13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

Thirteen Bankers describes the control that bankers have managed to btain over our current financial system. It begins with a history of banking and moves towards the "innovation" that has occurred in banking. Only a few generations ago, banking was a relatively low paying conservative industry. However, bankers introduced more and more complex instruments that allowed them to make more and more money. Bankers are also heavily involved in the regulation of banking, making it difficult to implement some needed regulation. Big banks have also become "too big to fail" The government's willingness to let institutions fail at the start of the 2009 financial crisis ended up "forcing" the government to bail out the remaining banks. There was a huge liquidity crisis that could not be resolved. The perverse impact was that the big risky banks end up getting bigger, while the small diverse banks were wiped out. "Too big to fail" banks take riskier and riskier bets because they know they can get bailed out.

Boomerang: Travels in the New Third World

In boomerang, Michael Lewis explores some of the sovereign players in the financial markets meltdown of 2009. He plays up the country stereotypes. Iceland is populated by men that do not listen to their wive.s After conquering the fishing industry, they figure they must be naturally gifted at investment banking also. Greek are loners who think everyone else is cheating, so must cheat themselves. The Irish had always suffered, yet they had a rapid economic turnaround. They guaranteed all banks, leaving each long-suffering Irishman with a huge share of debt.
One of the final discussions deal with California and local governments. Arnold Schwarzenegger thought he had a mandate to fix things. However, he discovered that people and politicians simply wanted a lot of services and don't want to pay for them. Thus there is a lot of future debt and a willingness to shift things to local governments. These governments end up spending hugs amounts paying for their current and former employees. Thus cities like San Jose can't afford to staff new community centers. Vallejo couldn't afford anything and ended up bankrupt.
Alas governments are just behaving like individuals who go into debt to pay for things later.

The Ascent of Money

The Ascent of money tells the story of the rise of finance as a key part of our economy. It starts with the basic trading units, and then goes on to the derivatives and the derivatives of the derivatives. As finance has become more important, people have continued to react irrationally to things. People also tend to underestimate the irrationality of others, leading to financial crises.

This book covers the rise of money in many parts of the world, from western Europe to Incan America to China. The focus is on the major events - often when one group gains or loses a large amount of money. From conquistadors to corrupt Savings and Loan owners, there is almost always somebody that tries to beat the system (often to be beat themselves by the system.) Often it is the very rules to protect that lead to future problems.

This Time is Different: Eight Centuries of Financial Folly

This book would have made a good academic paper. It does not make a good popular economics book. It spends forever explaining how it got its data, how it analyzed it, what other people did, and what they missed. This would be a nice few pages in an academic paper. But as book chapters, they get very old.

The book is also very repetitive. The authors explain what they are about to do, they explain how they did it, then they recap their explanations. Then in another chapter, they explain it again, just in case you skipped an earlier chapter.

The central point is that bank panics and government defaults have also happened and likely will continue. Often they occur when governments and others overextend themselves in boom times, thinking that this time is different. Governments often default out of convenience rather than necessity. They can also use tools like inflation and other currency debasement to reduce the debt.

These many chapters are primarily lead in for the brief final chapter on the current financial crisis, the real-estate bubble induced "great contraction". This is shown to be a global contraction with many of the similar characteristics of other crises. The authors make pains to point out that all the signs were similar to previous panics (including people adamant that "this time is different"). However, even this knowledge is not useful if politicians are not willing to act on it. (And since acting would usually involve breaking a big boom, they are reluctant to do so.)

Summarize the last chapter, and you could have a good paper, using ample data to show that this time is not different. Alas, this gem is hidden under 20 times its weight of repetitive blather.

Panic: The Story of Modern Financial Insanity

This is a compilation, primarily of "journalist" articles before, during and after major financial crises of the past few decades. Some of the articles included are well written and insightful, while others border on garbage. The intention of the book is good. However, it doesn't quite seem to carry out the goal. Since the essays differ significantly in tone and source, it is difficult to get a coherent picture of the true nature of the events and the opinion surrounding them.

The Great Crash 1929

This is a very readable history of the 1929 stock market crash. It provides the background of the crash, with the market's runup, and the gradual slump before the big crash day. It also carries on with the gyrations and false recoveries that happened shortly thereafter. He identifies s number of factors, including opaque investment trusts, extreme leverage, and self-investment as causes. These were all amplified by the boom that people thought would never end. In the end, it set the template for a crash similar to others that we have seen since. This is one of the better books on financial panics.