Book recommendations for understanding financial systems?

I have almost 10 years in the finance industry, both buyside and sellside and my take is that, while there are some fundamental principles at play, the world of finance is too messy and complicated for any one book to describe it. An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system.

So, once you accept that there is no "correct" answer to how the financial system and how markets work, what's left to do is to follow what's happening in the world and try to build your own mental model.

One source I'm a big fan of (and has a bit of a cult following in the financial world) is Matt Levine's "Money Stuff" blog: https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...

He's engaging, funny, talks about interesting topics and, most importantly, he's _rarely_ wrong. It's a rare thing seeing a journalist talk about your specialty subject and actually being correct.

Similar source is Felix Salmon: https://www.felixsalmon.com/

Similar league as Levine, but I find him slightly less engaging, for whatever reason.

For learning I strongly recommend against almost all books mentioned in this thread. They don't really teach how financial systems work in the society or the underlying principles. They give you just a viewpoint. Some of them are good read after you know the basics.

You need to pick up real college textbook (or online course) and read the parts that interest you and skim other parts. Example: Introduction to Finance: Markets, Investments, and Financial Management by Melicher and Norton

You can also pick up introductory undergraduate college textbook in economics and read the parts that interest you. Greg Mankiw's books are good but the price is off the charts, so maybe don't buy them. (Macroeconomics & Financial Systems could be cheap if bought used)

After that some light reading for general audience with interesting viewpoints and lessons:

- A Random Walk Down Wall Street by Malkiel

- Common Sense on Mutual Funds by John Bogle

- The Alchemy of Finance by George Soros (Sorosls theory of reflexivity in finance, nontechnical take on nonlinear dynamics in the markets)

I studied economics in college, then I worked for a few years as a business journalist before I finally switched careers to IT systems engineering. The following is a list of my favorite books on financial securities, banking and investment theory. These books are generally comprehensible to anyone with an interest in the subject, regardless of their educational background.

Arrighi, Giovanni (1994) The Long Twentieth Century: Money, Power and the Origins of Our Times

Brealey, Myers, Allen (2011) Principles of Corporate Finance, 10th ed.

Bruck, Connie (1988) Predators' Ball: Inside Story of Drexel Burnham and Rise of Junk Bond Raiders

Fisher, Philip (2003) Common Stocks and Uncommon Profits and Other Writings, 2nd ed.

Fridson, Martin and Fernando Alvarez (2002) Financial Statement Analysis, 3rd ed.

Graham, Benjamin, J. Zweig, D. Dodd (2006/08) Intelligent Investor, rev ed; Security Analysis, 6th ed.

Greenblatt, Joel (1999) You Can Be a Stock Market Genius

Greenwald, Kahn, Sonkin, Biema (2001) Value Investing: From Graham to Buffett and Beyond

Henwood, Doug (1997) Wall Street: How It Works and for Whom

Levitt, Arthur (2003) Take on the Street: How to Fight for Your Financial Future

Lewis, Michael (2010/1989) Big Short; Liar's Poker

Lynch, Peter and John Rothchild (2000) One Up on Wall Street, 2nd ed.

Mishkin, Frederic (2004) Economics of Money, Banking and Financial Markets, 7th ed.

Taleb, Nassim Nicholas (2005/10) Fooled by Randomness, 2nd ed.; Black Swan: Impact of the Highly Improbable, 2nd ed.

Vilar, Pierre (1976) A History of Gold and Money: 1450-1920

Tracy, John A. (2009) How to Read a Financial Report: Wringing Vital Signs out of the Numbers, 7th ed.

This is an online course, not a book, but it changed my understanding of finance. I studied Economics (initially) at university, and never found anything close to as useful as this class:

https://www.coursera.org/learn/money-banking

Somewhat meta comment, when I read all the conflicting recommendations here (seriously, for almost all recommendations there’s an anti-recommendation somewhere in this thread), it makes me question the value to me in really trying to understand the financial system.

I mean, I’m not completely financially illiterate. I understand compound interest. I stick with sinking most of my money into passive investing, saving x months of expenses in checking for surprises, and not accumulating any debt.

Every now and then I think about getting back into value investing (it was fun in high school) which is a little more active, but the effort required to understand this system seems enormous/impossible. There are simplified expositions of how to read a balance sheet, but then I run into weird edge cases of financial trickery that I’d never be aware of. So I figure I can’t compete with pros and passive investing seems like a reasonable enough approximation in the long run.

