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Guest John Cassidy

By this point, everyone knows about the global financial crisis - but do we understand what really happened? Here's how most experts explain it.

Over the past year or so, in America, the housing market was booming, interest rates were low, and banks there were handing out 'sub-prime' mortgages to people who really couldn't afford them. And those mortgages? Banks basically bundled them up and sold them to global investors in complex financial deals that few of us really understand. Then, trouble hits.

People started defaulting on those mortgages, banks took a huge hit, investors panicked, the markets crashed, and bam! A global recession hit.

That's one version of the story.

John Cassidy takes a bigger picture look. Cassidy covers the economy for 'The New Yorker', and he set out to explain what REALLY went wrong

He starts way back - in 1776 with Adam Smith, and his theory of the 'Invisible Hand' - in short, the theory that claims the economy regulates itself. For years, economists have used that theory to justify a free market... In other words, a market with little to no government regulation.

Well, Cassidy says that free market thinking is what sunk us - because, he says, markets DON'T self-correct. And he'd know, with a M.A. in Economics from New York University and over twenty years of reporting on business and finance. Cassidy has a lot more to say about the problems with markets in his new book: 'How Markets Fail: The Logic of Economic Calamities.'

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