Panic! The story of modern financial insanity

There are lots of books that give a very detailed account on economic crises. This one is one of the few that with a wide coverage of this issue, in terms of both time series (from Black Monday in 1929 to the mortgage meltdown that happened just a few months ago) and the various school of thoughts. However, this book is very technical and difficult!

This book is a collection of articles from Time, The New York Times, The New Yorker, Bloomberg News, The Wall Street Journal, Fortune, Business Week and The Economist. We can find analyses from financial specialists, speculators and scholars. Although this is a difficult book, you can select some interesting articles to start with. Here are my recommendations:

(1)   Articles that debate about the causes of Black Monday in 1987, namely (i) “Crash-Proofing the Market: A Lot of Expert Opinions but Few Results” (p. 57 – 61); “Short Circuits” (p.62 – 64); and Crash Course: Black Monday’s Biggest Lesson – Don’t Run Scared” (p. 65- 70).

(2) The interview with Rob Johnson, the top portfolio manager for George Soro’s Quantum Fund (p.96 – 105). He will give you a detailed account on how the crisis in 1997 had been stirred up.

(3) The interview with Jeffrey D. Sachs, the economic advisor to President Yeltsin during the Russian transformation from central planning economy to market economy (p.113 – 123). In his interview, you will find out that it is the economic and political factors caused the panic in Russia in 1997.

* He is also the author of The End of Poverty: Economic Possibilities for Our Time that I introduced in “020. What do you know about poverty?”

My favourite are the two articles that written by Paul Krugman, the winner of the Nobel Memorial Prize in Economics in 2008. He is also the author of The conscience of a liberal and The return of depress on economics that I mentioned in “013. Why do you study economics?” and “044. How does a baby-sitting co-op explain the economic depress?” respectively.

(4) In his article “Saving Asia”, he explains why plan A that suggested by IMF did not work out in the 1987 financial crisis. He also believes that the unfashionable and unsayable plan B, exchange controls, would be the only solution to lead the Asian countries out of the crisis.

(5) And in “After the Money’s Gone” (p.353 – 355), he gives a very brief introduction on how a “loss of confidence can be a self-filling prophecy (p. 354)” thus causes another economics crisis in 2007.

Don’t panic! The articles that I mentioned above are not that difficult to handle.

Lewis, Michael (Ed.). (2008). Panic! The story of modern financial insanity. London: Penguin Books.