Crisis Crash Course: High Finance, Low-Jinks

Three Books about Finance

Laura Conaway is an editor with NPR's Planet Money.

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"Three Books ..." is a series in which we invite writers to recommend three great reads on a single theme.

I never set out to become a financial journalist. Even if I'd had it in mind, I wouldn't have started on the eve of the worst financial crisis since the Great Depression.

But here I am, watching the stock market swooning around below 9000 and waiting for McCain and Obama to debate tonight on the miserable economy.

Meanwhile, I get to wrestle with questions like this one from my friend Jack. He says, "Hey, I've listened to your shows, but I still don't get it. Can you tell me exactly what a derivative is?" I can, mostly, but only because I've been slogging through a book by economist Satyajit Das.

'Traders, Guns & Money'

'Traders, Guns & Money'
Traders, Guns & Money, by Satyajit Das, paperback, 352 pages

If you've never heard of Das' book, Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives don't worry: I hadn't either. It's not an easy book, even if does say "fascinating reading" right on the cover. But if you want to get to the bottom of the crisis — this crisis — right now, you've got to read it.

Traders, Guns & Money is very fresh history, just two years old. Das picks apart the new machinery of the mega-trillion-dollar derivatives market, the one economists say might be next to collapse on our heads. And I'm with him, I really am. The guy has a thing for ridiculous puns and also for pitiable characters. We meet a couple of noodle makers who wreck their company on a deal that no one but Das seems to understand, but by the end of this book, you'll get the deal, too.

'Liar's Poker'

'Liar's Poker'
Liar's Poker, by Michael Lewis, paperback, 256 pages

If derivatives ever do wreck the world, you can count on Michael Lewis to sort the pieces. Lewis has seen this kind of mess before. He worked for Salomon Brothers during the great collapse of 1987. In Liar's Poker, he writes about stumbling straight from grad school into a world of Wall Street-educated sharks. These are traders who would play a single hand for a million bucks, who get rich betting on junk bonds and flame out fast. Lewis may not have lit the bonfire of the vanities, but you can bet he smelled the sulfur on the match. If you're scared now, just remember 1987.

'The Great Depression And The New Deal'

'The Great Depression And The New Deal'
The Great Depression and the New Deal, by Eric Rauchway, paperback, 160 pages

And then there's 1929. Maybe you thought your ancestors lived simply, even before the crash. Nope. Eric Rauchway says a lot of our great-grands were out buying Model Ts on credit. Their debt helped to fuel a Wall Street bust as surely as bad mortgages have poisoned the economy today. Rauchway boils it down to 150 pages. He calls it: The Great Depression and the New Deal: A Very Short Introduction. I call it required reading.

The thing is, we're watching an amazing moment in American public life. The Federal Reserve is pulling every last lever and the Treasury is using tax dollars to buy parts of banks. And yet this is not the first time government has thrown its full weight at the economy. Rauchway includes an amazing list of Depression-era laws — bank relief acts and gold reserve acts, Glass-Steagall and rural electrification. Seeing them all in one place, you start to grasp the difference between the present scare and the 1930s panic.

Those are my three books. I'll go ahead and admit that very few people would consider them dessert reading. Still, if you're starved for understanding, you need them. And if you still want sugar, try the comics.

Three Books ... is produced and edited by Ellen Silva and Bridget Bentz.

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