When I compare it to all of the other stuff I could learn or skills I could acquire in the same time, so far “learning about the financial system” is so messy and uncertain to me that I never really pursue it.

Has anybody run into this issue? What did you decide?

First, arm yourself with the tools to figure out whether what you're reading is bullshit or not (unfortunately a huge issue in the finance space). Read about The Organon by Aristotle, particularly his work around logical fallacies.

Then, for a brief overview of the history of money, currency, and markets read the first part of William Bernstein's The Four Pillars of Investing (provides some good historical context).

To understand financial market movements in the short term (like what is happening now), read about crowd psychology, behavioral biases (Kahneman), and black swans (Taleb).

To understand financial markets over the long term, read anything written by Buffet (his annual reports) or Munger, or their intellectual precursor, Graham and Dodd.

To understand the theories and thinking underpinning money and central banking, read about Adam Smith, Milton Friedman, Keynes, and Hayek.

Start with a bias toward history and older works, and move towards newer works to understand how the current zeitgeist got here and be able to think more critically about the ideas that are currently en vogue.

Also, I agree with the comment that recommends avoiding books by journalists. These are typically compelling narratives in search of supporting facts and theories (the wrong way to approach thinking). You should start your learning from the opposite position. Learn the theories and facts first, then think critically about any good-sounding narratives you see repeated in the wild.

From someone working in the hedge fund world, “Big Debt Crises” by Ray Dalio is the most useful book I have read on the topic.

The language is quite accessible and it describes how various kinds of business cycles have played out through history. The highlight for me is an elaborate, punch-by-punch retelling of how the 3 major financial crises played out (1930s Germany, Great Depression and 2008). Rather than looking backward with the benefit of hindsight as most textbooks do, this gives you a real impression of how the events played out in real-time. There are even newspaper headline clippings in the margins from every week or so, just to show how the popular narrative was evolving as it happened.

This is the best online course I've ever taken:

https://www.coursera.org/learn/money-banking

The professor explain the financial system very well using fairly recent and historic events.

Get some conflicting ideas. Two great, short books are The Mystery of Banking by Rothbard (available for free here: https://mises.org/library/mystery-banking) and Economics in One Lesson by Hazlitt (free here: https://fee.org/resources/economics-in-one-lesson/). They both conflict quite substantially with the mainstream and might open up a whole new line of inquiry for you.

For a slightly different take, Fooled By Randomness and The Black Swan by Nassim Taleb. I would read some of the more direct recommendations here and then read Taleb to remind you that not everything is predictable or easily explainable.

Surprised no one has mentioned "Trading and Exchanges: Market Microstructure for Practitioners".

Lots of people recommending Ernie Chan - and he is very big in the space but he uses 100 words when 10 will do its a hard time slogging through it.

De Prado is incredibly technical , if there was a De Prado cliff notes Id say read that.

And don't forget if you are coding this stuff up, lots of people have but those books into re-usable code on github.

Part one of this book really helped with my understanding of monetary policy, very clear examples of how the price of money is expressed through Exchange Rates, Interest Rates, and Aggregate Price Levels and the interplay between these measures: https://www.amazon.com/Concise-Guide-Macroeconomics-Managers...

Here is a PDF of a diagram I made to help organize my understanding of this content: https://www.lucidchart.com/publicSegments/view/e1d12ae5-a8a0...

Ascent of Money - Niall Ferguson will start you from the very beginning, and does cover all the subjects you mentioned.

Random walk down wall street is good, but the angle is more “so you want to get into investing?” It won’t go into too much detail of underlying systems like fiat currency.

Debt: The First 5000 Years

https://libcom.org/files/__Debt__The_First_5_000_Years.pdf

Huge, huge topic. You will have to pick a path through the enormous jungle.

The starting point I would recommend is bottom up, through accounting and financial statements. Core knowledge, of both practical and intellectual value. Tons of books here, I particularly like

Thomas Ittelson - Financial Statements

Accessible, straightforward, friendly.

After that, any of the collections of

Warren Buffett's Letters to Shareholders

are both entertaining and intellectually valuable, and provide great insight. Read forward, eg, from his first letters in the 1960s, to now.

