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Central Banking 101
Central banking is magic. With a few words, the Fed can lift the stock market out of desperation and catapult it towards euphoric highs. With a few keystrokes, the Fed can conjure up trillions of dollars and fund virtually unlimited Federal spending. And with a few poor decisions, the Fed can plunge the entire world into a recession. The Federal Reserve is one of the most powerful institutions in the world, and also one of the most difficult to understand.The Fed acts through its Open Markets Desk, which sits at the heart of the global financial system as the world’s ultimate and limitless provider of dollars. On behalf of policy makers, the Desk gathers market intelligence from all the major market participants, sifts through reams of internal data, and works behind the scenes to keep the financial system intact. It is responsible for all of the Fed's market operations, from trillions in quantitative easing to hundreds of billions in repo and FX-swap loans. The financial crises of 2008 and 2020 abated only through the emergency interventions of the Desk.Joseph Wang spent five years studying the monetary system as a trader on the Desk. From that vantage point, Joseph saw firsthand how the Fed operates and how the financial system really works. This book is a distillation of his experience that aims to educate and demystify. After reading this book, you will understand how money is created, how the global dollar system is structured, and how it all fits into the broader financial system.The views in this book do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.
227 pages, Kindle Edition
Published January 22, 2021
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Displaying 1 - 30 of 81 reviews
March 4, 2025
First of all I would like to emphasize that the book is not about central banks in general. It is highly written around the Federal Reserve Bank (USA central bank) with other central banks (ECB, BOJ, etc) pulled in for comparison along the way.
This is a quite special book. When I picked up this book I did not know what to expect.I picked it up because I wanted to learn about how the financial system works at the higher levels, that is
* How and when is new money created?
* What are difference between all different kinds of government controlled assets/securities.
* What does all types of monetary policies mean? I.e. What are the transaction.
* What is the effect of these policies?
* How does that influence internationally?
I got more informed on most of it. But it was a roller coaster in level of detail;
Approximately the first third of book was at my level; It introduced and explained simple financial (trans)actions and among other things illustrated (with balance sheets) how money was created (out of thin air) by not governments but commercial banks. Even though the material was dense and could have been better by being more elaborate. I'll give this part 4 stars
Then approximately after one third of book, it seems like the author got bored by the low pace and high detail and thought "I cannot continue with this precision and level of detailed, I will never reach what I really want to tell the world; how Federal Reserve act to control the financial system". So the mid third of the book the pace turned pretty fast continuing describing many different markets, financial instruments and transactions using much new (without definition or description of) financial jargon and terminology. The author assumes the reader knows a lot of the standard financial instruments and jargon. I felt that I have missed reading many other required books with titles such as "microeconomics 101", "financial markets 101", "macroeconomics 101", "Financial dictionary 101" and so on. I spent a lot of time looking up many of these new words and terminology that the author simply expects the reader to know the meaning of. All this seem necessary to being able to explain how the Fed is acting, but it doesn't help to skip jump over these topics so easy. For this part I'll give 2 stars for authorship and 4 stars for topic.
The last third seemed easier for me to read and grasp. The author, like in first third, explains in a very compact way how the Federal Reserve acts and how that affects the financial world and the markets. For this part I'll give 4 stars.
I will give 6 stars for writing a book about such an undisclosed topic, that is fantastic. I wish more people with this kind of knowledge would write books about it. I'll bet it would be a good book to any new employee in The Federal Reserve Bank that already has many years of experience from the financial world. For the rest of us we need the internet nearby to lookup and research much financial terminology on the side.
This is a quite special book. When I picked up this book I did not know what to expect.I picked it up because I wanted to learn about how the financial system works at the higher levels, that is
* How and when is new money created?
* What are difference between all different kinds of government controlled assets/securities.
* What does all types of monetary policies mean? I.e. What are the transaction.
* What is the effect of these policies?
* How does that influence internationally?
I got more informed on most of it. But it was a roller coaster in level of detail;
Approximately the first third of book was at my level; It introduced and explained simple financial (trans)actions and among other things illustrated (with balance sheets) how money was created (out of thin air) by not governments but commercial banks. Even though the material was dense and could have been better by being more elaborate. I'll give this part 4 stars
Then approximately after one third of book, it seems like the author got bored by the low pace and high detail and thought "I cannot continue with this precision and level of detailed, I will never reach what I really want to tell the world; how Federal Reserve act to control the financial system". So the mid third of the book the pace turned pretty fast continuing describing many different markets, financial instruments and transactions using much new (without definition or description of) financial jargon and terminology. The author assumes the reader knows a lot of the standard financial instruments and jargon. I felt that I have missed reading many other required books with titles such as "microeconomics 101", "financial markets 101", "macroeconomics 101", "Financial dictionary 101" and so on. I spent a lot of time looking up many of these new words and terminology that the author simply expects the reader to know the meaning of. All this seem necessary to being able to explain how the Fed is acting, but it doesn't help to skip jump over these topics so easy. For this part I'll give 2 stars for authorship and 4 stars for topic.
