The US housing market started wobbling in the summer of 2007.  Since then the world economy has been buffeted by a crescendo of crises – wholesale credit markets dried up, banks failed, the flow of credit to businesses and individuals dried up and economies have gone into recession.  This is the first recession we’ve been able to follow on the Internet, giving us an unprecedented ability to follow closely as events unfolded.  These bibliographic notes provide a guide to the books that have followed, which should provide a wider context and more reflective view of the past few years.

Many books focus on particular facets or incidents, such as the US mortgage market or collapse of Bear Stearns.  Others try to provide a general context, generally derived from historical perspective or economic theory.  This bibliography takes a wide view of the issues, drawing on some of the most relevant historical works.  It excludes blogs, newspapers, think tanks and reports.  Some of these sources are excellent, particularly on regulation, but books still afford a different kind of reflection on the issues – more personal than official reports, more rigorous and considered than media sources. 

Some of the most recent books have been best, partly as the debate moves forward and partly because their authors have taken longer to research and reflect than the more hasty first reactions.  The discipline of economics is still developing in response to the crisis, but is perhaps in a better state than is sometimes assumed.  Most problematic have been the political responses. Nominal left and right alike were taken by surprise, and there has been a big gap between the political and intellectual debate.  Developing serious political positions on the economy is likely to be a much longer task.

Credit Crunch

There are now lots of books giving an overview of what happened, some focusing on the mortgage market or banking sector, others trying to be more comprehensive.

The best overview is from a legal scholar, Richard Posner’s A Failure of Capitalism: The Crisis of ‘08 and the descent into Depression.  It concludes tritely that we need more regulation, but along the way describes the crisis with verve and intellect.  The first couple of chapters are an excellent non-technical guide providing one of the best overviews, better than Gillian Tett’s much vaunted ‘Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe’.  Her conclusion that anthropology is important in understanding markets is asserted rather than argued, and she seems confused about some of the technicalities.  Better on the anthropological/sociological theme is Donald MacKenzie’s ‘An Engine, Not a Camera: How Financial Models Shape Markets’.  It’s a brilliant work of sociology that profoundly understands markets.

Alex Brummer’s ‘The Crunch’ is poor, as is Graham Turner’s ‘The Credit Crunch’.  Larry Elliott and Dan Atkinson’s ‘The Gods That Failed’ is worse – a crass populist critical account.  Charles Morris’s ‘Trillion Dollar Meltdown’ is better, but only because the competition is weak!  Fleckenstein’s ‘Greenspan’s Bubbles’ is short and polemical.  So is David Scilia’s ‘Greenspan Effect’.  Bob Woodward’s ‘Maestro’ is probably the best of a bad bunch on Greenspan, but it’s dated now.  Paul Muolo and Matthew Padilla’s ‘Chain of Blame’ is a great account of the detail of the US mortgage industry.  Robert Shiller’s ‘The Subprime Solution’ focuses on housing but has wider implications – a short, well written and useful book.  Edmund L. Andrews earns no sympathy with his memoir of taking out a subprime mortgage, but ‘Busted: Life Inside the Great Mortgage Meltdown’ is a good read.

Michael Lewis ‘Panic: The Story of Modern Financial Instability’ is and occasionally useful compilation of articles that shows the unfolding realisation that something was very wrong.  However, the focus is descriptive and it’s a limited guide to what happened and why.  Vincent Cable’s ‘The Coming Storm’ is riddled with careless errors, which detract from a solid account of the crisis.  It’s a useful analysis of the political response in the UK.

Historical

The credit crunch has shattered complacent ideas about ending boom and bust, so it’s a good time to look back and re-assess financial and economic history.  The most widely discussed parallel is the Great Depression that followed the Wall Street Crash in 1929.

The classic book on the Great Depression is JK Galbraith ‘The Great Crash, 1929’ – and it’s still the best.  It shows that serious books can be clearly written.  More recently there’s a more anecdotal account by Selwyn Parker (also ‘The Great Crash’!), which is worth reading, but is journalistic and doesn’t have Galbraith’s depth and sophistication.  US Central Banker Ben Bernanke’s ‘Essays on the Great Depression’ is important as a guide to his thinking, and also a very good and important collection of essays outlining his revisionist approach to the Depression.  Milton Friedman and Anna Schwartz’s ‘Monetary History of the United States’ is long and dull, but the chapter on the depression is the essential monetarist account and widely influential.  It shows monetarism to be much more sophisticated than its false friends suggest.

