A comprehensive if somewhat subjective view of the two years since the credit crisis first broke, direct from the horse’s mouth. Perhaps more interesting than any insider account of the Fed’s frantic response to the meltdown of the banking system is the degree to which the Chairman was concerned with the human impact of his macroeconomic policy-making…

As capital markets continue to increase in scale and scope, there is a natural tendency to believe that they have also become more accurate at valuation. Scores of “rational” investors acting in their own self-interest, based on their own proprietary information along with anything publicly available, make their best guess about the value of a particular security – from a simple common share of IBM to a bet on the amount of rainfall next April. Those who believe the future looks bright will buy, and those who think better days are behind will sell.

As speculative euphoria once again grips financial markets and investors emerge from their fallout shelters in search of higher yield, it is entirely possible that we failed to learn anything from the last 12-18 months of market volatility. After the markets bottomed out on March 9, our valuation anchors were rebased. Could our economic prospects really be that grim? Could all that leverage – all that cash – simply vanish from the financial system overnight? Of course not, went the refrain, and the markets have since pared back almost half of their 2008 losses during one of the largest bear market rallies since the 1930s.

Another entertaining piece of journalism by Michael Lewis, this time reporting from the nucleus of the financial crisis. The premise? Buried deep within the world’s largest insurance company lay the other side of the global bet on real estate and perpetual growth. Lewis interviewed the FP traders accused of underwriting the risky default swaps that nearly destroyed the world economy while siphoning-off juicy bonuses from the comfort of their gated Connecticut suburbs. What he turned up was a far bigger fish and an interesting chorus

Armchair financial quarterbacks would do well to tune out the mass media every so often and tune into the real global dialogue on the nature of the recent crisis and our prospects for a sustainable recovery. It is no coincidence that those whose perspective is truly global consider the fundamental nature of our modern political economy in terms of decades not days, systems not statistics, and welfare not wealth.

In this speech, given just weeks before the March 2008 arranged marriage of Bear Stearns and JPMorgan, this banker to central bankers dissects the credit crisis of 2007 and calls attention to dangerous fault-lines that presaged the apocalyptic deleveraging of the next 18 months…

“Bob Farrell was a legend at Merrill Lynch & Co. for several decades. Farrell had a front-row seat to the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987′s crash. He retired as chief stock market analyst at the end of 1992, but continued to occasionally publish. Rumor has it for a humongous donation to Farrell’s favorite charity, you can get on his very exclusive email list. Marketwatch gathered some of Farrell’s more famous observations, and republished them as 10 Market Rules to Remember.” – via The Big Picture

An interesting piece of analysis via TBP about rising gas prices crowding out retail and industrial consumption. The premise is sound but fails to acknowledge the already stimulative effect of a $2.50 decline in prices from their 2008 peak…