The last third seemed easier for me to read and grasp. The author, like in first third, explains in a very compact way how the Federal Reserve acts and how that affects the financial world and the markets. For this part I'll give 4 stars.
I will give 6 stars for writing a book about such an undisclosed topic, that is fantastic. I wish more people with this kind of knowledge would write books about it. I'll bet it would be a good book to any new employee in The Federal Reserve Bank that already has many years of experience from the financial world. For the rest of us we need the internet nearby to lookup and research much financial terminology on the side.
August 1, 2022
The first ~100 pages are an extremely helpful and clear explanation of who the different players are in the Fed's operations, and how they are all connected. The book tails off a little bit in the second half. but the first half was a far better overview of "the system" than anything else I've encountered.
December 4, 2021
This book struck a nice balance between serving as an introductory textbook to monetary policy and keeping itself grounded in reality. This was primarily done by interspersing the descriptions of how institutions/markers work with entertaining stories that serve to highlight the clear limitations to said descriptions.
I suspect my review is rather limited by my lack of knowledge in this area - since I don’t know what I don’t know, I am not sure if there were any areas of the book that were skimmed over/misrepresented/underdeveloped.
As a parting observation, this book didn’t really discuss how all central banks worked - it really just explained how the Federal Reserve functioned, although I think I’m being a bit too picky at this point given that central banks are pretty different across the board.
I suspect my review is rather limited by my lack of knowledge in this area - since I don’t know what I don’t know, I am not sure if there were any areas of the book that were skimmed over/misrepresented/underdeveloped.
As a parting observation, this book didn’t really discuss how all central banks worked - it really just explained how the Federal Reserve functioned, although I think I’m being a bit too picky at this point given that central banks are pretty different across the board.
March 8, 2023
Curious how the Fed raises rates? Or why repo rates matter? Or how banks create money? Pick up this book. A little technical, but mostly approachable and definitely helpful.
May 7, 2023
This 225-page book contains knowledge that is as valuable as gold.
October 29, 2022
Central Banking 101 is a didactic primer for the inner workings of US monetary policy as administered by the Federal Reserve, an autonomous entity within the US government. I would highly recommend this book to any budding economist (amateur, armchair and professional) or trader. I would also recommend this be required reading for all college finance and economics majors, especially economics majors seeking a B.S. and not a B.A. (only business school students can appreciate this last point). I took a lot of breaks in between reading the chapters of this book for some concepts and details to sink in. Maybe I’m a slow learner but I do encourage readers to take their time
The book also has a great front cover!
Beyond giving a comprehensive explanation of monetary policy fundamentals and an outline of market participants, Chapter 9 on ‘Fed Watching’ (no affiliation with the song Feds Watching by 2 Chainz) is an eye-opener and a great mini ‘How To Manual’ on interpreting Federal Reserve communication over various channels in order to predict future Fed / market action to ‘trade the news’ (e.g. buy the hype of anticipated Fed policy vis-a-vis inflation expectations, sell the Minutes)
Thank you for your service at the NY Fed and for writing this book, Joseph Wang! 🫡🇺🇸💵🖨
Semi-Relevant Musings:
This book will enable you to understand up to 25% more of the dialogue of HBO’s Industry (an investment banking comedic drama) along with up to 15% more of IG finmeme content (See Also: Arbitrage Andy, Cash Poor Capital, Litquidity) and up to 420.69% more of FinTwit
“The only question remains: [Mr. Bond] will you yield, in time?”
- Le Chiffre in Casino Royale
“We all know you trade stonks”
- George Gammon to Joseph Wang (reading aloud submissions during an open Q&A)
The book also has a great front cover!
Beyond giving a comprehensive explanation of monetary policy fundamentals and an outline of market participants, Chapter 9 on ‘Fed Watching’ (no affiliation with the song Feds Watching by 2 Chainz) is an eye-opener and a great mini ‘How To Manual’ on interpreting Federal Reserve communication over various channels in order to predict future Fed / market action to ‘trade the news’ (e.g. buy the hype of anticipated Fed policy vis-a-vis inflation expectations, sell the Minutes)
Thank you for your service at the NY Fed and for writing this book, Joseph Wang! 🫡🇺🇸💵🖨
Semi-Relevant Musings:
This book will enable you to understand up to 25% more of the dialogue of HBO’s Industry (an investment banking comedic drama) along with up to 15% more of IG finmeme content (See Also: Arbitrage Andy, Cash Poor Capital, Litquidity) and up to 420.69% more of FinTwit
“The only question remains: [Mr. Bond] will you yield, in time?”
- Le Chiffre in Casino Royale
“We all know you trade stonks”
- George Gammon to Joseph Wang (reading aloud submissions during an open Q&A)
December 22, 2022
Very informative.
