October 26, 2014

A review of "Stress test"

Morning is the time of random thoughts and it'd better to jail those thoughts somewhere rather than let them wandering around and disappear. I decided to make writing the first thing I do everyday.

Yesterday, I came to a near bookstore and saw that the book "Stress Test: reflections on financial crisis" already on shelves. After reading the book's review by Bill Gates, I can't help waiting until the book is sold in bookstores, that I buy a kindle version through Amazon. I started reading the book every single free time because the content is so compelling and its author is so amazing. I want to jot down several points I think interesting here.


 

First thing I learnt from the book is that financial crisis is the crisis of faith. In the time of crisis, every people go crazy, concerning their money rather than whatever else. Nobody believes confirmation made by bankers or authority. People just run for their money. In this time of turbulence, the rightest thing for a banker to  do is not to persuade people to believe his statement, but to put a lot of money over the window, so that people can see money available for them; so that they understand they don't need to worry for their money and stop running. In time of crisis, a wise action is to calm public outrage.

Second thing I learn from the book is about money. I grew up never asking the existence of money. I spend money as that it's thing to spend, work for money as it's thing to work for, never asking where money does come from. After finishing the book, I become awareness of the existence of so called national central banks (the Federal Reserve in America), their duties and responsibilities. I start to realize the importance of IMF (International Monetary Fund) and its mission in taming global crisis. I understand the intrinsic value of money, that money is not solely a common tool for exchange but also a blood in an economy. Money acts as blood in an economy, bring oxygen to businesses helping them operate normally. Banks are hearts of the economy, keeping money flow. If money stops to flow, business stop functioning and start to lay down workers. People stop spending money making sales decrease. The overall economy jumps into a vicious cycle of evils which lead to recession. Money needs to flow to make the overall system functions.

Third thing I learn from the book is about the America's politics. In time of crisis, the politics is exposed. Politician fights not for their country but for their own profits. I often think that America is the only country that have a best institution in the world, where great people working together for a great America, but I was wrong. Overall, the american can be proud of their governments because their president always good. But behind the scene, the Main Street (or Congress) is the real stage of politics where politicians use their powers to control things. And the congress and politicians there are awful (dirty?). I just fully realize that even chosen congressman (leaders?) won't care about ordinary people in turbulence, so I should not expect other people care about me. 

The author is under lots of criticism even after crisis. He might be right or wrong, but to me, in time of crisis, we need a leader who might be wrong but strong rather than a leader who might be right but weak. Without actions, people can draw countless pictures of imaginary results where they can judge right or wrong.

I nearly recommend this book for people who want to understand the housing bubble in America and the finance crisis in 2008, as well as thoughts, debates and policies behind the scenes made by America leaders.

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