Roosevelt, Jr., the opportunity meant that they would "start the war from right here."

There is nothing to prevent combinations of these three failures and the authors examine two cases of such catastrophic failure: the rout of the Eighth Army in Korea in 1950 and the fall of France in 1940.

The analysis is greatly enhanced by the inclusion of an accountability matrix for each discussion.  The matrix cells are defined by columns such as control and coordination, identification of goals, supply or means and rows are defined by levels within the organization from high command to units.  Cell entries list errors or weaknesses with critical or serious failures marked.  The tool itself should be adopted by others tasked with post hoc analyses of events.    

This book will carry additional interest for anyone interested in military history, but it is recommended as an innovative approach to nonmilitary matters. 

The Gold Ring: Jim Fisk, Jay Gould, and Black Friday, 1869 - Kenneth D Ackerman (Harper & Row, 1988)

An account of the attempt to corner the gold market in the early Grant Administration.  The book's portraits of dishonor and double cross are staggering.  Taken as historic evidence, the story contains valuable warnings about markets and regulation.  [332.645]

"A fellow can't have a little innocent fun without everybody raising a halloo and going wild"  - Jim Fisk

It is difficult to conceive of how financial markets operated in an era of no regulation.  The picture drawn in this book is one of stunningly corrupt institutions dominated by wholesale fraud; in fact, perhaps either the term "markets" or "operated' is the wrong word to describe these money exchange forums.  The two of note in this book are the New York Stock Exchange and the Gold Exchange. 

The narrative revolves around seven people.  Jay Gould and his sometime business partner Jim Fisk engaged in market manipulation while using the treasury of the Erie Railroad as their personal cash source.  Cornelius Vanderbilt, with his New York Central railroad, was a constant competitor of Gould and Fisk.  William Marcy "Boss" Tweed supported Gould and Fisk with lawyers and pliable judges whose injunctions could be used to limit liability or to award custodianship of disputed assets.  Abel Corbin became a partner with Fisk and Gould because he offered a valuable connection - he was the President's brother-in-law.  President Ulysses Grant had been in office only a few months as he and his Treasury Secretary, George Boutwell, worked to move the country back to hard currency after the issuance of Greenbacks during the Civil War.

The author establishes the characters of several of these persons by describing the "Erie Wars" in which Gould and Fisk struggled with Vanderbilt over control of the Erie railroad and on securing a right-of-way to link with Midwestern railheads.  Although both sides were willing to use gangs of toughs on the rail lines and bribery in Albany to get the rights they sought, a novel scene on the stock exchange is more effective.  Once Vanderbilt decided to simply buy a controlling interest in the Erie, Gould and Fisk set up a printing press and simply kept printing stock shares to sell him.  (No regulations regarding registering shares or provisions against watering stock existed.)  When the Erie Wars became too notorious, Gould and Fisk simply holed up in New Jersey while both sides used the courts to get the outcome they wanted.

The central story, however, involves an attempt to corner the gold market.  Gould and Fisk might be able to lock up all the free gold immediately available in New York, but they could not hold out long if the Treasury decided the action on the Gold Exchange was affecting commerce.  Their answer was to recruit Corbin to introduce them to the President and to convince him that higher gold prices would help farmers as they were selling the crops. This would convince Grant to stop Boutwell from his monthly repurchases of outstanding Treasury debt with gold that would enter the market.  As Gould and Fisk began their bull run (lending out to the bears gold as they bought it), the Treasury stayed out of the way, although this may have been because Grant was on extended vacation.  Grant, however, became suspicious when the schemers tried too hard to keep him in by sending a letter from his brother-in-law to him by special messenger at his vacation spot.  He had his wife write back to her sister, Corbin's wife, warning them to stay out of any market schemes.  (How Gould used this response is even more revealing of character.)

Immediately upon his return to Washington, Grant authorized the sale of gold for bonds.  This broke the ring in the infamous September 24, 1869, "Black Friday" collapse of prices.  The issue then was to untangle accounts from the furious trading and to reach net settlement.  At this point, Gould and Fisk decided to repudiate all their trades or to use Boss Tweed's judges to help them do so.  The settlement process itself became corrupt with brokerages favoring their own accounts and not settling with outside parties.  Money was lost, some houses were ruined, and many reputations went with them.  Reforms would still wait 60 years in the future before markets could actually be counted on to act as markets.

