The Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System. By Professor Kevin Dowd and Martin Hutchinson.

This was my favourite financial book of 2011. It is not an easy read, but the authors manage to drive home a number of important points about how we got into the present mess and how to avoid future ones, with particular focus on the fatally-flawed collection of theories and practices – known collectively as Modern Financial Theory – that they say led bankers and others into error. The authors spare few from the lash: ratings agencies, accounting standards, central bankers, government regulators, CEOs and derivative rocket scientists. They even manage to make the recondite subjects of Value at Risk models interesting. Only quibble: a touch too much populist bashing of bankers and (groan) support for a global transaction tax. (Reviewer: Tom Burroughes).

The Big Short (paperback edition). By Michael Lewis.

For sheer, grab-by-the-lapels narrative punch, Lewis (author of books such as Liar’s Poker and Moneyball), has the rare art of making the mind-bending world of credit default swaps and CDOs come to life. There is a problem with the book, however. It never really explains how the crazy lending by banks happened in the first place. Blaming it on greed is a bit like blaming a crime wave on Original Sin. Sure, there is a nod to the easy money policy of the Federal Reserve, but that does not go far enough. Lewis gets closer to some kind of explanation by talking about how some of the old Wall Street firms transformed from cautiously-run partnerships into listed behemoths. This opens the issue of limited liability, as mentioned in the Dowd/Hutchison book (above). Even so, for sheer entertainment value, this book does the job brilliantly. (Tom Burroughes).

A Hard Pounding: Politics and Economic Crisis 1974-76. By Edmund Dell.

With gloomy newsfeed on a daily basis (not so much in this publication, we hope), it is comforting to see that the world economy has been in a big mess before and come out of it alive. The author of this book was “number two” in the UK Treasury in the mid-1970s when the (Old) Labour government tried to come to grips with deteriorating world trade and stagflation. One of the government’s favourite activities was attacking wealth and the City of London, for example by taxing income from higher investment at 98 per cent – to the dismay of Dell, one of the few economically literate ministers. (Max Skjönsberg)

The View from Number 11: Memoirs Of a Tory Radical. By Nigel Lawson.

Nigel Lawson was UK finance minister between 1983 and 1989, the golden era of deregulation when financial services in the UK and many other parts of the world changed dramatically. By the early 1980s, London failed to compete with New York and Canary Warf was nothing but a wasteland, but the Thatcherite reforms leading up to "Bing Bang" in 1986 propelled the City back into first place where it has stayed since. Lawson’s 1,000-page autobiography is unbeatable for historical references. (Max Skjönsberg)

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown. By Detlev Schlichter.

The wealth management industry has witnessed the skyrocketing price of gold, and this factor, along with concerns about negative real interest rates, has reignited some debate about whether the endless expansion of fiat money can continue without causing severe damage. Schlichter, a former investment professional who has taken time out of life in the City to pen this book, is an eloquent advocate of what is sometimes known as the “Austrian” school of economics. This is not an easy book to read, but it may just be one of the most important of our time. (Tom Burroughes).

No Fear Finance: An Introduction to Finance and Investment for the Non-finance Professional. By Guy Fraser-Sampson.

This is a fine book that explains a great deal to the intelligent layperson. As a financial journalist who now works with young people making their way in this profession, I would recommend it to anyone trying to chart a course through the reefs and shoals of modern financial jargon, with its bond yields, compound returns, break-even rates and book values. This is written in crystal clear fashion, with only a smidgen of mathematics to challenge dullards such as this reviewer. (Tom Burroughes).

Spills and Spin: The Inside Story of BP. By Tom Bergin.

(Full disclosure: the author is an old colleague of mine). Reuters oil correspondent and former oil broker Tom Bergin chronicles the rise of former BP CEOs John Browne and Tony Hayward, and examines the moves and missteps of both men - and others - in the period leading up to, during and after the Gulf of Mexico oil spill disaster of 2010. Although this is about the oil sector, the book is relevant for other businesses, including wealth management, as BPs problems were in part down to poor management, a failure to focus on threats (like drilling safety) and lack of focus on the core strengths of a business. The book is packed with detail. Anyone interested in risk management, better corporate governance and the dangers of short-term thinking should read this book. (Tom Burroughes). 

Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy. By Arnold S. Kling.

This book came out almost two years ago, so it is not strictly a 2011 book, but the reviewer read it recently - which is what counts! Kling cleverly contrasts the problem that knowledge in a modern market economy such as ours is becoming more diffuse but political power is becoming more concentrated. Hence the dangers of hubris when policymakers try to push an economy as vast as that of the US. Kling very effectively shows how the big mortgage agencies in the US, such as Freddie Mac, messed up so badly. (Tom Burroughes).

The Rational Optimist: How Prosperity Evolves. By Matt Ridley.

Ridley, having managed to escape with some dignity intact after resigning from the board of Northern Rock (remember that one?), gets back to doing what he does best: applying his formidable intellect and writing skills to describing why humanity reached its present wealthy state and telling us that actually, things are going to get even better. Any book that shows how “ideas have sex” is bound to get a lot of attention. And Ridley relishes demonstrating why today’s prophets of doom are wrong. Let’s hope Ridley is on the money this time - we could all use some cheering up. (Tom Burroughes).

Advising Ultra-Affluent Clients and Family Offices.  By Mark Pompian.

This book – published by Wiley in 2009 – is aimed very much at the higher end of the wealth management market. Although pitched at the US market, it appears to have broader significance. Worth a look, although it is not exactly cheap. 

This Time Is Different: Eight Centuries of Financial Folly. By Carmen Reinhart and Kenneth Rogoff.

What a great title! As the title suggests, big mistakes – credit bubbles, railway manias, tech booms and the rest, have often led to people saying that the next Big Enthusiasm will not involve a repeat of old mistakes. Sobering and also grimly amusing in parts. And of course the best "bubble" was the one about tulips in Holland. (Tom Burroughes).