February 24, 2025
Very comprehensive and interesting, but very dense!
July 19, 2021
This is the book I’ve been looking for! If you’re interested in a book that ties it altogether in terms of monetary operations and how CB’s work, this is it. Explained in clear language it takes the reader through a complex system with many moving parts. While you won’t be an ‘expert’ it provides the framework to be able understand cause & effect within the system.
Amazing book, highly recommended.
Amazing book, highly recommended.
January 21, 2025
A great little introduction to central banking, mostly from a US perspective. Wang worked at the Fed, so his discussions of non-US institutions are minimal.
June 12, 2023
4/5 -
The book achieves it’s purpose in teaching the reader about central banking. Although, there is a heavy focus on the US central bank.
Overall, this is a great book for someone interested in our monetary system. The biggest fallback is that you need prior banking knowledge to understand all the chapters in detail. (Would be 4.5/5 stars if this was ‘201’ instead of ‘101’).
The book achieves it’s purpose in teaching the reader about central banking. Although, there is a heavy focus on the US central bank.
Overall, this is a great book for someone interested in our monetary system. The biggest fallback is that you need prior banking knowledge to understand all the chapters in detail. (Would be 4.5/5 stars if this was ‘201’ instead of ‘101’).
February 15, 2025
Does its job as an intro text. Good primer on the money market and how CB policy works. Might have benefited from a discussion of historical CB practices before getting into "unconventional" stuff at the end. Unacknowledged debt to Mehrling?
July 30, 2022
Intro to what the US Fed does and how they do it, written by a guy that did it.
EXTREMELY practical. Explains things clearly, concisely, and uses helpful examples.
I think 90% of economists are full of s*** because they 1. cannot explain monetary policy this clearly, and 2. often say abstract, high-level things that flat out contradict the reality put forward in this book.
EXTREMELY practical. Explains things clearly, concisely, and uses helpful examples.
I think 90% of economists are full of s*** because they 1. cannot explain monetary policy this clearly, and 2. often say abstract, high-level things that flat out contradict the reality put forward in this book.
May 21, 2023
In "Central Banking 101", author Joseph Wang presents an astute and meticulously researched examination of the complex world of central banking. Offering a penetrating elucidation on a topic often shrouded in inscrutable jargon, the book strives to demystify the inner workings of central banks, elucidating their pivotal role in the global economic system.
Wang's treatise breaks through the intimidating barriers of financial lingo to make the topic accessible to not just economists and financial mavens, but also to neophytes navigating this complex terrain. His ontological approach transcends the surface level examination of financial operations, delving deeper into the fundamental nature and essence of central banking. The book explores the teleological aspects of central banking, considering not only the functionality but also the purpose and ultimate objectives that central banks are designed to fulfill.
The philosophical underpinnings of the book are rooted in Wang's phenomenological analysis, elucidating the intentionality and subjective experience of financial phenomena. The narrative shifts fluidly from a transcendental deduction of central banking principles to a metaphysical inquiry into the nature of financial stability and economic growth. By employing this philosophical framework, Wang skilfully elevates the discourse on central banking beyond the realm of mere empirical analysis, thereby rendering the subject matter profoundly engaging.
The book is particularly compelling when it delves into the hermeneutic aspects of central banking. It systematically unravels the intricate layers of meaning embedded in financial legislation and central bank mandates, elucidating how different interpretive approaches can yield divergent policy outcomes. This hermeneutic circle, where interpretation feeds into understanding, which in turn guides further interpretation, provides a fascinating perspective on the policy decision-making process.
Wang also grapples with the moral and ethical implications of central banking. The ethical framework of the book is constructed around deontological principles, positing that central banks have categorical imperatives to maintain financial stability and control inflation. In the context of recent financial crises, this exploration of ethical duty is both timely and thought-provoking.
Despite the book's depth and complexity, Wang's writing is crisp and lucid, making the intricacies of central banking palpable to the reader. His dexterous use of analogies and metaphors enhances the clarity of the narrative, transforming a potentially abstruse subject into an engaging discourse.
"Central Banking 101" is more than a mere financial primer; it is a profound exploration of the intersections between economics, philosophy, and ethics. Wang's philosophical approach elevates the discourse on central banking, transforming it from an esoteric financial subject to an engaging exploration of human society's economic underpinnings. His magnum opus offers a critical reflection on the nature and purpose of central banking, compelling readers to reconsider their own perceptions and beliefs about the financial world.
In summary, "Central Banking 101" is an essential read for anyone seeking to unravel the enigmatic world of central banking. It offers a refreshing and insightful lens through which to understand this complex, yet indispensable institution of our economic landscape. A masterclass in financial and philosophical exploration, Wang's work stands as a beacon in contemporary economic literature.