Robert F. Bruner’s ‘The Panic of 1907’ is a fantastic historical narrative that gives really useful context.  William L. Silber’s ‘When Washington Shut Down Wall Street’ is also useful, but less focused and more academic.  Barry Eichengreen’s ‘Golden Fetters’ is a brilliant, serious, heavyweight study of the depression in global context.  There is a large literature on the inter-war economy generally.  A good start is Zara Steiner’s ‘The Lights That Failed’, which is very strong on the financial and economic aspects and incorporates latest historical research. 

Liaquat Ahamed’s ‘Lords of Finance’ is a superb account of central banker’s actions in the inter-war period.  Ahamed is a financier rather than an academic, but his command of the material is magisterial and he writes beautifully.  More recent context is given in ‘The Great Inflation and Its Aftermath: The Past and Future of American Affluence‘ by Robert J. Samuelson. 

Three books on historic bubbles deserve attention.  Charles Kindleberger’s ‘Manias, Panics and Crashes’ is a widely-read popular account.  Better in my opinion is P. M. Garber ‘Famous First Bubbles’.  It’s a short good history of classic bubbles, which overturns some lazy conventional wisdom.  If it’s more conventional wisdom you’re looking for, try JK Galbraith’s ‘A Short History of Financial Euhphoria’ – a readable and perfectly respectable account, but one that simply illustrates widely accepted ideas. 

Economics

The credit crunch is widely seen as having shaken the economics profession.  The Queen even challenged LSE economists on why they failed to see it coming.  But the pessimism is overdone.  Financial economists understood the risks very well, and there was a discussion of over-leverage before the crash – even if its full consequences were not widely anticipated.  More problematic has been the weakness of macroeconomic thought and the failure to integrate financial economics into the rest of the discipline.  However, there are a number of accessible economics books on the crisis and the dynamics that gave rise to it.

Hyman Minsky has come to the fore.  He was a relatively unknown Keynesian economist who applied Keynes to the financial economy.  ‘Stabilizing an Unstable Economy’ is his major book.  It is quite difficult and technical in parts, but Part I is a long and fascinating narrative of the early 1970s banking crisis, which alone is worth the price of the book.  His short book on Keynes is useful, and his ‘Could ‘It’ Happen Again’ is excellent and prescient.  Robert Barbera has written a useful introduction to Minsky by way of applying his work to the Crunch, ‘The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future‘.  It is perhaps too simplified to do justice to Minsky, but it’s a less daunting starting point than ‘Stabilizing and Unstable Economy’. 

Keynes informs a lot of the discussion, but his General Theory is badly organised and haphazard, despite some brilliant passages.  His treatment of finance is cursory and very simplified – hence the need for Minsky.  Skidelsky’s biography of Keynes is tangential, but so brilliant it’s worthy of mention.  From the monetarist side, the Friedman and Schwartz mentioned above is most relevant.  Joseph Schumpeter is another classic economist worth reading, famous for his theory of ‘creative destruction.  Most famous is ‘Capitalism, Socialism and Democracy’, but see also ‘Theory of Economic Development’. T. K. McCraw ‘Prophet of Innovation: Joseph Schumpeter and Creative Destruction’ is a valuable recent biography of this fascinating man, who was also a wonderful aphorist. 

Richard Koo is essential.  His analysis of Japan is excellent, and shows some important parallels with the current global crisis.  His first book from 1993 is ‘Balance Sheet Recession: Japan’s Struggle with Uncharted Economics and Its Global Implications‘.  The argument was refreshed and updated in the context of the global credit crunch in ‘The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession‘. 

Another really important book is John B Taylor’s ‘Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis’.  It is one of the only really serious books to challenge the orthodox account.  He is not alone in suggesting that US interest rates were the problem (rather than global imbalances and excess savings in Asia), but he makes the best argument for it.  It’s a shame that it is so brief.  David Roche’s ‘New Monetarism‘ is also useful.

On efficient markets there are two intellectual histories worth reading.  ‘The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionised Economics and Business‘ by Johan Van Overtveldt is a detailed study by an acute observer, and Justin Fox’s ‘The Myth of the Rational Market’ gives an extended historical perspective on the efficient market hypothesis.  Whilst its political apotheosis is problematic, it’s important not to lose sight of its value of the efficient market hypothesis in certain bounded situations.

James Grant’s ‘Mr Market Miscalculates’ is a collection of prescient articles from Grant’s Interest Rate Observer, a consistently bearish newsletter from an unreconstructed goldbug.  There is much of value even if you don’t share his outlook. Andrew Smithers ‘Wall Street Revalued’ is a book about investment that isn’t for dummies.  He intelligently discusses micro-level issues around understanding corporate profits whilst linking them to macroeconomics.  It can be a bit too smug for comfort.

