Business Cycles

Lars Tvede, holds a master’s degree in Engineering and a Bachelor’s degree in international commerce. He spent 11 years as derivatives trader, portfolio manager and investment banker before moving to the telecommunication and software industries in the mid 1990s, where he co-founded and seed-funded a number high-tech companies. He returned to the financial industry at the start of 2005 to become general partner and fund manager in the Swiss hedge fund company ProValue (www.provalue.ch). Lars Tvede has published several books on general economics, marketing, telecommunication and trading, including his best-selling The Psychology of Finance, which has been translated to all major languages. He lives in Zug, Switzerland.

List of Figures and Tables vii

Preface xiii

Part I The Discovery of Business Cycles 1

1. Gambling Man 3

2. Cash Payment 19

3. The Dream Team of Money 27

4. The Napoleon of Finance 47

5. Jay and the Phantom Gold 57

6. Seven Pioneers 67

Part II The First Business Cycle Theories 81

7. The Golden Era 83

8. The Archeologists 101

9. Fisher and Babson 107

10. Keynes and the Austrians 117

11. The Great Depression 127

12. Lover, Horseman, Economist 141

13. The Problem with Money 153

Part III A Hidden World 165

14. The Simulators 167

15. Brains of Steel 189

16. Fat Tails and All That 199

17. Monkey See, Monkey Do 213

18. Dot Bomb 231

Part IV The Essence 239

19. The State of the Art 241

20. Three Questions 251

21. The Five Main Drivers of Cycles 257

22. The Ten Challenges of Central Banking 271

Part V Business Cycles and Asset Prices 305

23. The Mother of All Cycles: Property 307

24. When Art was In 333

25. All That Glitters 349

26. What Things are Made of: Commodities 367

27. Bonds, Stocks and Funds 379

28. The World’s Biggest Market: Foreign Exchange 391

29. Business Cycles and Market Rotation 399

Afterword: The Beat of the Heart 421

Appendix 1: List of Important Events in Business Cycle Theory 423

Appendix 2: List of the Largest Financial Crises in History 429

Chapter Notes 433

Bibliography 449

Index 471