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Book Review – Panic: The Story of Modern Financial Insanity

February 26, 2009 Leave a comment

Michael Lewis, a Wall Street bond salesman turned author of best-sellers like Liar’s Poker and Moneyball, takes the reader on a fascinating journey through financial meltdowns in Panic: The Story of Modern Financial Insanity.

Starting with the crash of 1987, and moving through the Asian financial crisis, the Russian default,  and the Dot-com Bubble, the books finishes with the current Sub-prime fiasco.

With a 20/20 hindsight, it would have been tempting to simply offer solutions and crisp cause-and-effect scenarios while compiling a book like this. It to Lewis’s considerable credit that he resists this temptation and instead provides the reader with far more interesting stories and insights about financial markets, media and human behaviour.

The basic structure of the book, while dealing with each crisis, is that of providing some articles/excerpts published before, during and after the crisis. The selection of articles captures perfectly the prevailing zeitgeist of the times preceding the crises. It is somehow therapeutic to remember that there was a time, not too long ago, when merely launching a website caused a company’s stock price to rise astronomically. Articles published during the crises serve to highlight the desperate attempts to make sense of extremely complicated situations, while those published after the crises reflect the vague general consensus on the most likely culprits or causes.

The book also serves to point out that everybody didn’t lose his/her mind in the euphoria that preceded each crisis. There were people who were blowing whistles with all their strength, it is just that nobody was listening.

The seemingly inevitable cycle of booms and busts is as sad a reflection on human behaviour as it is uplifting in the current economic climate. The next boom is just around the corner. Look out for whistleblowers when it happens.

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