Crisis on Infinite Economies

Did you know that we're in the middle of a huge financial crisis? And on our way to a recession? I hate to be the bearer of bad news, but it's true.

Now that the election is over, we no longer have to view this crisis through the lens of partisan slogans and sound bites ("The deregulators did this!" and "Freddie Mac did this!" and the like). I just recently read two very sharp, very engaging articles that offer a big picture view of the crisis, and I though I would share. You're welcome!

The first, "The End" by Michael Lewis (of Moneyball fame), is in this month's issue of Portfolio. Lewis wrote a book called Liar's Poker about his time as a bond salesman at Salomon Brothers in the late 80s, and uses that experience to draw the necessary parallels between the go-go 80s (which ended with the savings and loan crisis and a multi-billion-dollar government bailout) and go-go 00s (which ended with the subprime mortgage/collateralized debt obligation/credit default swap crisis and a multi-billion-dollar government bailout).

The second is "Wall Street Lays Another Egg" by Niall Ferguson, a history and business professor at Harvard, from the new Vanity Fair. I especially like this one because it traces a coherent narrative of the history of not only the current crisis, but of banking itself. (His latest book is called The Ascent of Money, so I guess he knows a thing or two about it.) It's one thing to read the Wikipedia page about collateralized debt obligations; it's another to be able to coherently connect the dots from farmers negotiating future prices for their crops to bankers slapping mortgages together and selling them as AAA-rated bonds. Ferguson does a good job.