This amusing history of unbelievable corruption and its audacity is highly recommended.

Deflation: What Happens When Prices Fall - Chris Farrell (Collins, 2004)

Inflation has been the global experience since the end of WWII, but this may have been the anomalous period in modern economic history in that deflation or stable prices are more likely over the long run.  Since the mid-1990s, deflationary pressures brought about by advances in productivity and technology have moderated the increase in prices and wages. This book looks at causes and consequences and tries to argue that, in the main, this is a good thing. [332.43]

This book was written as an analysis of current economic trends.  With the perspective of the past dozen years, a book such as this becomes interesting for what it appears to have gotten right and for what we now know to have been quite wrong. 

The author's premise is that deflation brought about by a drop in demand, as happened in Japan after its real estate bubble collapsed can be very damaging to an economy.  The Great Depression is another example of such a deflation; it was a rapid drop in prices and, by setting up expectations of further falls in price, encouraged consumers to put off buying goods that would only be cheaper later still.  The fall in demand and economic activity becomes self-perpetuating.   

There is another type of deflation, one that is gradual and results from outward shifts of the aggregate supply curve.  (NB. This is NOT an argument of "supply side" economics nor should it be confused with that specious doctrine.)  Such a shift results from new technology, increased competition, or changes which reduce the costs of production generally.  In this world, wage increases may be severely dampened, but they are more than compensated for by increased purchasing power. 

Farrell argues that our current bout of low inflation, bordering on deflation, is similar to the same phenomenon at the end of the 19th century in that both grew from new technology: railroads, telegraph, electricity or the internet and supply chain management.  In fact, he suggests that most of modern history saw fairly stable prices with the post-WWII period being the true exception.  Such periods of economic transition can be very difficult for many workers and business owners as industries undergo Schumpeterian creative destruction. 

Correctly, then, Farrell expected some social stress as workers are displaced and industries undergo new competition.  He could see free trade as a likely scapegoat for the social cost of a changing global economy.  This clearly is continuing today and it has affected our political process.  The book is colored by the dot.com collapse and its destruction, but that is already fading.  The author cannot anticipate the far more serious collapse of 2008.  This will exacerbate some of the negative trends and will reverse the steps toward income equality that the late-90s boom engendered as employment grew.   And, the consequent deleveraging as credit collapsed would hold back recovery much longer than might have been expected.  Overall, the author has presented a clear argument that better explains what our economy is going through and offers comfort in that we have been here before. 

This book is recommended for its fresh perspective on deflation.

The Day the Bubble Burst - Gordon Thomas and Max Morgan-Witts (Doubleday & Co, 1979)

This is a social history of the Great Crash of 1929.  It weaves together the individual histories of dozens of persons whose lives or fortunes were deeply affected by the Great Bull Market and its subsequent collapse.   [338.54]

Neither of the authors of this book is an economist or a business writer by profession.  The style of the book is quite different from most financial histories in that it spends more of the text on recording the thoughts and feelings of the characters.  In fact, it is more like the style one expects to find in a novel.  The attribution of thoughts or feelings to the main characters would make a reader suspicious of the validity of the accounts except for two things: the book was written forty years ago when many of the principals or their families were still alive and available for interview and the authors cite numerous journals, diaries, and interviews among their sources.

The book covers the last months of the Great Bull Market from New Year's Eve 1928 to October 1929.  It is not restricted to the usual players in the Street, but takes individuals at several levels of society and at venues outside New York.  These individual stories reinforce the narrative by adding a poignancy to human plans overwhelmed by the event.  There are several projects or goals set by the participants for the last week in October that the reader knows will never come to fruition.  The stories include the standard players such as Michael Meehan, the pool operator; Thomas Lamont and George Whitney, partners at Morgan; Richard Whitney, George's brother, embezzling from his customers for one bad investment after another while president of the NYSE; Jesse Livermore,  who often blamed for the Crash because he often sold short; Charles Mitchell, famous for placing bids on behalf of the bankers' group to try to stabilize the market, but who also was selling short the stock of his own bank; and Professor Irving Fisher, the economist whose serious work on the money illusion has been swept aside by his Panglossian pronouncements.  

