I’ve just read a pile of books about the financial crisis (partly for work, partly for pleasure), and here are my favourites.
If you’re not sure what a synthetic CDO is, but would like to, I would highly recommend Gillian Tett’s Fool’s Gold, which follows a group of JP Morgan bankers from swimming pool antics to creating credit default swaps. It also has the novelty value of featuring a female banker, Blythe Masters, which makes a nice change.
Alternatively, along similar lines is The Big Short by Michael Lewis, which follows a disparate group of people inside and outside the big banks, all of whom predicted the subprime mortgage crisis, and thereby made their fortunes. It also makes it look easy to make lots of money by just reading prospectuses properly. Surely it can’t be that simple?
Martin Wolf’s Fixing Global Finance and Charles Dumas’s Globalisation Fractures both focus on the savings glut theory, that describes the role of Chinese under-consumption in the lead-up to the crisis. They both provide good macroeconomic context, but aren’t as strong on explaining what exactly went wrong within banks and regulators.
For a theoretical perspective on how markets work, and how they don’t, John Cassidy’s How Markets Fail is pretty good. The best bit is the first part, which gives a potted history of the people behind some of big ideas in economics. This means that it probably won’t date as much as some other books about the crisis, despite the slightly repetitive rant about Alan Greenspan towards the end.
Readers: have you read any other books about the crisis that you would recommend?