This holiday season finds many an investor in the predicament of Ebenezer Scrooge's nephew - "a year older and not an hour richer."
To understand why, pick up any of the following books on the financial crisis, which has sliced $30 trillion off the value of global equities this year. The authors include economist Paul Krugman and billionaire investor George Soros.
The Origin of Financial Crises by George Cooper (Vintage/Harriman). Cooper, a seasoned central bank watcher, shows how muddled thinking at the Federal Reserve allowed excess credit to build up in the economy, cycle after cycle, inflating asset prices into ever bigger bubbles. His solution: Require the Fed to prick ballooning credit early and often.
Greenspan's Bubbles by William A. Fleckenstein (McGraw-Hill). Fleckenstein, the president of Fleckenstein Capital Inc., of Seattle, presents a damning account of how former Fed Chairman Alan Greenspan inflated two asset bubbles that mutated into $11 trillion in home-mortgage debt.
Mr. Market Miscalculates by James Grant (Axios). The author's foresight is on display in this anthology of articles from his redoubtable newsletter, Grant's Interest Rate Observer. In 1999, when the best seller Dow 36,000" appeared, Grant imagined a different asset class reaching "Real Estate 36,000." By 2001, he was reporting how Americans were mining their home equity and even "day trading" houses.
The Return of Depression Economics by Paul Krugman (Norton/Penguin). Krugman, who was in Stockholm, Sweden, this month to pick up his Nobel Prize in economics, dashed out this new edition of his book on the crises that ravaged Latin America and Asia in the 1980s and '90s. Though Krugman is too enamored of inflation for my taste, he's good at describing the mechanics of economic dislocations. The chapter on Japan's decade-long slump offers a spooky preview of what is unfolding in the United States.
The Trillion Dollar Meltdown by Charles R. Morris (PublicAffairs). Morris startled investors when he predicted that the bursting credit bubble would result in at least $1 trillion in losses to the banking and other investment sectors. With write-downs and credit losses now totaling $991 billion, a planned paperback edition of the book will bear a new title: The Two Trillion Dollar Meltdown.
Chain of Blame by Paul Muolo and Matthew Padilla (Wiley). This journalistic thriller chronicles how subprime-mortgage lending rose from the ruins of the savings-and-loan crisis, slithered throughout the financial system, and ended with more than one million Americans losing their homes. Muolo and Padilla introduce the bankers, nonbank lenders, loan brokers and underwriters that drove the reckless practices that engulfed institutions including the Bear Stearns Cos. Inc., Lehman Bros. Holdings Inc., and Merrill Lynch & Co. Inc.
Bad Money by Kevin Phillips (Viking). The former Republican strategist lays out a harsh case against Wall Street and Washington, depicting the United States as an overstretched empire slumping toward the fate of Hapsburg Spain, the maritime Dutch Republic, and imperial Britain. The book presents primers on everything from securitization to government manipulation of inflation data. What sets it apart is Phillips' emphasis on the symbiotic relationship between politicians and big money.
The Subprime Solution by Robert J. Shiller (Princeton). When this Yale economist looks at the subprime-mortgage meltdown, he sees "a historic turning point" with parallels to the Treaty of Versailles, the Great Depression, and the Marshall Plan. Shiller says the crisis is tearing at America's social fabric and will probably slow economic growth for years. His solution: additional financial innovations, to make the housing market less bubble-prone and more open to people with low incomes.
The New Paradigm for Financial Markets by George Soros (PublicAffairs). For 20 years, Soros has challenged the theory that markets, however choppy, always move toward equilibrium. Now the worst financial crisis since the Great Depression has handed him evidence that the hypothesis is dangerous as well as flawed. A jumble of autobiography, philosophy and market history, the book offers solutions that range from abandoning some financial instruments to curbing lending. If his pet theories annoy you - "reflexivity," anyone? - skip to the section where Soros provides a diary of his own decisions as a hedge fund manager.