Boomerang: Travels in the New Third World by Michael Lewis (PDF)

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As Pogo once said, “We have met the enemy and he is us.”The tsunami of cheap credit that rolled across the planet between 2002 and 2008 was more than a simple financial phenomenon: it was temptation, offering entire societies the chance to reveal aspects of their characters they could not normally afford to indulge.Icelanders wanted to stop fishing and become investment bankers. The Greeks wanted to turn their country into a piñata stuffed with cash and allow as many citizens as possible to take a whack at it. The Germans wanted to be even more German; the Irish wanted to stop being Irish.Michael Lewis’s investigation of bubbles beyond our shores is so brilliantly, sadly hilarious that it leads the American reader to a comfortable complacency: oh, those foolish foreigners. But when he turns a merciless eye on California and Washington, DC, we see that the narrative is a trap baited with humor, and we understand the reckoning that awaits the greatest and greediest of debtor nations.

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⭐A Domino Effect: The Hungry Ghost of ProsperityAs in his previous works, Lewis is a genius at making dull topics come alive with his creative non-fiction techniques, most particularly characterization. He achieves this through precise dialogue and well chosen descriptive detail. However, perhaps because he wanted to get this book out in a timely fashion, it suffers from a lack of depth, is loosely organized, and ends rather anti-climactically. Similar to “The Big Short,” it contains the thesis: that the sins of Wall Street have indeed contaminated international finance, and that the same disaster that visited America in its market collapse is already manifest in the copy-cat investment practices of various countries around the globe. Implicit is the warning that global economic disaster is just a bubble away. By examining the financial blunders of European countries, Lewis makes it clear that greed and ignorance by investors and institutions are the primary causes of global economic instability. It is time for financial advisers, investment institutions, monetary systems, and investors to take a second look at how they hedge their bets and whether they possess the requisite knowledge to invest prudently as well as to their country’s advantage. For in the final analysis, it is man’s incurable hubris that drives mistakes of a domestic and worldwide magnitude, just as it was in the American banking fiasco of 2008.He alludes to the collapse of Iceland’s banking system on Oct. 6, 2008 as a result of the naiveté of the young, inexperienced operatives who effectively ran Iceland into the ground by creating a gigantic “hedge fund” rather than a viable financial system. Lewis observes that Iceland was a “nation of extremely well-to-do, well educated, historically rational human beings who had organized themselves to commit one of the single greatest acts of madness in financial history.” A nation of citizens who gleaned their financial knowledge “at various American business schools,” it came as no surprise that “what they did with money probably says as much about the American soul, circa 2003, as it does about Icelanders.” Driven by materialism and greed, Icelanders bankrolled friends and family so that they might enjoy the fruits of prosperity. They took to heart the American example that it was important to buy as many assets as possible with borrowed money, assuming the market was bound to go up. Thus, they speculated, owning approximately fifty times more foreign assets than they had in 2002. They lived lavishly, never realizing they were creating a housing bubble like their American counterpart. They monetized assets to reduce debt and to avoid paying dividends to shareholders. As it turned out, a “handful of guys in Iceland who had no experience in finance were taking out tens of billions of dollars in short-term loans from abroad,” then re-loaning the money to themselves and their friends to buy other assets. Lewis quotes a London hedge fund manager: “They created fake capital by trading assets amongst themselves at inflated values.” This approach would have worked if the investment companies and banks weren’t “lightweights” and the country weren’t “inbred,” possessing as it did, so few families. Although the Icelandic traders sought advice from Goldman Sachs and Morgan Stanley, they didn’t know enough about finance to stay out of trouble. Thus, their property values existed on paper only and the country slid into bankruptcy. The fishing industry that had previously grounded the Icelandic economy was superseded by the culture heroes: the big-name bankers that are now lying low or have left Iceland for good, having brought to work on the day of the financial collapse huge plastic bags into which they withdrew their money in cash and left. In the process of describing the sudden system failure, Lewis draws a picture of an intelligent people duped by greed and ambition. Should we consider such actions American materialism gone awry? Lewis further describes Icelanders as pushy and rude, plowing into him on the streets or dropping heavy suitcases on him as he sat on a plane. Conveyed is a picture of aggressive pricks, Type A personalities whose ambition was cultivated in American universities. Moreover, when Icelandic bankers were told they had a problem, according to Lewis, they “shot the messenger.” Not only were they arrogant and inadequately schooled, they were clueless. These losses still might have been prevented had not global dealers who saw bankruptcy