More widely interesting books include Diane Coyle’s ‘The Soulful Science’, which is an account of new debates in the discipline, debunking common prejudices.  Behavioural economics has been influential in understanding what went wrong in the financial sector.  The best book on the subject is ‘Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing’ by Hersh Shefrin.  The articles in George Loewenstein ‘Exotic Preferences: Behavioural Economics and Human Motivation’ are also useful.

Charles Dumas of Lombard Street Research is brilliant.  His ‘China and America: A Time for Reckoning’ is the essential starting point for the current crisis, showing how global imbalances work.  It’s also very readable.  His earlier book ‘The Bill from the China Shop’ is reproduced as an appendix, so don’t buy both!  Eichengreen’s ‘Global Imbalances and the Lessons of Bretton Woods’ is useful.  Roger Bootle’s ‘Death of Inflation’ is old now (1997), but interesting in retrospect.  Investment banker George Cooper’s ‘The Origin of Financial Crises’ is very good – a recent readable account with real depth. Paul Krugman’s ‘The Return of Depression Economics’ is an accessible book drawing parallels for today.  Finally ‘When Markets Collide: Investment Strategies for the Age of Global Economic Change‘ by Mohamed El-Erian is better than its title – it gives a valuable and compelling ‘big-picture’ analysis, but is over-rated.

Regulatory/Risk

Regulation is one of the most difficult topics, and also one of the most pressing.  Regulatory reforms are pressing forwards, but the literature is still limited.  The classic is Walter Bagehot’s Lombard Street – still a great read, and still relevant.  Howard Davies and David Green’s ‘Global Financial Regulation’ is only a few months old, but already out of date!  Alexander Kern’s ‘Global Governance of Financial Systems’ is useful at the macro-level.  Riccardo Rebonato’s ‘Plight of the Fortune Teller’ is an important critique of how regulators have operated, and is very useful on risk management more generally.  Jean-Charles Rochet’s ‘Why are there so many banking crises’ is very good, but also very technical and difficult.  Robert Rubin’s ‘In an uncertain world’ is good – memoirs of Clinton’s Secretary of the Treasury.  Greenspan’s ‘Age of Turbulence’ is important, and also better than its reputation.  Nassim Taleb’s ‘Fooled by Randomness’ and ‘The Black Swan’ are pretentious and over-rated, but make some good points and are influential in the debate. The late Peter L Bernstein’s ‘Against the Gods: The remarkable story of risk’ is a good readable account of risk in history, and ‘Capital Ideas’ is also good. Frank H Knight’s ‘Risk, Uncertainty and Profit’ is tangential and old, but very important.  The distinction between risk and uncertainty is really important in risk management and regulation. 

Two books praising industry over finance are worth reading for their substantiation of a common prejudice: Eamonn Fingleton’s ‘In Praise of Hard Industries’ and Lawrence E Mitchell’s ‘The Speculation Economy: How Finance Triumphed Over Industry’.  Neither is very convincing, but they are bold attempts to substantiate a difficult argument. 

‘Money, Markets, and Sovereignty’ by Benn Steil defends the principle of monetary sovereignty.  From the left, ‘The Coming First World Debt Crisis‘ Ann Pettifor and ‘The Great Financial Crisis: Causes and consequences’ by Foster and Magdoff offer another perspective.  The first is a weak account that draws on crude prejudices about predatory bankers and feckless borrowers.  The second is more considered, but relies too much on rehabilitating ideas that seemed tired even in the 1970s. 

‘Restoring Financial Stability: How to Repair a Failed System’ edited by Viral V. Acharya and Matthew Richardson is a considered and thoughtful collection of academic essays.  The first chapter is the best factual account of the crisis, with a useful timeline (derived from the Bank of England).

Alistair Milne’s ‘The Fall of the House of Credit: What went wrong in banking and what can be done to repair the damage’ identifies the collapse in confidence as the key factor in the crisis, and suggests that the solvency position might be better than is often believed.  It is one of the more impressive scholarly treatments of the crisis. George Soros’s ‘The New Paradigm for Financial Markets’ suffers from arrogance and myopia, but it makes some good points (even if they are less original than he thinks).

Banking/Finance/Hedge Funds

Following from the general literature on the credit crunch are more focused books on the financial sector generally, and specific institutions individually.