Wang's treatise breaks through the intimidating barriers of financial lingo to make the topic accessible to not just economists and financial mavens, but also to neophytes navigating this complex terrain. His ontological approach transcends the surface level examination of financial operations, delving deeper into the fundamental nature and essence of central banking. The book explores the teleological aspects of central banking, considering not only the functionality but also the purpose and ultimate objectives that central banks are designed to fulfill.
The philosophical underpinnings of the book are rooted in Wang's phenomenological analysis, elucidating the intentionality and subjective experience of financial phenomena. The narrative shifts fluidly from a transcendental deduction of central banking principles to a metaphysical inquiry into the nature of financial stability and economic growth. By employing this philosophical framework, Wang skilfully elevates the discourse on central banking beyond the realm of mere empirical analysis, thereby rendering the subject matter profoundly engaging.
The book is particularly compelling when it delves into the hermeneutic aspects of central banking. It systematically unravels the intricate layers of meaning embedded in financial legislation and central bank mandates, elucidating how different interpretive approaches can yield divergent policy outcomes. This hermeneutic circle, where interpretation feeds into understanding, which in turn guides further interpretation, provides a fascinating perspective on the policy decision-making process.
Wang also grapples with the moral and ethical implications of central banking. The ethical framework of the book is constructed around deontological principles, positing that central banks have categorical imperatives to maintain financial stability and control inflation. In the context of recent financial crises, this exploration of ethical duty is both timely and thought-provoking.
Despite the book's depth and complexity, Wang's writing is crisp and lucid, making the intricacies of central banking palpable to the reader. His dexterous use of analogies and metaphors enhances the clarity of the narrative, transforming a potentially abstruse subject into an engaging discourse.
"Central Banking 101" is more than a mere financial primer; it is a profound exploration of the intersections between economics, philosophy, and ethics. Wang's philosophical approach elevates the discourse on central banking, transforming it from an esoteric financial subject to an engaging exploration of human society's economic underpinnings. His magnum opus offers a critical reflection on the nature and purpose of central banking, compelling readers to reconsider their own perceptions and beliefs about the financial world.
In summary, "Central Banking 101" is an essential read for anyone seeking to unravel the enigmatic world of central banking. It offers a refreshing and insightful lens through which to understand this complex, yet indispensable institution of our economic landscape. A masterclass in financial and philosophical exploration, Wang's work stands as a beacon in contemporary economic literature.
February 12, 2024
An S-tier return to the basics. However I'd like to fact-check or challenge some of his claims. E.g., his claim that cutting rates might not be as stimulative to the economy as econ dogma posits, cuz evidence shows that rates and economic growth are positively correlated. Fr? No shit, duh. 1) There's the reverse causality. CBs cut rates BECAUSE of low growth. 2) Low growth pushes down r* (secular stagnation). That's also why the low rates over the past decade were not very stimulative - cuz the natural rate was low. And his claim that a decade of QE has only seemed to lift financial assets, without lifting the real economy. I don't disagree, just need more evidence on this.
Random thoughts:
- How 'complicated' is monetary policy? I'm starting to suspect it's not as complicated as PhD econ, or else there wouldn't be armies of Fed Watchers who nvr even studied econ formally and have nvr even seen econ equations. Rather, it's the balancing and processing of the legions of economic data, and learning to tune out the noise. However, that makes it infinitely more complicated since you're now in the unknown, and economists don't even have a comparative advantage in the field they know best - analysts who studied history or accounting at uni could Fed-Watch reasonably well, given experience and training. Hard things are easy; Easy things are hard.
- What's the trade-off between a conditional representation and unconditional representation? The standard trade-off between generality and tractability. The evolution of the financial landscape has definitely seen the emergence of new risk factors and premia that a tractable unconditional representation can't model. Hell, the Fed was created to help smooth out crises in commercial banking, and help regulate commercial banks. That model is obvs as useful as an assfuck today, when the shadow banking sector outweighs commercial banking, and the offshore dollar system outweighs onshore. Has the Phillips Curve rlly broken down, or is it just going thru transitions? Is NAIRU drifting up or down? Is r* going to rebound? Is growth in advanced economies rlly tapering? That's the sort of ex ante unknowns that we fight every day, yet regulating ex post is the only thing we can do to keep our consciences comfortable.
- What's the path forward, now that we're probs permanently in an ample reserves regime, the Fed has lost a lot of control over short rates and definitely a lot more influence over long rates, the Fed Funds market is losing activity and the Fed Funds Rate its significance? Could central banks possibly lose their rizz going forward? What happens when all the boomers die out and no one even rmbs how it was like to have high rates and a scarce reserves regime? Lol. I always found it mildly interesting how non-PhD top talent would obvs prefer to work at an investment bank than the central bank, so CBs naturally are at a disadvantage for attracting talent.
- Why does the left love MMT? What's so appealing abt it to them? Can't they see that a company can't be fully levered (altho that would achieve the theoretically lowest WACC) cuz it literally can't service that debt - same logic for entire countries?