coming decided to short Iceland rather than publicize the problem. The exception was a U. Chicago finance authority who told the Icelandic business community they had nine months to remain solvent, but the establishment prevented the man’s words from being published. As a result, Germany, The Netherlands, Sweden and the UK lent the government of Iceland money at 14 per cent interest. Lewis concludes his study of the Iceland bankruptcy with the observation that the culture itself is macho-male and anti-women. Lewis speculates that in the future the “Icelandic female will have a great deal more to say about the financial situation of Iceland, now that the males have revealed their incompetence and thus been suitably subdued.Likewise, Lewis compares the fate of America before the Wall Street collapse to the present situation in Greece. He exposes the vast amounts of cheap credit that seemingly presented new opportunities for the ambitious citizenry. What the Greeks wanted to do with their money was “own homes far larger than they could afford, and to allow the strong to exploit the weak.” If Lewis is right, America not only disseminated its tired financial theories, it also set an example of inordinate materialism and vanity that the Greeks imitated. Particularly astonishing is the fact that a Greek monastery was partially responsible for turning the Greek government bonds into junk bonds by creating a giant swindle, forcing the Greek government to pad the monks’ real estate empire. Lewis points out that Greek government jobs pay three times what civilian ones do. The government is expensive, spending its money on a costly railway system it can’t afford and employing four times as many teachers per pupil as the highest performing educational country: Finland. The Greek public health-care system is far more expensive than those of other European countries. Thus, concludes Lewis, Greece is a country plundered by a rapacious mentality of self-serving materialism. Moreover, Greek government is not only out of control in its spending and accountability, it is also not transparent. There are no statistics the citizens can consult. In response to questions, the government simply lies about its expenditures. Worst of all, the Greek government does not enforce tax collection so huge numbers of citizens cheat on their taxes. Says Lewis, “The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating and stealing.”Nowadays Greece is a country brought to its knees by protests. Claims Lewis, “Democracy destroys itself because it abuses its right to freedom and equality. Because it teaches its citizens to consider audacity as a right, lawlessness as a freedom, abrasive speech as equality, and anarchy as progress,” it is doomed to failure. One wonders if Lewis has America in mind). Greece is anarchic; Greeks are out for themselves. They have no patriotic loyalty.When Lewis examines Ireland, he comes to the conclusion that Irish finance is “even worse than that of the Icelandic banks.” Ireland is the third most likely country to default. It has 14% unemployment and 1/3 of its citizenry under the poverty line, What fueled Ireland’s decline was the elimination of trade barriers, free higher education, and a low corporate tax rate. A burgeoning population of the young compared to the aging resulted in the rise of an ambitious professional class. As Lewis points out, “A bubble is inflated by nothing firmer than people’s expectations.” The Irish young expected the housing prices to continue rising, so they, like their American counterparts, invested in real estate, creating a housing bubble. Irish exports dwindled, and the economy was dominated by the construction industry. In their ascent, the Irish nouveau riche created what was analogous to a Ponzi scheme. As it is, today the Irish have borrowed 97 billion euros from the European Central Bank since November 2007 to repay private creditors. Real estate purchases that were below the radar ceased, and the Ponzi scheme collapsed, finally. However, a lack of disclosure continued with America’s Merrill Lynch adding to the failure of transparency by protecting its own self-interest. Finally, the Irish banks were nationalized, but not until foreign debt was paid back and Irish banks’ private lenders sustained huge losses. This practice was rationalized, not only by Lenihan, Ireland’s Minister of Finance, but by U.S. Treasury Secretary Hank Paulson. Now, Ireland is in the hands of the International Monetary Fund, which has agreed to a bailout. This is small consolation to Irish citizens with their vast tracts of abandoned estates and economically depressed young professionals.The Germans, in contrast to the other countries Lewis examines, are still strong economically, having pursued a frugal economic policy and possessing an abhorrence of debt. Lewis discusses the German “anal” temperament and wittily describes appropriate examples while explaining how that very trait has resulted in the German propensity to succeed financially. They “long to be near the s—, but not in it,” remarks Lewis. Only the Germans have established an independent Finance Ministry. However, as Lewis points out, the Germans will have to “integrate Europe fiscally” if the European Union is to survive, for it will seem necessary to European Union members that all members have some sort of financial “equality.” Yet when Germany entered into the European Union, it promised its citizenry that it would never participate in a bailout of another country. Merkel has not even appealed to the German people to bail out Greece, thus the reasons for bombs being sent to her and stones being hurled through the windows