Book Review: Panic by Michael Lewis

First, this book is EDITTED by Michael Lewis, not written by him!  You think they could put that a little more clearly on the cover?  Any way, this book is a series of articles/essays about various financial collapses begining with the Wall Street collapse in 1987.  The major crashes covered are 1987, east asia (late 1990's), tech bubble in 1999-2000, and the subprime mortgage collapse in 2007-2008.  I enjoyed the book and felt like I learned a lot about topics such as currency exchanges, hedge funds, and CDO's.  I think reading about previous crashes really helps provide valuable perspective for the current economic situation.  The best essay in the book was a hillarious tongue-in-cheek article by Dave Berry. All the people waiting at gate C71 in the Salt Lake Airport think I'm insane because I was almost rolling on the floor I was laughing so hard while reading this article.  I wish the book was a little shorter, but I'd still recommend it (especially since all the proceeds are going to help rebuild New Orleans).

Reading a finance book has me thinking about the future.  Econimists nearly unanimiously agree that inflation is coming because the US government is printing money.  This means any money you have in the bank will shrink in value (be worth less), and any debt you have will shrink relative to its previous size (although most debt will still be bad).  So, how should we act if we know inflation is coming.  Clearly, we don't want too much money in the bank, and we would really like to exchange any dollars we do have for some other asset that will hold its value better.  I'd be reluctant to exchange dollars for Euro's since Europe will probably have a similar inflation problem.  One possible asset is real estate.  It is really cheap at the moment, and you can lock in debt at historically low interest rates.  What's the down-side here?  The only real downside is that real estate could continue to fall in value so it may be wise to wait another 3-6 months to ensure that we are at/near the bottom, but, other than that, what's the down-side?  With all the forclosures out there, there will be millions of people that can only rent for the next few years so finding renters shouldn't be a problem.  Alas, while this sounds like a good plan to me, I have neither the resources or desire to follow my plan.  In five years we'll know if I guessed right or was just crazy.