Understanding the Financial Crisis

The Economist says it's a "must-read on the origins of the crisis." You'll say: it's a finance guy with a sense of humor! George Cooper in The Origin of Financial Crises gives a clear overview — and strong critique — of central banking policy (in plainer terms: what the Federal Reserve did and should do). He also explains some reasons why perfectly rational actors can encourage a credit bubble.

Here's a new edition of Warren Buffett's classic collection of essays on corporate governance and financial markets. The essays are quite accessible — and, more important, they address topics Cooper doesn't dwell on, including credit default swaps and other "derivatives" (you know, the things that Buffett famously referred to as "weapons of financial mass destruction").

If either of the above feels a little over your head, you might pick up this handy reference. It includes easy-to-read and clearly illustrated (yet surprisingly sophisticated) overviews of modern capital markets. Heck, it might even get you some investment insight. You know, for when you have money to invest again.

Get some perspective! Crises and recessions and depressions have befallen humanity before. And we survived. This authoritative historical work even comes recommended by the New York Times' business editor.

Paul Krugman, Nobel Prize in Economics winner and New York Times columnist, is a popular economist who probably isn't overrated. This recent update to his 1999 book is easy to read and includes some important conceptual insights. Krugman also offers some theories on human behavior as an economic force ("behavioral economics"), something Cooper avoids.

Maybe there really is nothing new under the sun. (Re-)read the classic 1980s story of the leveraged buyout of RJR Nabisco and you might find yourself wondering if the "go-go 80s" ever really ended. Replace "leveraged buyout firm" with "private equity" and "junk bond" with "asset-backed securities" and you might just think you're reading about the much more recent past. (In fact, many of the same players are still important movers-and-shakers today.) The biggest difference: this time around, there are far more zeros in the dollar figures.

In the same vein, you might remember when the major hedge fund Long-Term Capital Management failed a few years ago and received a government-orchestrated bailout. This well-written book sheds light on how, even with our brilliant quantitative models and lightning-fast information gathering abilities, we still can go very wrong.

The Bear Stearns collapse, for many, was the first clarion call that something was greatly amiss. Try this book, the first major journalistic history of the present crisis. (You can read a free excerpt here.)

Now that you're up to speed, stay that way with subscriptions to Conde Nast's glossy Portfolio magazine...

...and influential British stalwart The Economist.

Finally, don't forget that economic and social discontent can also inspire literary greatness. Curl up with this classic, about (and written during) the Great Depression.