The authors go further and include other characters to give a broader sense of the easy riches mania that seemed to carry away the country.  There are also Henry Ford, eccentric and living in an America that is fading into the past; Joseph Kennedy, snubbed in his visit to the House of Morgan, but having a better sense of the market than his "betters"; John J. Raskob, focused on his plans to build the Empire State Building; A. P. Giannini, laboring against the fear that his Transamerica Corporation might become a tool for speculators and also seen as an upstart by the J. P. Morgan firm; the "league of gentlemen," fifteen clerks and officers of Union Industrial Bank of Flint, Michigan, each of whom was embezzling from the bank to invest in the stock market; and the Vargo family, immigrants in Flint and bootleggers who trusted their savings to the Union Industrial Bank.

By following each of these stories, the reader is reminded that the Crash did not happen on just one day; the market's collapse took place over several days.  At the end of each of those days, there was a hope that the rally might undo the damage.  The reader will likely feel a pang of sympathy for the characters because we know the end of the story.  That is something too often missing from economic history: the sense that no one at the time knew how the story would end.  We can empathize with their frail hopes.

This book is recommended for a sense of the mania for easy money that swept through society during this period.

Last Call - Daniel Okrent (Scribner, 2010)

A thoroughly entertaining history of Prohibition: the motivations of its proponents, its social impacts, and how government policies were implemented.  [363.41097309042]

Prohibition has a certain image in the popular mind: Elliot Ness, passwords at speakeasy doorways, terrible liquor.  This book provides a comprehensive and highly readable history of one of the strangest legal periods in US Constitutional history.  The author also gives a very different view of our history - how quickly the population gave up on enforcement, how little it was wanted anyway.  It is ironic that Prohibition became truly unpopular generally once President Hoover took enforcement seriously.  

He also examines the very modern interest group dynamics that led to the 18th Amendment and places them in the context of a much broader platform of social legislation.  Women's suffrage was supported by the dry forces because of the certainty that women would vote for dry candidates.   Prohibition was intimately linked to tax policy, for example, with the income tax a necessary prerequisite.  Alcohol could not be banned unless an alternative source of revenue could be found to make up for the loss of liquor excises.  (No wonder the author, in a book discussion, once mentioned that his original title might have been "How the Hell Did This Happen?")  This same argument would lead to the drive for repeal of Prohibition by classes hoping to end the income tax. 

In a certain sense, Prohibition is seen as the last struggle by a disappearing America - rural, WASP, and religious against a tide of change to the modern, urban and ethnic culture that America was becoming.  The fighting went to the last ditch when the "Dry" forces delayed re-apportionment of Congress after the 1920 Census until 1929 because they knew that the composition of Congressional representation would change radically when urban, ethnic districts began to appear. The parallels to social legislation driven today by the same fear of change makes this more than just a history of a curious period deep in the past.   

This book is highly recommended. 

Fool's Gold - Gillian Tett (Free Press, 2009)

The other side of the story that ends with The Big Short.  The history of the development of CDS and their limits as tools for risk and how those limits were overlooked in pursuit of profit buy some banks with catastrophic consequences.  [332.660973]

The Financial Times columnist offers a history of the development of the credit default swap (CDS), the derivative financial instrument that cost so many banks so much in losses as to bring on the financial collapse of 2008.  Gillian Tett focuses on the derivatives team at JP Morgan while tracing developments at other banks to create new financial instruments. 

Along the way, Ms. Tett points to the pieces of the history that combined to make the disaster.  She recounts the efforts by the Wall Street banks to leave the derivatives business essentially unregulated (or, at most, self-regulated.)  She covers the work by industry committees to draft ISDA rules, including avoiding creating a third-party clearinghouse, as a way to put off regulation by the Federal Reserve and their further work to lobby against four separate bills in Congress in the 1990s to regulate derivatives trading.   