One of the realizations in the journey is that there are, and have been, a lot of different kinds of money- credit money and exchange money and asset money and so forth. A relatively abstract/intellectual but immensely useful survey is

The Nature of Money - Geoffrey Ingham

The concept of an asset is critical to the functioning of the financial system. New kinds of assets are created all the time. One of the best written books I have read recently goes into venture capital and debt asset creation:

The Code Of Capital - Katharina Pistor

The role of different kinds of money in history, especially US history, is absolutely fascinating. I am in the middle of

American Bonds - Sarah Quinn

and can recommend.

I do not especially recommend the Dalio books or Graeber's Debt or Ferguson's books. They are fine but I did not find them helping me build understanding. Not quite junk food, but definitely not protein.

I unfortunately have not found any of the books I have seen about the Federal Reserve to be worthy of recommending. My wife works there and so I have perhaps a unique perspective. But nothing conveys the challenge and the mechanics of what they do. Still looking. The papers the various Fed banks publish, as well as the papers published by the Bank of England, are uniformly outstanding.

Finally, some of the bitcoin people have written about money. Tho I am a believer in bitcoin I absolutely recommend against most of them, especially Saifedean Ammous's book. Do not read.

Good luck!

Ascent of Money - Niall Ferguson

The Long and Short of It - John Kay

A great place to look is the second hand study books for professional qualifications like the CFA, Chartered Banker and so on

If you are looking for a shorter read, I would recommend "The money creation paradox" paper published by ING: https://think.ing.com/uploads/reports/Money_paradox2.pdf

I find fascinating that, despite the simplicity of the question, not every economist agrees on how this happens.

Ray Dalio - How the Economy Works https://youtu.be/PHe0bXAIuk0

If you’re interested in fiat currency and the fed, I highly recommend the book Lords of Finance. The author does a really good job of showing just what central banks do and how their responses to economic events shape outcomes. The book entirely focuses on the Great Depression and the central banks of the USA/Europe but it’s really well written and really helped me appreciate what the fed does.

While I haven't read the book, the corresponding multi-part documentary "The Ascent of Money" is a really good introduction to what money is and how it evolved over the past centuries. It's also free on YouTube: https://www.youtube.com/watch?v=JAbVltqySrA

This video by Ray Dalio, "How the Economic Machine Works in 30 Minutes" is an excellent primer on understanding the financial system as a whole: https://youtu.be/PHe0bXAIuk0

I really enjoyed the graphic novel "Economix: How our economy works (and doesn't work)" by Goodwin & Burr.

I found it informative, clear, concise, and funny at times, all uncommon for educational economic text in my experience.

I started "Big Debt Crises" by Ray Dalio a while ago and so far it's proving to be a very good introduction on what you're looking for.

1.- First, understand that if we are playing head or tails, me having $10 and you having $1,000,000 , who will end up getting the other's money?

2.- Most independents money managers I know, love this book;

Extraordinary Popular Delusions and the Madness of Crowds - by Charles Mackay http://www.gutenberg.org/ebooks/24518

You can't go wrong with 'The Big Short'. I saw the film a few times before I ever bought the book, and it's still enlightening.

Random Walk and Black Swan are two good reads. Even if you end up not agreeing with the two's takes, they'll make you sufficiently skeptical of how well a book claims to explain the industry, which is a good position to approach it from.

My bias will show, but the industry routinely blows itself on sometimes small or sometimes very large scales, sometimes or often through devices of its own creation. It's important to know that the system is entirely capable of doing this to itself, and therefore the system, and those in it, may not be able to explain itself well.

Edit: another thing worth reading is Too Big to Fail, The Big Short, and Greatest Trade Ever. All are engaging books, and really walk through how 2008 started and ended through different perspectives of the system. TBtF will cover the Fed and Tier 1. BS/GTE cover the sell side. And then when you pair GTE with what happened to it's focus, John Paulson, after 2008, in that he didn't really have a repeat 'win,' it's a good anecdote for what I said above.

