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Category: Economics
Published: 1987
Read: 1998
Reviewed: May 2010


This book, referred to as the most important political book of the decade, is an 800-page exposť of the Federal Reserve published in 1987.

The first part of the book details the economic crisis of the late 1970s when inflation was running wild and no one knew what to do. To regain control of the economy, the Fed adopted a very aggressive policy and switched their game plan from using interest rates (Keynesian theory) to using the money supply (monetarist theory).

The second part of the book covers a variety of money-related topics, many from a philosophical viewpoint, including:

  • The history and purpose of money itself ("The payment of interest was the core of the capitalist dynamic - it mobilized idle wealth for productive enterprises.")
  • The morality of lending ("The moral offense [of charging interest] was profit without work. The usurer sold time - which belonged only to God.")
  • The political aspect of banking ("Bankers were not ordinarily thought of as a progressive element in American politics, yet banking itself functioned on the premise of progress, on a working believe that reliable gambles could be made on the future.")
  • The philosophy of banking ("the essence of finance was, therefore, an exchange across time -- transactions between the past and the future . . . Wall Street, for all its bewildering complexities, was as simple as that -- the meeting place where past and future agreed on terms and the money changed hands.")
  • The relationship of money to religion (the comparison of the Federal Reserve to a religious institution whose "official secrecy naturally enhanced the mystique", and the observation that fiat money was based on faith - just like the church.)
  • And many purely economic issues, like monetary policy, inflation, and consumer spending.

Naturally, the book also gives an inside look at Fed, including a brief history of central banking, the creation of the Fed, the Fed's operations (such as FOMC meetings), and the Fed's relationship with member banks and politicians (particularly during the turbulent Carter and Reagan years). This book also focuses on the human element of the Fed, including the most recent chairmen at the time (Paul Volker and William Miller), the composition of the Board members, and their relationship with each other.

The book's third section then shifts back to the real world. It picks back up in the early 1980s as the economy is mired in a severe recession, with manufacturers, home builders, small businesses, and farmers getting hit especially hard. The economy eventually picked back up and, as everyone knows, it became morning in America again. The book then quickly touches on such post-recession topics as: the Latin America debt crisis, the passing of the baton to Greenspan, and the stock market Crash of 1987.

One of the best things about this book is that it looks at issues from a historical and multi-disciplinary perspective. So many books make static observations about events without giving them any context. But to gain a true understanding of a subject, a book needs to respect the scope and breadth of related issues and how they helped shape the way things are today.

Although the subject of money relates to so many areas of life, the book does take on an air of contrived sophistication at times. The book's lessons are also less relevant today because the rise of Fed-watching, which has become one of the most popular financial past-times over the last couple of decades, has raised everyone's comprehension of the subject matter.

Although the book is very introspective about many monetary topics, it does not get philosophical about whether the Fed itself should exist, which is a very popular and particularly relevant topic today. Readers who are interested in that debate should check out the highly-regarded book, "The Creature from Jekyll Island". In addition to being philosophically-neutral, "Secrets of the Temple" is also less instructional, and is more of a narrative about the Federal Reserve during the Volker years. Even though it sprinkles plenty of lessons on top of the stories, someone looking for an education about the more technical aspects of the Fed, would be better off with a different book.

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