"Introduction to Financial Crises" by George Cooper

The one reading I am drawn to enough to write about here is "The Introduction of Financial Crises" by George Cooper. An excellent read for any person who is interested in the, well, origins of the financial crisis, this book spends a predominant amount of its pages reuting the Random Walk Hypothesis. This hypothesis, a cornerstone of economic theory, states that the activity of a financial market today has no effect on the activity of the same financial market tomorrow, that market performance follows a 'random walk.' However, using empirical evidence and solid logic, George Cooper casts serious doubt on the foundation of the Random Walk Hypothesis and its applications.

And it all makes sense as well. The Random Walk Hypothesis states that because a market follows no set path and that, you can't predict it. Because a market can only go up or down, the application of the random walk hypothesis is like flipping a coin x number of times. The larger x becomes, the likelier the outcomes of the coin flip become perfectly split (100 flips- 50 heads 50 tails). A market's value according to the RWH should always remain halfway in between the two extremes, negative infinity and positive infinity, or exactly zero.

However, common knowledge states that once recessions occurr, they snowball, and become deeper, and not by chance alone. It is a clear shortfall of the RWH that once markets start to fail, people react, facilitating their failures and withdrawing all of their money.

This reading is a great read for anybody remotely interested in what is happening in today's economy.