of the Greek consulate. Likewise, the European Union is rushing to ameliorate the ever growing debt of Greece, Ireland, and Portugal, but soon the Union will be rushing to the aid of Spain, Italy and even France.Germany remains the wealthiest country because it still has a gold-based economy. It is possible that the European Central Bank, not gold based, might face insolvency and thus have to seek funds from Germany. This could mean that other European countries and their banks might default. Lewis points out that Germany may well control the financial future of Europe. And all of this superiority on Germany’s part is the result of their refraining from taking advantage of cheap money. The Germans didn’t speculate. There was no credit boom in Germany. Real estate prices remained flat. As a fiscally responsible country, they thus incurred little debt. Lewis points out that although some bankers wanted to ape the American and Irish examples of speculation and borrowing, they did not do it in country although some did go abroad for that purpose. Those who went abroad in their speculative ventures ended up victims of the downturn, with repercussions for some German banks.Lewis also talks about the IKB, a private bank in Germany incorporated in Delaware. It became a so-called “conduit” for Rhineland’s monetary schemes, allowing Germany to borrow money cheaply. With their money, they purchased subprime mortgage bonds. As it turned out, these traders were also reckless and ended up regarded as crooks by their conservative countrymen while American traders who did the same thing, went unpunished and continued to prosper. The contrast in how the various traders were subsequently treated by the populace, reveals the difference in values and temperament of the two countries. While American traders were let off the hook, the Germans violators were vilified and prosecuted.Lewis concludes his scrutiny of the European banking market with an analysis of American state and local finances, noting that there are many states existing under the threat of default. He interviews Arnold Schwarzenegger and emphatically suggests that the first major state governmental entity that will go bankrupt is California. This is a state that tried to satisfy all demands of its citizens, incurring debts no state could withstand. He refers to Californians as a people who want services but do not want to pay for them. California has suffered from the housing bubble, but more importantly, its retirement funds and salaries to public servants, prison guards in particular, have resulted in what one could call a Ponzi scheme of unfunded mandates for retired government workers. He cites the city Vallejo as representing the future of California cities, where “people take what can, just because they can, without regard to the larger social consequences.” Thus, Americans, like the Greeks, are grabbers, snatching what they can even as the economy founders.Lewis wisely notes that it is the very abundance of a society that nurtures self-gratification. The better society becomes at providing instant self-gratification, the less capable of self-regulation the individual becomes, thus, the physiological dysfunction that defines America and other countries today. Lewis relates this dysfunction to drug abuse, alcohol abuse, and legalized gambling because Americans are conditioned to sacrifice their long-term interests for a short-term reward, unlike the Germans. In so doing, Americans are heading downward into the pit of dependency, one could argue. Such is the intimation of America’s decline. Perhaps this means a personality disintegration as well. Ah, America. Ah, freedom. Get your house in order!Lewis is a good writer, relating the idiosyncrasies of a nation to its financial practices. His prose is sharp and clear. The book does meander around the subjects and is sometimes repetitive. If he hadn’t attempted to get the book out early, it would have no doubt been more focused and would have lacked extraneous detail. As it is, it is still very much worth reading. Folks, the boomerang is here… It’s come back to bite us. I hope Lewis’ next book will prescribe a remedy besides psychotherapy or neuroscience to correct the prosperous Americans’ and others’ fierce senses of entitlement.Marjorie MeyerleColorado WriterAuthor of “Bread of Shame”

⭐In The Big Short Michael Lewis showed us what happened during the early stages of our ongoing financial crisis. In this new book, a compilation of more recent reportages that have appeared separately in Vanity Fair, Lewis leads us through the next leg of the story. Engaging in what he refers to as “financial disaster tourism” he hits the ground in the four locales which he regards as most emblematic of the global juggernaut that was unleashed in 2008 and that is still rolling with varying degrees of virulence over the world’s economies. Lewis again employs his trademark technique of seeking out a handful of people whose individual stories communicate the essence of a macro picture. He starts in Iceland at the recommendation of Texas-based hedge fund manager Kyle Bass. Apparently Bass has long had a fascination with Iceland because, like Bill Gates, he was an inveterate Risk player as a child and he always felt Iceland’s geographic niche between Europe and North America made it a strategic key in that game of global domination. Bass’s adult interest in the tiny country, however, had nothing to do with its geography and everything to do with its peculiar banking system. Michael Lewis travels there with that same focus, finding in the island nation’s bizarre dysfunction a microcosm for the post-2008 financial world. With