The other great problem was how to keep these instruments from impairing the balance sheet: if they carried any risk for the bank, the bank would have to maintain adequate reserves behind them.  By breaking the CDS into separate tranches according to the risk implicit in the underlying securities, it would be possible to find buyers who matched the level of risk of each tranche with their own preferences for a balance between yield and risk tolerance. There was, however, a particular problem with the "riskless" tranche, the most senior and lowest risk tranche since it was difficult to imagine that this tranche would ever be at risk.  Fortunately, the insurance giant AIG was willing to take on this instrument as an asset.  The return would be small, but with sufficient scaling up, the total would be significant.  Eventually, lobbying by the industry convinced regulators that the senior tranche was sufficiently safe that it didn't need to leave the balance sheet or impair operations by requiring reserves behind it.  Since there was much to be made by selling CDS, the banks went into it fully and this meant they were accumulating a lot of the senior tranche.  Thus both AIG and the banks were set up to take on risks they could not measure.

The key problem was whether the underlying logic of the instruments was correct; there was no way to be sure.  The assumption was that each security (mortgage) had an independent probability of failure.  Even if they were not perfectly independent, the correlation among the constituent securities was assumed to be low.  Experience with corporate failures made the assumption seem safe; the assumption was on far shakier ground when new instruments were designed to use only mortgages.  It was difficult to calculate the probability of general collapse in real estate.  The problem was ignored or assumed away.

The collapse came, quietly at first, but with increasing fury as derivatives began to melt on the balance sheet.  When it was over, few banks were left standing firmly.   Although there were heroes whose rationality and ability to avoid jumping in to the risk pool saved their banks much grief (and Jamie Dimon appears to be one of Ms. Tett's heroes), most banks were caught by the very instruments that had been paying them so well.  The cost in wiped out value reverberated throughout the markets and into the real economy.  The recovery continues eight years later.

This book is highly recommended.

The Match King - Frank Portnoy (Profile Books Ltd, 2009)

In a time of economic exuberance, even sophisticated investors, bankers, and brokerages were not too interested in where the dividends came from.  This is the story in detail of one of the greatest collapses - or was it fraud - of the 20th century.  [364.1680924]

It would seem that every book about the 1929 Wall Street crash makes passing reference to Ivar Kreuger and the collapse of his "Match Empire."  Although, his name is often teamed in such histories with those of Samuel Insull and Charles Ponzi, there is a critical difference.  Ponzi's scheme was limited and had no hope of being a legitimate investment; Insull's network of utilities and holding companies was merely regional; Kreuger built an international enterprise that was capable of lending funds to sovereign governments, that developed new financial tools (such as nonvoting Class B shares and convertible debentures), and that could rival the House of Morgan.  Ivar Kreuger and his match monopolies were in a different league - almost appropriately the same league as the South Sea Bubble.

This book is more than a recounting of some facts; it is the biography of an enigma.  How much about Kreuger's life or business dealings was real?  how much was sleight of hand?  Further, why would a old banking house like Lee Higginson participate so willingly in raising funds for International Match or the firm of Kreuger and Toll when they really knew so little about the business?  How could the most cursory of financial data be trusted as a guide to understanding a complex firm?  Here is a look at how financial markets operated before requirements for audited financial statements or registration of securities became standard.  In good times, as many subsequent market booms have shown, investors do not really want to look too carefully under the hood of the engine that is generating profits.  It did not seem to trouble investors that their investments paid a 25% dividend on money lent to Germany for 6%.  In  the absence of solid accounting data, funds could be raised and shifted among a number of off-balance sheet vehicles and firms without the knowledge of investors or the firms' bankers.  Today, an investor will study the 10-Ks and 10-Qs of prospective investments.  These tools only came into being after, and partly because of, the collapse in 1932 of Kreuger's empire once the search for remedies for the losses that all came with the end of the 1920s bull market began. 

After every collapse, there is a desperate search for a single, simple cause or villain to blame and widespread human greed or blindness is never really an acceptable explanation because it spreads guilt too broadly - it might include ourselves.  Although the International Match shares held their value for almost two years after the crash of most other share prices, when they fell, they became the focus of blame.  Suddenly, the now-dead Kreuger could not defend himself against harsh, self-interested accusations.  Some of these charges are believable.  (The forged Italian treasury bills that Kreuger had used argue that.)  Time, however, would reveal that many of the assets of International Match and its associated companies were genuine.  The author leaves his conclusions mixed: part blameworthy, part exculpatory for Ivar Kreuger.  That is, perhaps, the most satisfactory approach.

This book is recommended with the note that some readers may wish to reconstruct some basic accounting statements to better understand the whole.

  .