April 13, 2012
By, Barry Glassman
For those of you who don’t spend your days and nights thinking about the intricacies of the global economy, sorting out what really triggered the onset of the 2008 recession and how that continues to affect us today might be somewhat daunting.
You might be wondering how something called a collateralized debt obligation, or CDO, played a role in the collapse of the housing market or how the mortgage default rate in the U.S. helped bring down Iceland’s economy. You might even wonder why the news here spends so much time talking about the riots in Greece.
I often have to explain to our clients why these things are important, and how these seemingly far-flung issues are related to their retirement or other financial goals.
The truth is that these are all pieces of a global financial puzzle. And by far the best book I’ve come across that helps clearly explain how the pieces fit together, and the book I have handed out to clients and friends over the past six months, is Boomerang: Travels in the New Third World, by best-selling author Michael Lewis.
Interestingly, it was in writing his previous book, The Big Short, in which he explored how some people made a lot of money after the U.S. housing market collapsed, that Lewis came to understand the bigger picture of what was happening throughout the global economy. “One of the hidden causes of the current global financial crisis is that the people who saw it coming had more to gain from it by taking short positions than they did by trying to publicize the problem,” Lewis writes.