My review of Crash: How a Decade of Financial Crisis Changed the World is finally out at the London Review of Books (subscribers only I’m afraid). From what I’ve read it has received glowing reviews elsewhere, and mine is no exception. Reflecting its ambition it is no quick read (the main text is 600 pages). There is an introduction which does summarise some of the key ideas, but the triumph of the book is that it combines a detailed account of the events of the last ten years with an analytical overview which makes sense of the detail and which makes good sense. It has the additional advantage from my point of view that it is broadly consistent with many of the arguments made on this blog, although I don’t think I ever managed to match the quality of his prose.
The argument that binds the whole book together is that the crisis was not the result of the specific shocks of Subprime debt or the housing markets of Ireland and Spain, but an inevitable consequence of a global banking system that became chronically short of buffers to cushion against any kind of significant systemic shock. To use the technical term the system became over leveraged: lending too much in relation to the capital it had to cover loans going bad. This is the same theme as the book by Tam Bayoumi I discussed here, but in fact the two compliment each other: Bayoumi focuses on the regulatory changes that created global megabanks, while Tooze deals with the consequences of when these banks crashed.
“It was a class logic, admittedly – ‘Protect Wall Street first, worry about Main Street later – but at least it had a rationale and one operating on a grand scale.”
“‘It is a spectacle that ought to inspire outrage. Millions have suffered for no good reason.”