Three accounts of the financial crisis

Paper Promises

by Philip Coggan

For those who want to understand how the global economy got into its current mess, Philip Coggan's Paper Promises is the "most illuminating" account of the financial crisis to appear to date.

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Written with "lucidity" and "without a trace of jargon", Coggan's book examines the rise of paper money, starting from the 9th century, when it was first introduced by the Chinese emperor Hien Tsung to deal with the shortage of copper. Coggan's "highly pertinent observation" is that the value of the paper was "equivalent to the citizen's belief in the stability of the governing regime", a fact that has a "clear bearing on the present crisis".

The global monetary system has been built on much the same basis since former US president Richard Nixon ended the dollar's convertibility to gold in 1971. Now, "just as much as the paper issued by the grand khan, the dollar and the euro rest on faith in the regimes that underwrite them".

With a current sense of "mildly hysterical panic" in financial circles, Coggan's book adds a "welcome note of calm analysis", writes Diane Coyle in The Independent. Drawing on his years of experience as a journalist, Coggan takes "a step back from the headlines" to consider the bigger picture. The far-reaching historical perspective the book takes in both the Dark Ages and the 1929 Great Depression in America reminds us that "crises have occurred frequently, and in some ways never change".

However, the current situation may be a "decisive turning point" for the West, he concludes. "The global economy is changing; for many in the West, it will not be for the better."

Paper Promises: Money, Debt And The New World Order byPhilip Coggan. Published by Allen Lane. Price: £20.

The Unintended Reformation

by Brad S Gregory

Gregory offers a "highly original combination of history and morality". Taking a Christian perspective, he argues that the Reformation led to sectarian and materialistic contemporary America, replete with popular buzzwords such as "whatever" and "stuff". The plurality of belief that emerged from the Reformation, says Gregory, shifted attention away from outward behaviour towards internal belief. With its concern for "individual salvation, the Reformation opened the way to an obsession with individual enrichment at the expense of communities, friends and families".

The conclusion of this "bold and unusual" book is that only religion can help humanity escape our contemporary predicament: the material curse of poverty and the mental afflictions of prosperity. There's "a great deal of truth in" Gregory's book, writes Barton Swaim in The Wall Street Journal. His "bleak view of the contemporary world", while sometimes "blinkered and exaggerated", will strike a note with many.

However, the problems arise with his efforts to trace the "genealogy" of our "lamentable" modern state back to the Reformation. Although widely sourced, "his arguments are marked by baffling leaps in logic and tendentious blustering". The later chapters are better reasoned, "but only slightly".

Indeed, Gregory's "almost comically negative view of the entire Protestant Reformation" leads one to suspect that the book isn't so much a work of careful historical analysis as a "kind of parochial score-settling". Yes, "his complaint that Western morality elevates acquisitiveness to the status of a virtue is justified". But the world would be "a moral and intellectual wreck whether the Reformation happened or not". And wreck or no, it remains "a far sight better" than anything that the institutionalised worldview of medieval Catholicism "could have produced".

The Unintended Reformation: How A Religious Revolution Secularized Society by Brad S Gregory. Published by Harvard University Press. Price: £25.

The Number That Killed Us

by John Wiley

Reviewed by Matthew Partridge

How could so many smart, highly paid bankers have made the mistakes that led to the financial crisis? Everything from easy money to fair lending laws has been blamed, writes Matthew Partridge. However, Pablo Triana claims that a key risk management model Value at Risk (VaR) was the real culprit.

Developed in the 1980s at financial institutions Bankers Trust and JP Morgan, VaR quickly caught on. Sadly, it had many flaws: most critically, the belief that past correlations between assets would continue to hold true. VaR's dominance also meant that every bank managed risk in the same way so they herded together in both good times and bad.

Triana does a good job of detailing the major players in the creation and spread of VaR. He is also fair-minded enough to admit that older risk management techniques had flaws too. But he fails to make the case that VaR drove bad decisions, rather than merely providing intellectual cover for them. VaR remains an intriguing bit-part player in the crisis, rather than the number that killed us'.

The Number That Killed Us: A Story Of Modern Banking, Flawed Mathematics, And A Big Finanical Crisis by Pablo Triana. Published by John Wiley & Sons. Price: £26.99.