This is a good start, "Money as debt". Saw it in university and since then you will never take financial markets seriously. And all the "stimulus" we see is just pushing the can forward. You will start to see through a lot of lies.

https://www.youtube.com/watch?v=2nBPN-MKefA

Some more heterodox takes on economics/finance:

https://www.goodreads.com/book/show/17836526-killing-the-hos...

https://www.goodreads.com/book/show/42515482-and-forgive-the...

https://www.goodreads.com/book/show/20655234-freakonomics-su...

https://www.goodreads.com/book/show/6304389-the-spirit-level

https://www.goodreads.com/book/show/17368973-the-heretic-s-g...

More conventional investment perspectives, particularly useful if you want to invest:

https://www.goodreads.com/zh-TW/book/show/11645917-a-random-...

https://www.goodreads.com/book/show/106835.The_Intelligent_I...

https://www.goodreads.com/book/show/25574.Common_Stocks_and_...

Actually - any college level book. There are tons, they're cheap on ebay, look for pearson or mcgraw hill. If you're creative, you can probably find a epub/pdf.

But even the DK Eye Witness have a good idea - how business works, how money works.

Financial system, economics, monetary policy become very simple with pictures, and even easier on an spreadsheet. Even more so is how many people don't know how much the government does in collecting statistics to analyze and examine the health of the economy - The BLS https://www.bls.gov/ is a great resource and once you have a basic understanding (or know healthy or "safe" numbers) you can explore other country economic numbers and see if they make sense (or not!) e.g. https://psa.gov.ph/ for Philippine Statistics.

Contemporary Financial Management is great -

Accounting Princicpals are also great (can you read a PL sheet? Do you know GAAP? How about Compliance regulations?)

Just "money" is one piece of the puzzle - money is a tool and that tool has been transformed into different pieces that fit what we do finance in life -

A basic book would be rich dad, poor dad - it's quite cliche but it's a good introduction to "wealth" and assets vs liability == net worth.

---

tl;dr I ranted, I can go on - the DK Eyewitness books are a good starting point and then you can dig deep - but mostly it really runs quite simple for most things and then gatekeeped by interesting vocabulary.

How Money Works: The Facts Visually Explained (How Things Work) Hardcover – March 14, 2017 by DK (Author) . How Business Works: A Graphic Guide to Business Success Hardcover – 2015 by Dk (Author)

The Economics Book: Big Ideas Simply Explained Paperback – February 6, 2018

The Business Book: Big Ideas Simply Explained Paperback – November 20, 2018

How Business Works: The Facts Visually Explained (How Things Work) Hardcover – April 14, 2015

DK Eyewitness Books: Money: Discover the Fascinating Story of Money from Silver Ingots to Smart Cards Paperback – June 14, 2016

I will offer that 'Where does money come from' By Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson. Its a fantastic short book on how money actually works in this system.

The follow up to this is Richard Werners study on central banking.

A lost century in economics: Three theories of banking and the conclusive evidence

https://www.sciencedirect.com/science/article/pii/S105752191...

This is one of the first empirical tests of theories of central banking and how money flows.

Anything by Richard Werner I think is lucid. He has lots of youtube videos that goes into the details in the book and this study.

How The Economic Machine Works by Ray Dalio

https://www.youtube.com/watch?v=PHe0bXAIuk0

I don't agree entirely but good signal-to-noise ratio on this content

Elliott Wave Principle by Robert Prechter and A. J Frost

https://epdf.pub/queue/elliott-wave-principle-key-to-market-...

This is the technical analysis method used by many market traders and it both predicted this week's market plunge as well as described its form, and is currently forecasting a further plunge next week.

For economics I would look for any youtube talk by Prof. Steven Keen - he accounts for debt that most mainstream economists ignore.

"The End of Alchemy" by Mervyn King is a great book that explains fiscal/monetary policy and the modern banking system from the ground up. King was the head of the Bank of England during the last recession. This was the book that made me "get it".

"When Genius Failed" by Roger Lowenstein is the story of the fall of Long Term Capital Management which was basically the biggest hedge fund failure ever. Teaches you a lot about modern high finance and systemic risk.

Besides books, read what Patio11 has written in the past. [0] [1] etc.

[0]: https://training.kalzumeus.com/newsletters/archive/investing...

[1]: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

If you are looking for somebody who understands markets today - listen to Mike Green. He doesn't write, but sometimes speaks (Hidden Forces, RealVision)

Reading Stress Test by Timothy Geithner taught me quite a bit, although it’s not a primer on the financial system but play by play of the financial crisis.