Random thoughts:
- How 'complicated' is monetary policy? I'm starting to suspect it's not as complicated as PhD econ, or else there wouldn't be armies of Fed Watchers who nvr even studied econ formally and have nvr even seen econ equations. Rather, it's the balancing and processing of the legions of economic data, and learning to tune out the noise. However, that makes it infinitely more complicated since you're now in the unknown, and economists don't even have a comparative advantage in the field they know best - analysts who studied history or accounting at uni could Fed-Watch reasonably well, given experience and training. Hard things are easy; Easy things are hard.
- What's the trade-off between a conditional representation and unconditional representation? The standard trade-off between generality and tractability. The evolution of the financial landscape has definitely seen the emergence of new risk factors and premia that a tractable unconditional representation can't model. Hell, the Fed was created to help smooth out crises in commercial banking, and help regulate commercial banks. That model is obvs as useful as an assfuck today, when the shadow banking sector outweighs commercial banking, and the offshore dollar system outweighs onshore. Has the Phillips Curve rlly broken down, or is it just going thru transitions? Is NAIRU drifting up or down? Is r* going to rebound? Is growth in advanced economies rlly tapering? That's the sort of ex ante unknowns that we fight every day, yet regulating ex post is the only thing we can do to keep our consciences comfortable.
- What's the path forward, now that we're probs permanently in an ample reserves regime, the Fed has lost a lot of control over short rates and definitely a lot more influence over long rates, the Fed Funds market is losing activity and the Fed Funds Rate its significance? Could central banks possibly lose their rizz going forward? What happens when all the boomers die out and no one even rmbs how it was like to have high rates and a scarce reserves regime? Lol. I always found it mildly interesting how non-PhD top talent would obvs prefer to work at an investment bank than the central bank, so CBs naturally are at a disadvantage for attracting talent.
- Why does the left love MMT? What's so appealing abt it to them? Can't they see that a company can't be fully levered (altho that would achieve the theoretically lowest WACC) cuz it literally can't service that debt - same logic for entire countries?
January 16, 2025
The goal of Central Banking 101 is to teach the “foundational aspects of central banking, as well as offering an overview of the financial markets,” and it does a decent job of that. Rating a book is tricky because you can’t erase your prior knowledge—you can't know how you'd feel about it if you hadn't already read similar content. This is the main difficulty I have with rating Central Banking 101. The book is an excellent introduction to Fed policy, money, and banking. But, much of the content I had been previously exposed to through various macroeconomic courses and books.
I was priveleged enough to take a great macroeconomics course with Ken Kuttner during my freshmen year where we used his publicly available textbook (https://econ.williams.edu/faculty-pag...) which covered a lot of the central topics in Central Banking 101.
That being said, I do think CB101 is a great book for those with little previous experience/knowledge about central banking. The book explains money and banking in very clear, simple language making complex topics easily digestible. The sections on money creation and shadow banking were especially good, while sections on crisis monetary policy (QE, forward guidance, etc.) were helpful. A key strength of the book was that it was written in 2020, allowing it to delve into unconventional monetary policy and shadow banking which is usually missing from older central bank books and sources (which have become a bit stale). To my knowledge, CB101 and Kuttner’s textbook are two of the best up-to-date sources on central bank policies and goals and I feel grateful to have read both.
Some good, intuitive quotes:
1. “A common misconception is that a bank takes in deposits and then lends those deposits out to other people. Rather than lend out deposits, a bank simply creates bank deposits out of thin air when it makes a loan,” (19).
2. “Purchasing Treasury securities by printing central bank reserves was like printing a $ 100 bill and using it to buy another $ 100 bill. The amount of money in the system didn’t change, just the composition of it. There were now fewer Treasury securities and more central bank reserves,” (193).
3. “In a repo transaction, which is short for repurchase transaction, a borrower “sells” a security to a lender while at the same time entering into an agreement to buy back the same security at a future date at a slightly higher price. The prices for these transactions will be lower than the market value of the security to provide the lender with an extra margin of safety. Economically, this is equivalent to borrowing money using the security as collateral,” (122).
4. “MMT postulates that a government issuer of fiat currency is not constrained by taxation or debt, but only by inflation. Taxation and debt issuance are merely tools through which the government manages inflation,” (223).
I was priveleged enough to take a great macroeconomics course with Ken Kuttner during my freshmen year where we used his publicly available textbook (https://econ.williams.edu/faculty-pag...) which covered a lot of the central topics in Central Banking 101.
That being said, I do think CB101 is a great book for those with little previous experience/knowledge about central banking. The book explains money and banking in very clear, simple language making complex topics easily digestible. The sections on money creation and shadow banking were especially good, while sections on crisis monetary policy (QE, forward guidance, etc.) were helpful. A key strength of the book was that it was written in 2020, allowing it to delve into unconventional monetary policy and shadow banking which is usually missing from older central bank books and sources (which have become a bit stale). To my knowledge, CB101 and Kuttner’s textbook are two of the best up-to-date sources on central bank policies and goals and I feel grateful to have read both.