Youssef Cassis ‘Capitals of Capital’ is a solid historical account of financial geography.  David Kynaston’s massive multi-volume history of the City of London is fabulous, but thousands of pages long!  Worth dipping into on previous crises, though, like Overend and Gurney and Barings.  On Hedge Funds, Barton Biggs’ Hedghogging is good fun.  Richard Bookstaber’s ‘A Demon of our own Design’ is more serious, and very good.  Satyajit Das’s ‘Traders, Guns and Money’ is an entertaining anecdotal account by an insider who really knows the business.  Roger Lowenstein’s ‘When Genius Failed’ is the classic account of the failure of LTCM.  It’s a great narrative and a solid account, but not always reliable on the technical details.

William Cohen’s ‘House of Cards’ is an excellent, thorough history of Bear Stearns.  More books on Bear Stearns are due out soon, but as yet not much on Lehman.  Ken Auletta’s ‘Greed and Glory on Wall Street‘ is a good account of the last crisis at Lehman.  Patricia Beard’s ‘Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley‘ and William Cohen’s ‘The Last Tycoons’ cover Morgan Stanley and Lazard respectively.  Philip Augar has written some very good books on the City (‘The Death of Gentlemanly Capitalism’ is best), but his new book on the recent crisis, ‘Chasing Alpha’, is a let-down.  It is too superficial and the arguments are derivative of his earlier books. Augar’s ‘The Greed Merchants’ is more useful.

Credit rating agencies have been roundly criticised, but it’s the less sexy end of debate.  ‘The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness’ by Timothy J. Sinclair is one of the few books on the subject, but it barely scratches the surface. 

Wiley has recently reprinted the wonderful classic, ‘Where Are the Customers’ Yachts, or A Good Hard Look at Wall Street’ by Fred Schwed, Jr.  Details change, but many of the dynamics are the same.

Emerging Economies/Country Risk/Development

The credit crunch must be understood in the context of globalisation, and particularly in relation to the huge imbalances that have emerged between fast-growing, high-saving economies in east Asia and mature high-spending economies in the developed West that borrow from them.  Issues of country risk and economic development have been less prominently discussed while the edifice of Western capitalism has been in crisis, but remain an essential part of the story.

Joshua Aizenman’s ‘Managing Economic Volatility’ is useful but dated.  Paul Blustein’s ‘And the money kept rolling in (& out)’ is a competent account of Argentina. His ‘The Chastening’ is less good on the ’98 crisis.  Gerard Capiro’s ‘Financial Crises: Lessons from the past, preparation for the future’ is useful, but already dated (2005).  Older still is Morris Goldstein’s ‘Assessing Financial Vulnerability’, but well worth reading now.  Padma Desai’s ‘Financial Crisis, contagion and containment from Asia to Argentina’ is good.  Eichengreen’s ‘Capital Flows and Crises’ is an important economic study.  Michael Pettis’s ‘The Volatility Machine’ is sensationalist and missed the boom (published 2001) but bears reading again now. On broader development issues, from a vast literature I’d pick out Ha-Joon Chang’s ‘Bad Samaritans’ – an important, readable study from a radical perspective.  Gregory Clark’s ‘A Farewell to Alms’ is a good, controversial historical account.  Martin Wolf’s ‘Why Globalisation Works’ is excellent from the other side and well worth reading.

Asgeier Jonsson’s ‘Why Iceland?  How one of the world’s smallest countries because the meltdown’s biggest casualty’ is an insider’s account of Iceland’s spectacular (and wholly predictable) fall from grace, and will be reviewed on Culture Wars soon.

Martin Wolf has been consistently the most insightful commentator.  His FT columns are essential reading (together with Willem Buiter’s Mavercon blog on the FT, Noriel Roubini and a few others).  However, his book ‘Fixing Global Finance’ was relatively (and perhaps inevitably) disappointing because it did not go further than substantiating some familiar arguments from his column; it is too early to develop the substantive new ideas that will require more reflection. 

A couple of books on demographic financial risks are important: ‘Forgive Us Our Debts: The International Dangers of Fiscal Irresponsibility: The Intergenerational Dangers of Fiscal Irresponsibility‘ by Andrew Yarrow and ‘Age Shock and Pension Power: How Finance Is Failing Us‘ by Robin Blackburn.  Richard Jackson and Neil Howe’s ‘The Graying of the Great Powers: Demography and Geopolitics in the 21st Century’ for the Center for Strategic and International Studies is useful.  Whilst its economic analysis does not always stand up, it makes a very persuasive case for seeing demography as the backdrop for economic development in the next few decades.

Finally Terry Pratchett’s ‘Making Money’ offers some light relief.