The Economist Guide to Financial Markets by Marc Levinson

I have been here before where I actually wanted to find out what is going on with finance. I was amazed that its more about ideology than it was about finance itself. It was more about psychology and the intents of human nature than it was just about transactions and definitions.

In as much as books are good, i would urge you to follow certain men as well.

Prof. Richard Werner and all his books. Prof. Steve Keen and all his books.

List still loading ...

I've been having an interesting time working through Security Analysis by Graham and Dodd. It's ancient, but it really gets to the heart of what bonds and stocks actually are, and gives you an insight into how everything worked before it all got accelerated to the Nth degree. The historical perspective of the 1928 crash being recent memory is really interesting too.

I Worked as a quant for a few years, but in a certain point moved to data science and lost interest in stock market.

Read many technical and non technical books, and I recommend this one - Berton J Malchiel - A random walk down Wall-Street.

Simple but not simplistic, it has some great useful lifelong tips for investment. I follow it's advice for >10 years - from 2008 crisis, until these crazy days.

If you have the time for a deep deep dive, I would recommend David Harvey's The Limits to Capital New Edition (2006). There's always the recorded version of his course on Reading Marx's Capital[1] which is similar.

[1]https://www.youtube.com/user/readingcapital

“How to Read the Financial Pages” is an excellent book.

It covers most of Equities and Bonds and is often hilarious.

It covers how governments finance themselves by issuing bonds, t-bills etc

A fairly straightforward read for any HNer, should be a couple of days easy.

https://www.amazon.co.uk/dp/B0054ZBXLG

Money: The unauthorized biography by Felix Martin discusses money as social technology and its history https://www.amazon.com/Money-Unauthorized-Biography-Coinage-...

This is a fantastic book. Written for quant wannabes but really good for everyone. https://www.amazon.com/gp/aw/d/0071468293?psc=1&ref=ppx_pop_...

Oil 101 by Morgan Downey is one of the worst-edited books I've ever read, yet the amount of knowledge contained in that book is astonishing. The petroleum markets are vital to the financial system, as we saw on Monday when oil over-supply catalyzed a downward move in global equity markets.

If you’re interested in valuation, Damodaran’s course is available for free online. Just google Damodaran.

Specifically about the stock market, Flash Boys by Michael Lewis is a fun read and taught me a lot about what the stock market is. It's not the densest book. It's more of a narrative than a teaching tool, but for what it is I found it very informative.

Stuff from Warren Buffet is usually good. You could browse the shareholder letters a bit https://www.berkshirehathaway.com/letters/letters.html

Check out the Wiley CFA Book suite, they are broad and explain concepts ranging from debt to economics ; https://www.wiley.com/learn/cfashowcase/

For understanding how money works, I’d recommend Debt: The First 5000 Years by David Graeber.

Lords of Finance: The Bankers Who Broke the World

https://www.amazon.com/Lords-Finance-Bankers-Broke-World/dp/...

https://www.goodreads.com/book/show/13144133-where-does-mone...

Where does Money come From

Dr Ernest Chan

Ray Dalio

Marcos Lopez de Prado

These authors are how I started. I'd be happy to list specific books if that is helpful, but I don't want to give you a false sense that if you read books I mention you will have the same understanding that I do.

Best books to understand why the financial system behaves the way it does are Nassim Taleb's books. Take the principles there, and apply them to finance and it explains 100% of why prices move the way they do.

Since I'm mainly interested in risk and volatility, this list might be a bit biased but here we go:

A random walk down Wallstreet

Options and volatility pricing, by Natenberg

Why stock markets crash, by Didier sornette

Manias, panics and Crashes by Aliber and Kindleberger

Debt: the first 5000 years

Nick Nick Szabo's long essay: Shelling Out: The Origins of Money

https://nakamotoinstitute.org/shelling-out/

Stigum's Money Markets will tell you about the financial system specifically.

Something like The Economist's Guide to Financial Markets will give you a good general overview.

Some of the recommendations on here are truly awful.

"Borrow: The American Way of Debt" by Louis Hyman

It's basically a historical study of debt in the United States over the past 100 years or so. Very interesting and educational.

