Monday, April 7, 2008

Charles Morris and the Trillion Dollar Meltdown

Charles Morris has new book explaining the credit crunch. It is titled "The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash." This looks to be a great book based on some of the reviews I have seen. In the meantime, Mr. Morris has provided us with an article over at Foreign Policy that provides the steps leading up to the current financial crisis. I have posted his summary points below.

Eight Steps to a Trillion-Dollar Meltdown
1. The Fed spikes the punch bowl.
2. Leverage soars.
3. Consumers throw a toga party.
4. A dollar tsunami.
5. Yields plummet.
6. Hedge funds peddle crystal meth.
7. A ratings antigravity machine.
8. The Wile E. Coyote moment arrives.

Note which item starts the process. One can only wonder how things would have been different had the Fed taken more seriously their own Gary Stern's admonitions in 2003 or had they paid attention to calls for action from the The Economist in 2004.

1 comment:

  1. And add a dash of historical perspective and insight to this promising book by reading Kindleberger and Minsky. And if you need light to read by, you can always burn Jordi Gali's new text in New Keynesian Econ, given the insights into the current situation offered by "state of the art" theory.