I'm not done reading this, but I wanted to make a few comments anyway, so you can all run right out and either (a) buy your own copy and read it, because you should and/or (b) cheap it up and go read Yves Smith at her blog Naked Capitalism.
Smith has been in the industry for a few decades and she's detail oriented. Her writing style at times turns to cliches, and I don't necessarily find her convincing in asserting that the whole oil price thing was driven by speculation -- I agree that was a factor, but I persist in believing there was supply tightness and will be again as the economy picks up in the near future, here and elsewhere.
But her survey of the history of changes in financial instruments and regulation thereof is very enlightening. Her integration of it with economic theory as taught in schools and believed in the financial and political community is amazing and insightful -- especially since she keeps pointing out what's wrong with all of that. Best of all, Smith does not allow the guy with the weird hat and the wand to distract her from what matters:
Illiquid assets are risky.
Leverage is risky.
People whose personal incentives are poorly aligned with the survival of their company (and their country) will wreak havoc.
Yves Smith is no Elizabeth Warren. But she's definitely worth spending a lot of time and thought on. She provides the kind of context necessary to think about what regulation might help, and what regulation will just cause us to relax enough to get completely messed with. Again.
Words to live by: in finance, if it looks too good to be true, it is.
But the phrase which haunts me, every time she mentions it, in the book or on her blog: leveraged spread strategies in illiquid markets. Read more here:http://www.nakedcapitalism.com/2010/05/incentives-complexity-and-the-blame-game.html
Yeah, you definitely have to wedge your head into a weird space to make sense of it all, but it has a lot of explanatory power.