Meltdown by Thomas E. Woods

The Great Deformation by David Stockman

The Fed Flunks: My Speech at the New York Federal Reserve Bank by Robert Wenzel

Economics in One Lesson by Henry Hazlitt

I recommend a different approach. Start with a little bit of money in the stock market with a portfolio that you are allowed to change every Sunday. Then slowly understand what caused the value of your portfolio to go down or up and how you can hedge against your risks.(Once you lose or gain money you will get the motivation to read fat books dont worry) In the end its all a risk calculation and the faster you get into doing it the better. I am not rich or with a finance background but this is the approach I am following now.

What is there to know?

Make massively risky bets on things that rarely break, but when they do they break so epically that the government will bail you out.

At Finimize, we offer a selection of products designed to help with exactly this: https://www.finimize.com/

Disclaimer: I work there!

Aside from that, I'd also recommend the previously mentioned Ray Dalio economic machine video, Benjamin Graham's Intelligent Investor (for understanding value investing) and Black Swan (for an alternative insight into tail risks such as the one we're going through)

I wrote my Master's thesis on cryptocurrencies, and had to do some background research on how the monetary system works. I found that Bernard Lietaer's "Money and Sustainability - The Missing Link" was easily approachable and had a lot of good stuff in it. Another of my staples was David Graeber's "Debt: The First 5,000 Years" which has a lot of good and interesting content, but is very very heavy to read.

Any book on International Finance, to start. And then maybe a Banking 101 to understand how banking works. Then Macro Economics, to know how economics of markets and countries work.

There's no quick fix to learning this stuff.

However you might still want to; so take this biased Internet-clip with a grain of salt and enjoy: https://www.youtube.com/watch?v=mII9NZ8MMVM

The architect of the Euro, Bernard Lietaer, wrote a book called The Future of Money that I’m reading now.

Where are the customers yachts? - but basically if you get the title you don't have to read it :)

I recommend: ‘The Origins of Economic Disorder’ by Fred Block, and ‘The Vega Factor’ by Kent Moors.

reddit.com/r/mmt_economics

Not a book, I know but there are a lot of articles and resources in the sidebar, including a list of academic papers on the inner workings of money/monetary systems. Search for "MMT Foundations" within that subreddit to find those.

Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

Got to put in a plug for a book my mother read shortly before she died last year. The author is insanely smart, the book is really good, the message is incredibly important:

https://marianamazzucato.com/publications/books/value-of-eve...

Blurb:

"Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all.

In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it.

The book uses case studies–from Silicon Valley to the financial sector to big pharma–to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP. "

Marx's Capital, despite being old, is pretty prescient for the modern day.

Unfortunately only in German language:

Bernard A. Lietaer: Das Geld der Zukunft

Bernard A. Lietaer: Mysterium Geld

I'm not knowledgeable enough to properly recommend a book on the subject so take this with a grain of salt, but I thought the historical (and opinionated) overview of the evolution of English money in Christine Desan's "Making Money: Coin, Currency, and the Coming of Capitalism" was interesting https://www.goodreads.com/book/show/21492062-making-money

I like this quote about how financial institutions evolved:

"It happened improvisationally, indeed probably unintentionally. Participants solved one problem and created others; they reacted as often as they acted affirmatively; they moved by experience and intuition, without an overarching theory; and the whole affair took decades, involved many different actors, and coheres largely in retrospect."

I think the best way to understand it all is to understand the history of how it came to be. I would start with something like:

Money: Whence it Came, Where it Went by John Kenneth Galbraith

The Ascent of Money: A Financial History of the World by Niall Ferguson

"Monetary History of the United States" by Milton Friedman.

It's tough sledding, but worth it. And by giving the history, one comes to understand how we got to where we are.

"Capitalism" by Reisman gives a solid theoretical foundation on topics like rent control, inflation, etc. I especially found illuminating its coverage of the 1970's oil crisis and how the root cause of it was price controls.

I'd avoid economics books written by journalists and politicians, as all I've run across are dominated by ignorance, bias, and agendas. Ones by economists often have agendas, too, but they aren't nearly as ignorant. Just imagine a technical book about electronics written by a journalist, and you'll know what I mean.

Highly recommend Naked Economics by Charles Wheelan.

Youtube how economic machine works by ray dalio.

I liked Trading and Exchanges by Larry Harris

House of Morgan - biography of JO Morgan and kin

Snowball - biography of Warren Buffet

The Good Earth - novel about Chinese farmer

Fortune’s Children - the rise and fall of the Vanderbilts

Web of Debt by Ellen Hodgson Brown.