Some good, intuitive quotes:
1. “A common misconception is that a bank takes in deposits and then lends those deposits out to other people. Rather than lend out deposits, a bank simply creates bank deposits out of thin air when it makes a loan,” (19).
2. “Purchasing Treasury securities by printing central bank reserves was like printing a $ 100 bill and using it to buy another $ 100 bill. The amount of money in the system didn’t change, just the composition of it. There were now fewer Treasury securities and more central bank reserves,” (193).
3. “In a repo transaction, which is short for repurchase transaction, a borrower “sells” a security to a lender while at the same time entering into an agreement to buy back the same security at a future date at a slightly higher price. The prices for these transactions will be lower than the market value of the security to provide the lender with an extra margin of safety. Economically, this is equivalent to borrowing money using the security as collateral,” (122).
4. “MMT postulates that a government issuer of fiat currency is not constrained by taxation or debt, but only by inflation. Taxation and debt issuance are merely tools through which the government manages inflation,” (223).
November 30, 2023
The title belies the need for at least some financial literacy in order to appreciate this book. With this in mind, what author Joseph Wang does very well is describe the roles and functions of the Federal Reserve, including how such has changed since the 2008 financial crisis (for example the way in which the Fed now affects short-term interest rates since the advent of Quantitative Easing). The role of the U.S. Treasury is also explained in conjunction with the Fed with respect to how they affect not only interest rates and monetary policy, but private banks, shadow banks (not as sinister as the name implies) the U.S. economy, and the economies of the rest of the world. Some other enlightening facts and observations from Mr. Wang: money markets - including the repo market, foreign exchange swaps, and federal funds market - are huge in the modern economy; due to the nature of fractional reserve banking commercial banks are inherently leveraged, meaning that they have the potential to earn lots of money but are also relatively fragile (depending on size); and most U.S. currency is (probably) held outside the United States because the Dollar is the world’s standard currency (the $100 bill is actually the most common bill in circulation). Contrary to the somewhat conspiratorial belief that the Fed willy-nilly or nefariously dictates interest rates and boom / bust cycles, it can only affect short-term rates while long-term rates are determined by the market (hopefully). On this subject, Mr. Wang also gives his perspective about whether lowering interest rates truly spurs economic growth, or if it simply temporarily boosts financial assets and market activity by disincentivizing saving.
September 10, 2023
This book offers a detailed insight into the workings of the US Federal Reserve, or the Fed as it's commonly known. The Fed operates with a dual mandate: maintain 2% inflation and ensure maximum employment. While its primary tool was initially interest rates, over time, it's evolved to include diverse market operations like buying Treasury bonds, offering credit lines, and providing forward guidance on future actions. All of these are described here thoroughly.
Joseph Wang doesn't stop at the Fed. He dives deep into other market players and traded assets, especially emphasizing fixed-income assets like bonds. There are snippets about equities and the foreign exchange market, but they don't get the same in-depth treatment, given their limited impact on the broader economic picture.
Though the topic is inherently complex, Wang does an impressive job of breaking it down in layman's terms. But, be warned, it's not light reading. I often found myself rereading sections to grasp the nuances.
This book is a treasure of knowledge to anyone fascinated by such macroeconomic alchemy (Adam Glapiński – hope you are reading this, it's not too late yet!).
Joseph Wang doesn't stop at the Fed. He dives deep into other market players and traded assets, especially emphasizing fixed-income assets like bonds. There are snippets about equities and the foreign exchange market, but they don't get the same in-depth treatment, given their limited impact on the broader economic picture.
Though the topic is inherently complex, Wang does an impressive job of breaking it down in layman's terms. But, be warned, it's not light reading. I often found myself rereading sections to grasp the nuances.
This book is a treasure of knowledge to anyone fascinated by such macroeconomic alchemy (Adam Glapiński – hope you are reading this, it's not too late yet!).
February 21, 2025
“The Fed controls short-term interest rates, and it influences longer-term interest rates. Borrowers usually save a little money on their business loans or mortgage loans when the Fed lowers rates. A business or consumer may take out a loan at a 4% interest rate that they would not have taken out at 6%. But would they have taken out a loan at 2% that they would not have taken out at 3%? Even if lowering rates stimulates the economy, it likely has diminishing effects.
Taking low interest rates to the next level, Japan and the Eurozone faithfully followed their economic models and took their interest rates to negative territory. Economists at the ECB believe that negative rates encourage growth by forcing companies to invest rather than see their money disappear via negative interest rates.72 In a sense, negative rates are like a tax on cash that is designed to force spending. Notwithstanding the research out of the ECB. the Furozone economy has had poor growth for many years.
