Tuesday 21 November 2017

Review: Economics: Boomerang: The Meltdown Tour by Michael Lewis

Allen Lane, £20

'Americans wanted to own homes far larger than they could afford. Icelanders wanted to stop fishing and become investment bankers. The Germans wanted to be even more German; the Irish wanted to stop being Irish." This is how Michael Lewis sums up how we all ran out of money.

Lewis has already told the story of the US crash in his huge bestseller The Big Short; this new book brings the story up to date. In Boomerang, Lewis brings readers on a "meltdown tour" of Europe's financial hotspots in a quest to find out how it all went so spectacularly wrong.

Far from being depressing, it's a hilarious romp that will have you laughing out loud at the great one liners that just say it all.

Iceland for Lewis is "Wall Street on the Tundra" -- a fishing nation that became a hedge fund. When its bubble burst, Iceland's 300,000 citizens found they were in some way responsible for $100bn of bank losses.

It was a crash that saw people stocking up on food and taking their money out of the banks and putting it literally under the mattress. There were hundreds of people walking around with bags stuffed with as many foreign currencies as they could lay their hands on.

In the good times they had borrowed lots of money to buy as many assets as possible. They used cheap money to buy private jets, second and third homes in London and Copenhagen. They thought the party would never end.

There were a few people who warned they were heading over a cliff, like Lars Christensen, of Danske Bank, who travelled to Iceland to tell them why. "I was told, 'you're Danish, and you are angry with Iceland because Iceland is doing so well'," he explained.

Sounds familiar, right?

And then there is Greece.

Lewis writes brilliantly about what he found in the nation that invented maths and leaves you in no doubt about the scale of its financial problems.

It is an utterly corrupt society where people who go to public health clinics assume they will need to bribe doctors to take care of them, he says.

Their current prime minister, who is trying to sort out the financial mess, tells Lewis about trying to find out exactly how much money the government had, or, more precisely, owed. None of the official figures were what they seemed. One of their mathematicians became known as "the magician".

He was the man who had for years been able to make inflation, the deficit and the country's debt disappear by massaging the figures. Collecting taxes was never taken seriously.

Much of what Lewis found in Ireland has already graced the pages of Vanity Fair. The Morgan Kelly warnings, the ghost estates and the fatal bank guarantee.

The late Brian Lenihan faced a choice, he says. "Should he believe the people immediately around him or the financial markets? Should he trust the family or the experts? He stuck with the family. Ireland gave its promise. And the promise sank Ireland."

We know the rest. The Germans were no slouches either. They played their part in boosting the rise in subprime loans that ignited the credit crunch. As for Californians, well they were happy to pump up their debts up like Arnold Schwarzenegger's biceps.

Lewis has emerged as the best financial writer to cover the entire catastrophe and Boomerang is another great read. It is highly entertaining and perceptive. And it reminds us we weren't the only nation to blow ourselves up.

Siobhan Creaton is a Business Correspondent with the Irish Independent and the author of A Mobile Fortune: The Life and Times of Denis O'Brien, and of Ryanair: The Full Story of the Controversial Low-Cost Airline

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