Corporate Finance - Stephen Ross

I think the first question that you will face is if you agree with the Efficient Market Hypothesis (EMH) and the random walk. Basically they say that prices reflect all available information and that you cannot "beat" the market (there's a subtle difference between EMH and random walk). The return on an investment is a direct reflection of the risk. Good reading to get an understanding for this are "A Random Walk Down Wall Street" and papers by Eugene Fama (EMH will be covered by any intro to finance book as well). For a good overview of EMH, I like this paper: http://www.cs.ucl.ac.uk/fileadmin/UCL-CS/images/Research_Stu...

The investment takeaway is that you should invest in passive index funds with low management cost (typically ETFs).

There's different contrasting points of view most notably behavioral finance. The EMH argument is basically the market is an aggregation of all available information. Due to the power of averaging it is going to be correct (if one person overestimates, another will underestimate and it will all cancel out). The behavioral counterargument is that there are certain human biases that lead to all parties being wrong in the same direction (such as risk aversion). Another POV that is aligned with the behavioral view is that the theory of evolution provides a good framework for thinking about markets. I like the book "Adaptive Markets" which also gives a good overview of EMH and behavioral finance so I'll recommend that as a reference. I think together with "A Random Walk Down Wall Street" you're set for "general framework of thought" material.

Personally, I am a value investor so I can only recommend books from that school of thought. The basic idea is that you look at the fundamentals of a company and the stock market can misprice them. The holy grail is finding a company where the sum of (current) assets is worth more than the current market valuation via the stock price because in essence that means if the company would be liquidated and everything would be sold off, you'd still walk away with a profit. In essence, you're trying to buy 1$ for < 1$. This is Buffett's philosophy and he has done really well with it. I'd recommend "Value Investing" by Greenwald, Kahn, Sonkin and van Biema as a good intro book that summarizes everything and has some easy to follow examples (because you can't usually just take the assets face value but have to discount them etc.). The classics are "The Intelligent Investor" and "Security Analysis" (more academic but for me this is the gold standard). If you need a quick "how to read balance sheets/income statement/cash flow statements" I'd recommend "Warren Buffett Accounting Book"

I think the best essay that describes what markets are good for is "The use of Knowledge in Society" by Hayek. At least it makes sense for me that they serve the function of aggregating local and specialized information. If you're interested, it's also a decent idea to research the different theories of the business cycle. Keynesian, Real Business Cycle, Austrian etc.

tl;dr:

- A Random Walk Down Wall Street

- Adaptive Markets

- Value Investing (+ Warren Buffett Accounting Book)

Edit: I'm assuming you want a "quick overview". Otherwise, get some mainstream Finance and Behavioral Finance textbooks :D

1. People’s QE (modern monetary policy, some great explain-to-me-like-I’m 5 sections) 2. Doing Capitalism by Bill Janeway (innovation economy) 3. Crashed by Adam Tooze (some financial history)

I listened to the audiobook version of 3 books by Adam Tooze in the past year and found them to be excellent for understanding how finance works, through 3 separate case studies/examples if you will ..

1. The Deluge: The Great War, America and the Remaking of the Global Order describes how most of the current global financial structures were formed, through the lens of WW1 policy

2. The Wages of Destruction: The Making and Breaking of the Nazi Economy .. moves you forward to WW2/post-depression economy

3. Crashed: How a Decade of Financial Crises Changed the World (recommended elsewhere in this thread) .. brings things up to current times

Why there's no suggestions for Karl Marx? He predicted these crises and that they're unavoidable in capitalism and all only get worse with the time.

Internship in a Wall Street Firm is better;

The short answer is this.

Wall Street exists to profit by skimming money off society, like a predator waiting for gazelle to approach a watering hole.

The Chinese government produced an excellent short film on this that was shown on airlines about 5 years ago. At the end was a warning to the USA not to devalue the dollar (to wipe out Chinese holdings.) :)

Silicon Valley VC's also do that, by skimming 2/20 (or more) from institutional investors with no downside risk to the VC.

The long answer - it will take you decades to study and learn. Do some reading and watch NBR.

Why would you ever read a book on financial systems by someone who isn’t absurdly rich