Here's the thing, as Robert Peston compulsively remarks online, on air and in print: how come many acclaimed experts – Gordon Brown, Alan Greenspan, Hank Paulson, Fred the Shred and Merv the Swerve – got it so calamitously wrong? How come they were all credit-crunched in 2008 and 2009? Even Peston wasn't infallible. He could see desolation arriving but not to a precise schedule, not so that he could raise his voice in BBC editorial meetings and demand a special timber-shivering spot on Today. This mess caught everyone flat-footed – and by far the best half of his book is explaining how and why.

Peston, to be fair, did know that something was drastically wrong. He got his famous Northern Rock scoop because he'd spotted that the Rock – overleveraged, overborrowed, overconfident that the good times would roll on for ever – was patently vulnerable once confidence wobbled. He was waiting for the Bank of England to lurch to the rescue: his exclusive was rooted in analysis. But he's utterly right – here's another thing! – to turn some of his fire on journalists themselves, on the dogs that didn't bark.

Begin with newspaper editors who "rarely knew much about business and the economy and couldn't have cared less" about the continuing yarn of who was up or down on the stock market that day. Ask where, apart from the very specialist press, you could find any coverage of bond markets, derivatives, foreign exchange markets and, crucially, debt markets. "For years all this borrowing and lending was thought of as the equivalent of a sewage system or an electricity grid – necessary but dull." Yet suddenly the sewage started to swill down Threadneedle Street as the grid went up in flames.

Peston, from his earlier stints on the Investors Chronicle and the FT, was more up to speed than most. He'd followed the mushroom growth of foreign exchange trading, bond markets, the whole derivatives industry offering you a speculative punt-cum-malign insurance hedge bet on "the weather in the Caribbean, the unemployment rate in Japan, the risk of political unrest in China". Make that $43 trillion of unallocated loans, around 61% of global GDP. Set these swirling currents of funny money flowing across the world each morning against the shrinking reserves that banks were required to keep liquid and guard against very rainy days, and anyone who understood the true situation could see big, big trouble building. But who, in reality, spotted such looming peril?

You can excuse the FT a few boots, give a nod of approval to a small group of watchful pundits; but the list of those who seemed asleep at the wheel is jolting. The press didn't sound the alarm; MPs couldn't tell their credit default swaps from the holes in their socks; the Treasury and its dominant minister – "No more boom and bust" – looked idiotic the moment the tsunami struck. The feted CEOs of the City's great financial institutions were as far off the pace as any. Maybe greed – and the fact that the more leveraged you were the fatter the profits you could make, and then pay yourself – blinded them to the risks they were taking. But maybe, too, they didn't fully comprehend how exposed that left them. Maybe, like so much of a Britain gorged on easy credit over two decades, they didn't understand the state they and we were all in.

And "understanding", again, is the key word for the future: understanding that one version of capitalism has failed, understanding that we have to boost banks' reserves, regulate their borrowing, get a handle on the casino markets that stretch from Shanghai to Leadenhall Street. It isn't just bankers' bonuses or City pay scales in general that matter. It's understanding what's going on so that we can control it better – and there's the rub.

Do we understand the arcane but decisive markets any more clearly than we did a decade ago? Does George Osborne exude a detailed mastery of his brief, or Ed Balls convince us that just a little more juice would help the engine tick back towards former glories? Have we absorbed the harsh lessons – here repeated – about borrowing more today than we can possibly pay back tomorrow? (See homilies about kick-starting growth that, in truth, can probably be forgotten for another 10 years or more).

There's a chilling moment Peston recalls from Sir Mervyn King's Today lecture this year, where the Governor says frankly that "we should have shouted from the rooftops that a system had been built in which the banks were too important to fail". It's almost a mea culpa, says Peston: but not quite. "For it was prefaced by 'with the benefit of hindsight' – and when any of us say 'if I knew then what I know now', we are excusing ourselves, not apologising."

It's sensible to say that Peston has less to apologise for than many, and to add that his discursive, conversational but entrancingly fact-studded trip around the disaster zone ought to be mandatory reading for anyone who wants to have a voice in where we go from here. Peston and his more shadowy co-author, Laurence Knight, have performed a signal service.

But it is also fair to say that their description of how we got into this mess is much more compelling than their prescriptions for how we get out of it, which tend to be now conventional calls for more rigid regulation, more visionary leadership, more public acceptance of hardship and toil. Well, yes: with the benefit of hindsight, that's all fine and dandy. But as a way out of the swamp it doesn't seem overwhelmingly convincing.

Peston's last chapter – rather obviously added near close of publisher play – is all about rigging the Libor rate and the horror of Barclays. Did he, or anyone else, see that coming when he started on chapter one? And if not, how do we expect to clear away the debris of the past? We may know, in infinite, grisly detail, what Andrew Mitchell said to a policeman in Downing Street, stuff we can debate over a pint without breaking sweat. But when the real stories seize us by the throat, are we any less in the dark than before?


Peter Preston

The GuardianTramp

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