its entire population roughly the size of Toledo, Ohio, Iceland had its own currency and massively outsized banks, the three largest of which collectively had assets that by 2007 had ballooned to more than ten times the GDP of the country. When the banks blew in the next year, the fallout too was outsized The origins of these queer circumstances make for an interesting story given that Iceland’s economy historically was based in little more than fishing. The people had managed to parlay this economic nucleus into a surprising degree of prosperity, which enabled education and cultural development. The problem was that career opportunities were still limited in the nation’s small-town milieu. And the other problem, according to Lewis, was the daredevil proclivities of Icelandic males. Perhaps stemming from genetic selection in an environment where the ability to fish in treacherous waters had always been a survival skill, male Icelanders seem prone to testing the limits of almost everything and then barreling blindly forward. Lewis, in amazement, describes this trait as though it had hardened into a kind of faulty neurological wiring that makes the men incapable of even perceiving risk, much less allowing it to moderate their behavior. Thus combining career boredom with an innate recklessness, Iceland was flirting with trouble when it’s professional men discovered investment banking in the 1990’s. They found they could borrow massive amounts of money in the global markets and invest it profitably for the time being in almost anything. And if regulation was weak in New York and London, it seems to have been virtually non-existent in Reykjavik. Asset values inflated into what one academic interviewed by Lewis describes as the most perfect financial bubble in the history of the world.His next stop, unsurprisingly, is Greece. And for anyone who might suspect Lewis of pursuing some kind of leftwing vendetta against the banking industry, his reporting on Greece shows him ready to apportion blame wherever he sees it, which is almost everywhere. Actually, the Greek banks come off relatively well here, and it is Greek society as a whole that Lewis portrays as bearing responsibility for the national pathos, even as he finds Greek citizens as individuals to be warm and delightful. We see a nation seemingly guided by a liberal collectivist ideology but in practice governed by private greed, fraud and universal mistrust. Hence, the Greek parliament is forever offering extravagant funding for everything Greek hearts might desire, but administration of the programs is given into the hands of corrupt officials, crony capitalists and thuggish unions who game the system at every opportunity. The cost of government is thus sky-high, while revenues to pay for it are forever lagging, due in part to almost universal tax evasion that officials do little to punish or even detect.Next is Ireland. Perhaps owing to a long history of abject rural poverty, the Irish took to residential property development like starving birds to a sudden over-abundance of corn when easy money flooded the global markets after the 1990’s. The problem was that no one seemed to be paying much attention to who was going to buy all these new homes. One can picture our financial-disaster tourist wandering aimlessly, camera in hand, around what he calls the Irish “ghost estates”. These are large, uninhabited new developments out in the Irish countryside which are connected to nothing. Construction was stopped on many of them when the money ran out and awareness dawned that buyers were lacking anyway even if the money had continued to flow. Since the Irish government chose to guarantee the blind and broken banks who funded all this, the hapless Irish taxpayers remain on the hook for it. Lewis also visits Germany, apparently to get a quick view from the other side of the Eurobanker’s table. Americans, like non-German Europeans, seem incapable of writing about the Germans without lampooning them. Often they appear as ham-fisted martinets, other times as guttural buffoons. Sometimes they are portrayed as evil geniuses who harbor fond memories of Hitler or the Kaiser and are still bent on ruling the world. Lewis manages to find a different tack. Taking his cue from a sociologist who developed the observation, Lewis informs us that Germans have a national obsession with all things scatological. In their literature, their songs, their humor and their everyday speech, it seems the Germans, more so than other cultures, are focused on excrement. The theory then attempts to explain the German love for order and cleanliness as reaction formation against this private compulsion in the other direction. Getting us back to finance, Lewis takes the idea a step further by suggesting that the Germans have worked very hard to keep their own financial system pristine, while facilitating “dirty” finance outside of their own borders. I found all this a little strained, and Lewis’s chapter on Germany is in my opinion the weakest part of his book. He fully redeems himself in the final chapter, however, where he takes us back to the United States. He finds the ultimate portrait of financial disaster in his own adopted home state of California. Here, his writing rises again to its tragicomic best. Lewis’s celebrity nowadays is such that he can get his journalistic foot into almost any door he chooses. And indeed, he opens this chapter in the company of none other than Arnold Schwarzenegger, former Mr. Universe, former pop movie icon and, of course, former “Governator” of California, all professional heights he reached after arriving in America as an obscure immigrant from Austria