Judging from a decade of experience, lower interest rates appear to boost financial assets, but not necessarily real economic growth.”
Taking low interest rates to the next level, Japan and the Eurozone faithfully followed their economic models and took their interest rates to negative territory. Economists at the ECB believe that negative rates encourage growth by forcing companies to invest rather than see their money disappear via negative interest rates.72 In a sense, negative rates are like a tax on cash that is designed to force spending. Notwithstanding the research out of the ECB. the Furozone economy has had poor growth for many years.
Judging from a decade of experience, lower interest rates appear to boost financial assets, but not necessarily real economic growth.”
June 9, 2024
I have a masters degree in economics, with a concentration in macro, and this book taught me more about the
mechanics through which the Fed effectuates monetary policy than any course that I’ve taken for the actual degree. The first half of the book should be required reading for anyone that wishes to be a well-informed citizen.
Where the book truly shines is its detailed descriptions of the operations of the Fed and of the transactions that investors and market-makers engage in and how they influence the effectiveness of the Fed’s actions. The book is written from the view of an insider who has seen the inner workings of the central bank and who can provide a first-hand account of such operations. However, the second half of the book meanders into macroeconomics and policy making in geenral, and while the author makes some interesting points, these topics were not treated with sufficient detail and analysis, leaving an impression that there is an orthodoxy when it comes to topics such as the interaction between inflation, unemployment and government spending.
mechanics through which the Fed effectuates monetary policy than any course that I’ve taken for the actual degree. The first half of the book should be required reading for anyone that wishes to be a well-informed citizen.
Where the book truly shines is its detailed descriptions of the operations of the Fed and of the transactions that investors and market-makers engage in and how they influence the effectiveness of the Fed’s actions. The book is written from the view of an insider who has seen the inner workings of the central bank and who can provide a first-hand account of such operations. However, the second half of the book meanders into macroeconomics and policy making in geenral, and while the author makes some interesting points, these topics were not treated with sufficient detail and analysis, leaving an impression that there is an orthodoxy when it comes to topics such as the interaction between inflation, unemployment and government spending.
October 25, 2021
An excellent primer on how modern global banking system works told through the prism of a former trader at the FED’s open markets desk. This is quite elementary knowledge that should be included in high schools as introductory level economics. From my personal experiences as a financial markets practitioner my observation is that the most basic concepts of how modern banking operates is incredibly poorly understood not just by the public at large, but by a vast majority of financial markets participants. This book would go a long way to addressing this knowledge gap that exists in all segments of society. In my opinion knowing or at least having a high level understanding of how money and modern banking work is an essential skill. The knowledge asymmetry that exist on this front can be a significant source of power and its abuse. Please do yourself a favour and read this book, especially if you’re a student or practitioner of economics and finance
May 1, 2023
Very good primer on the plumbing of the Fed and banking system. I came across Joseph Wang with the recent regional bank failures in the US. He has good social media presence, and seems to be building a following, as he provides real-time and weekly updates on financial conditions through his various channels. I find him to be very detailed and thorough in his analysis, understandably so given his experience at the FRBNY. He's also very balanced in his views - neither too pro-, nor too anti-Fed. It's very easy to find people who bash the Fed and spell doom every time things blow up, so finding someone who is centric helps a lot (all in one brain, rather than listening to one hawk and one dove to achieve balance). I definitely recommend his work/following him on social media to anyone that wants a detailed, level-headed analysis of what's going on, or just for understanding the banking system in general.
January 26, 2025
This had been an enjoyable read for me. A book that not only covers the feds role in the economy, but also the backdrop where it conduct its operations. If you are reading this book as a ‘beginner’, it’s worth a re-read after becoming more adept.
The book is broken up into 3 sections.
The first section, which is almost half the book, starts off with introductions and explanations on various players and their roles in the financial markets.
Section 2 covers those financial markets that are more relevant to the fed. This section may be a bit technical and difficult to grasp for folks without the appropriate knowledge, but I feel the author provides a good enough explanation.
First 2 sections may seem counterintuitive at first considering the title and the synopsis, but as you progress through the book, you will find that the author draws linkages to the fed where relevant. Towards the end of the book, you will be able to better appreciate the hows and whys on what the fed does.
The book is broken up into 3 sections.
The first section, which is almost half the book, starts off with introductions and explanations on various players and their roles in the financial markets.
Section 2 covers those financial markets that are more relevant to the fed. This section may be a bit technical and difficult to grasp for folks without the appropriate knowledge, but I feel the author provides a good enough explanation.
First 2 sections may seem counterintuitive at first considering the title and the synopsis, but as you progress through the book, you will find that the author draws linkages to the fed where relevant. Towards the end of the book, you will be able to better appreciate the hows and whys on what the fed does.
