I haven’t written much here about the current economic crisis, but it’s been affecting everyone for quite a while, now. Part of the problem I’ve seen is that there’s so much day-to-day news and analysis that it’s hard to get the kind of articles that really step back and evaluate the whole situation in context.
Perhaps it’s because 2009 just kicked off, but there have been a few recent articles that I wanted to highlight that could (should?) help everyone understand the broader problems that the economy has been facing.
“The End” — by Michael Lewis. It’s a long but very interesting article that deals with the housing bubble, how it blew up, and the people who warned of the specific dangers long before. Excellent, excellent read.
“Risk Management” — by Joe Nocera. This is an article from Sunday’s New York Times Magazine that goes deeper into the concepts of measuring risk. Specifically it gets into the “Value At Risk”, or VaR, method of measuring risk. While the model is generally good for day-to-day risk measurement, it is far from complete. Using VaR simply can’t tell you how bad it can get… and we’re seeing that how bad it can get now.
The End of the Financial World as We Know It
How to Repair a Broken Financial World — both articles by Michael Lewis and David Einhorn. This is a two-part OpEd (no idea why they split it that way) from the New York Times. While not as good as the first two, it does take some of the lessons learned and ties them to what we can (should?) do going forward.
Letter about Madoff to the SEC — This letter was written and sent over three years ago, detailing how and why Madoff’s fund was a Ponzi scheme. No one listened or investigated deeply!