Books I’ve Loved Reading: Freefall by Joseph Stiglitz


America, Free Markets and the Sinking of the World Economy


Joseph Stiglitz is a former Chief Economist for the World Bank, he’s a professor at Columbia University, and he’s won the Nobel Prize in Economic Sciences and the John Bates Clark Medal, which is awarded by the American Economic Association and is second to the Nobel in terms of prestige.  No matter how you slice it, Stiglitz is one of the most frequently cited economists in the world.

Now he’s written a book about our economic meltdown, and if I could wish one book to be read by every American age 18-80, it would unquestionably be his: Freefall: America, Free Markets and the Sinking of the World Economy.

Now, before you freak out and think, “Oh there’s no way am I reading a book on economics by that dude,” let me assure you that I totally understand you’re fear and you should not to worry… it’s written so that anyone can read it… and totally get it.  Totally.  That’s what makes it so great, and when I picked it up off the table at my local bookstore, I wasn’t expecting it at all.  In fact, the first time I looked at the book I decided against it mostly because I wasn’t in the mood for some heavy third year econ textbook at that moment.  Boy, was I wrong.

Freefall weighs in at 361 pages cover to cover, but it reads like a lean 220 tops.  Chapter One: The Making of a Crisis.  Stiglitz pulls no punches.  He states right of the bat that the only thing that was surprising about our economic meltdown was that it seemed to come as a surprise to some people.  I wanted to stand up and cheer.

Remember that day in September of 2008.  Lehman had gone kapowie on Monday… Merrill Lynch was stuffed down Ken Lewis’ throat on Sunday night?  AIG would go down faster than the Titanic by like Wednesday, and on Friday it was Treasury Secretary Paulson and Fed Chair Bernanke jumping in what I imagined at the time to be a little clown car, running up to Capitol Hill yelling “the sky, she is falling… quick, someone hand me $700 billion or you may have already eaten your last meal”.

Remember that day?  All I could think to say on that day was: How can these two clowns look so shocked and surprised… they had to know this was coming months ago… and certainly weeks ago… without question several days ago… come one… what’s going on here?  They’re not surprised, they can’t be.

Yeah, well Stiglitz takes care off any confusion you might still be clinging onto about that day, and the events leading up to that day.  It’s great.  You’ll feel like you just landed back on the planet you recognize as Earth once again.

The Boston Globe said that “Freefall is a must read for anyone seeking to understand the roots of the financial crisis. Stiglitz brilliantly analyzes the economic reasons behind the banking collapse.”  And boy does he ever, so that a 14 year-old would understand it.

The New York Times review of Freefall said: “Mr. Stiglitz uses his experience teaching to give the lay reader a lucid account of how overleveraged banks, a shoddy mortgage industry, predatory lending and unregulated trading contributed to the meltdown.”

And Business Week said: “Stiglitz offers a powerful account of the financial meltdown and criticizes the Obama Administration for ‘muddling through’ rather than pushing aggressively for change…. An excellent overview of what caused the crisis and what reforms should be enacted…. I can only hope Obama makes room for it on his nightstand.”  And can I get an Amen to that?

Chapter Two is titled: Freefall and It’s Aftermath, then it’s onto Chapter Three for “A Flawed Response,” and by then, it would take an 800 pound gorilla to wrestle the book from your hands.  Stiglitz then goes on to explain the mortgage crisis and how the banks bankrupted the planet, so hold onto to your hat ‘cause it’s one heck of a ride.

Stiglitz may not be funny or sarcastic,  but he phrases things so incredibly well that important points just come off the page and smack you across the face… never to be forgotten.  In fact, as I was reading it, there were several sentences that I read and thought to myself… well, there’s no point in me ever writing about that point, because there’s just no way to say it any better than that.

Once you read Freefall, no one at a party will ever be able to confuse the issues spouting uninformed views of what’s happened on Wall Street, and who did what to create the mess we’re in… and will be in for some time to come.  And that’s really what makes Freefall such an important book for everyone to read.

We can’t expect this country to begin to turn around until we come to an understanding of what needs to change, and that’s certainly not happening by our listening to the nightly news, or watching the preposterously partisan politicking going on Washington D.C.  Freefall represents a short cut to everyone getting a handle on what’s happening today, and what’s ahead if we don’t make some significant changes and soon… like yesterday.

Stiglitz acknowledges that we are part of the problem, as without borrowers you couldn’t have the monstrous debt we live under today, but he drills through that pedestrian point to the heart of the matter and that’s that the bankers caused this economic catastrophe, period.

He points out, for example, that when you talk about a group that borrowed too much on the assumption that housing prices would never fall and sub-prime loans presented no risk, you’re talking about the Wall street crowd.  Some homeowners may have followed those assumptions to a comparatively miniscule degree, but so what and who cares, when compared to the leverage at companies like Lehman Bros.

The average Wall Street firm was leveraged 32:1 and the garbage that passed as “assets” to leverage would never pass muster if judged by any reasonable set of standards.  And if you never fully grasped what’s meant by moral hazard, you will after reading Freefall.

I read it, bought another copy as a gift for a friend who had invited me for dinner, and then went back to Amazon and bought it as an audio-book as well.  I listen to it when driving in my car, when I need someone to remind me that I’m not the insane one here… it’s them.

I just checked Amazon and Freefall is going for roughly $18.50, which is $9 and change off of it’s $27.95 normal price tag.  And in the spirit of full disclosure, as an Amazon Affiliate, I make 7 or 8 percent on that, so that’s about $1.35 assuming you buy it by clicking the link below.

There are a few used ones as well, but they’re only selling for $16.50, so no big savings there.  Buy it now, you’ll feel better as soon as you get through Chapter One.  Buy two copies and send one to a friend that you know needs it.  Together we could educate the country… okay, so maybe not the entire country, but who knows how far this could go?

Happy reading… Mandelman Out.

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