August 13, 2021
Many aspects of the financial plumbing system are boring as hell (to mere mortals), purposely confusing, sometimes more important than they seem and in the case of what this book covers, extremely important. I'm a bit dense when it comes to this type of stuff even though my career was in finance but I now understand some things better.
Forewarned is forearmed!
This author and this book shone a good amount of light on this normally very dry topic. Written in a clear, straightforward, not boring and not dense style conveying that the author actually knows what he's writing about.
I'd almost go so far as to say that even for those who are not interested in this topic, but are curious enough to add to their understanding of why this world is the way it is, they will come away with a broader understanding of things.
Very worthwhile read. Kudos to the author.
Forewarned is forearmed!
This author and this book shone a good amount of light on this normally very dry topic. Written in a clear, straightforward, not boring and not dense style conveying that the author actually knows what he's writing about.
I'd almost go so far as to say that even for those who are not interested in this topic, but are curious enough to add to their understanding of why this world is the way it is, they will come away with a broader understanding of things.
Very worthwhile read. Kudos to the author.
March 4, 2025
I’d say this book is more Central Banking 102 than truly bare bones 101. Still, I found it to do a decent job explaining the various players, tools, and strategies underpinning the modern global financial system (from the viewpoint of Federal Reserve post GFC). While the narrative format is definitely more digestible than a Financial Econ lecture would be, I’m still going to have revisit several times to get anything more advanced than “Treasury yields” and “money markets” to stick. **Important to remember that all the contrived complexity of these terms and market tactics only really reveals how utterly meaningless the world of finance (and by extension the global economy) is!! Extremely possible humans simply had had way too much time on their hands through the second half of the 20th century.
December 8, 2021
This book is so clear and concise it should be mandatory reading for every single financial writer, and anyone who invests in cryptocurrencies. So many of the conspiracy theories you see just can not stand up against this book as here it all is and this is how it works.
Would be great if an actual publisher picks this up and makes it into a more polished version. But I do appreciate the self published vibe, probably why it is so clear and concise. It is not dumbed down for a more general audience. Maybe this is why there is so much confusion around the Federal Reserve and Treasuries, because it is always dumbed down and that's where the confusion comes in.
Anyways must read for anyone who wants the straight answers on how central banking and treasury issuance works.
Would be great if an actual publisher picks this up and makes it into a more polished version. But I do appreciate the self published vibe, probably why it is so clear and concise. It is not dumbed down for a more general audience. Maybe this is why there is so much confusion around the Federal Reserve and Treasuries, because it is always dumbed down and that's where the confusion comes in.
Anyways must read for anyone who wants the straight answers on how central banking and treasury issuance works.
March 11, 2022
A very good introduction to the monetary system and how central banks and commercial banks can create new money for lending, which stimulates economic activity. The author covers a wide range of foundational themes in finance, including government debt, money markets, capital markets and US Federal Reserve activities. Examples are taken from the period of the 2008 financial crisis up to the end of the C-19 quantitative easing programmes by central banks around the globe. Although these topics are foundational, they are not for complete novices, and if you know nothing about financial markets or products, you will still be required to undertake additional research to get up to speed for this book.
August 15, 2022
Useful to some extent
The author of the book certainly simplified and explained some complex concepts between the Federal Reserve and various markets quite well. However, he seems to have unfairly stated (almost as a fact) that equity market participants are relative simpletons compared to the credit market participants (who seem to be able to sense “dangers” well ahead of everyone else). I think it has happened before, in terms of credit markets reacting first, but it is also the underlying nature of the asset class that (sometimes) achieve this for the credit guys. Still a largely enjoyable read.
The author of the book certainly simplified and explained some complex concepts between the Federal Reserve and various markets quite well. However, he seems to have unfairly stated (almost as a fact) that equity market participants are relative simpletons compared to the credit market participants (who seem to be able to sense “dangers” well ahead of everyone else). I think it has happened before, in terms of credit markets reacting first, but it is also the underlying nature of the asset class that (sometimes) achieve this for the credit guys. Still a largely enjoyable read.
August 23, 2021
A very detailed but understandable book about financial system plumbing. While this book talks about central banking a lot, it also explains other details about financial markets -- capital markets, yield curves, eurodollar markets, shadow banking, delta hedging, securitization. As someone without a CFA, I was able to grok Joseph's explanations easily, which was wonderful.
Don't waste your time spending years trying to piece everything together with Investopedia articles, give this a read instead.
Don't waste your time spending years trying to piece everything together with Investopedia articles, give this a read instead.
June 17, 2023
While I certainly finished the book being more informed about central banking and monetary policies, I wished the author did not premise his entire book on the U.S. Federal Reserve which no doubt is a key institution on the global stage, but certainly not the only one. Notwithstanding the spotlight that the U.S. Fed took here, I am glad to have read this book as it radically altered my understanding of what money actually is, and how deeply involved the central bank is, from the mundane day-to-day transactions to the volatile equity and debt capital markets.
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