Review: Modern economics for disaffected investors

By J. Sturgeon | Financial Post | Jan. 31, 2009

Markets have crashed, savings have been wrecked for many and the spectre of a deep recession looms large. It's little wonder that modern capitalism is drawing ire in certain corners.

The system, it seems, has spun out of control.

Timely, then, that David Serber, an author who doubles as portfolio manager with one of Canada's largest financial institutions, has offered up a refreshing primer on the machinations of modern economics for disaffected investors.

Best of all, Inflation, China and Oil:How to Protect and Enhance Your Wealth in the Early 21st Century manages to do it in just 85 pages.

In about an hour and a half, one can take up the history of capitalism from Smith to Keynes to Reagan and Thatcher, as well as grasp the primary economic movers of the coming decades: China, oil and the threat of inflation.

The ultimate aim is to arm potential investors with an understanding of the broader processes shaping the global economy and provide a long-term strategy to manage accordingly. It's a task Mr. Serber does effectively.

The crux of the book is straightforward: China's economic ascent will continue to fundamentally change the global economy. Its growth will keep global thirst for energy high, meaning oil will remain a sought-after resource --even as its price rises.

As the building blocks of economic activity, commodities, too, will remain in demand by ever-hungrier economies, driving up costs on everything from food to consumer goods.

These intertwined processes will, of course, fan inflation, dragging down the value of currencies, especially in the West, where soaring public debt is adding to inflationary forces.

However, the book has a subtext: The market works best unimpeded. Government tampering, Mr. Serber says, distorts the ebb and flow of supply and demand and encumbers economic progress.

Mr. Serber even advances the argument that, much like the church was separated from the state in the West long ago, global economies should be separated from government, too.

Overall, though, the book is balanced between Mr. Serber's own faith in the free market and some acknowledgement of ideas favouring a degree of government guidance in the economy.

Page by page, he advocates the former but leaves readers some room to think for themselves, ending each of the four chapters with advice on how they might construct a balanced portfolio that can withstand bumps in the road while tapping into longer-range opportunities.

jasturgeon@nationalpost.com