in the late 1960’s. For his meeting with Lewis, Arnold arrives offhandedly dressed and without any entourage or security whatsoever. He’s invited Lewis to go biking with him, and now leads him on a spin through the chaotic exurbs of Southern California. Afterwards, barely winded, and unfazed by multiple traffic hazards, he takes his shaken new charge back to his office to tell him all about California and its intractable problems. I’m pretty sure that Michael Lewis is a Democrat, but he writes without ideological blinders. He obviously admires the Republican Schwarzenegger for his intellectual honesty, optimism and relentless energy. However, even the redoubtable strongman, by his own admission, proved helpless against the problems of California. The state’s voters embraced him initially and then eight years later threw him out of office, his approval ratings having crashed through the bottom of the floor. In Lewis’s rendition, the travails of California sound depressingly like those of Greece. A land of shallow idealism mired in administrative incompetence, California promises everything but is willing to pay for little. The state’s perpetual budget crisis seems to be without the slightest hope of being resolved at any point in the foreseeable future. Arnold seems disappointed but has taken it all in stride and moved on with his life. He says he had fun trying. Lewis realizes he could visit just about any city in the state and find a relevant crisis to observe, so he picks a few. The mayor of one of them – San Jose – sums up pretty well the problems of his city and most of the others when he points out that he could terminate every single current employ in his government and not save enough money to pay the pensions and post-retirement benefits of the former employees. He could then tax his wealthy citizens into oblivion and, having thus destroyed his tax base, still not put much of a dent in the problem. Apparently believing themselves much richer than they were – particularly during the Fin de siècle boom years – government officials had fecklessly backed away from confrontation with the public service unions, who were thus able to assume a largely free hand in crafting pay and benefit packages. The day of reckoning came much sooner than even pessimists had imagined. On his way out of the Mayor’s office, Lewis asks as couple of his aids for suggestions about where, given his investigative focus, he should go next. Without hesitation they both point him to Vallejo, and Lewis makes a beeline for the place. Three years earlier, Vallejo became one of the few municipalities in the United States ever to file for bankruptcy, overwhelmed by reckless promises made in happier times to its public employees. By the time Lewis gets there, the city has few active public employees left and is a shell of itself. Many of its homes are in foreclosure and its taxable population is drifting away. Street maintenance is non-existent, and crime is rising. Paradoxically, though, it’s in reporting on Vallejo that Lewis discovers more glimmers of hope than he has managed to find elsewhere, for much the same reason that former drug addicts can sometimes be inspirational: hitting absolute rock bottom creates a certain clear-sightedness about problems and a motivation to correct them. Lewis meets the recently-hired city manager, Phil Batchelor, who has come reluctantly out of retirement to take the job. A sober, unassuming man, his one precondition for doing so was that the city council members all sign a written pledge to him they will start behaving in a civil manner towards one another. It seems someone had recently thrown a severed pig’s head onto the floor at one of their meetings. Having been able to discharge most of their debt in bankruptcy and renegotiate their labor contracts, Vallejo has the chance for a fresh start, and Batchelor is determined to make the best of it. He’s not interested is apportioning blame to anyone for past failures and is pragmatically focused on solving problems one at a time. Lewis also spends time with a 41-year-old Vallejo fireman named Paige Meyer. Meyer has seen his compensation and benefits cut sharply, but is nonetheless still passionate about his work. He treats fighting fires as though it were a calling, and is re-inventing the job to make do with fewer resources, even though Vallejo apparently has many more fires than other comparable communities. He seems to have no bitterness and to enjoy his life despite the financial devastation around him.Putting all these stories together, it’s not hard to get Lewis’s vision of what has happened to our developed Western economies. He doesn’t preach, but rather like Dickens’ Ghost of Christmas Future, he lets the grim facts unfold and speak for themselves. The common denominator here is the illusion of easy money, which our modern financial markets have conjured up for us and which has fooled everyone from multi-millionaire bankers to municipal street cleaners into thinking that everything they want is there for the taking. Lewis doesn’t say it directly, but he appears to regard the problems of places like Greece and Vallejo as indicative of what lies in store for all of us who fall prey to illusions that life is easy and money is free. Despite his gloomy subject matter, the tone of Lewis’ writing remains funny and optimistic. He closes with stories about people like Batchelor and Meyer because he wants us to see in them role-models for how to get by when our world suddenly ceases to be sustainable.

⭐One of my favourite ever books. This copy was perfect. Brand new, exactly as described.

⭐A bit dated but a good read. Arrived quickly

⭐Good to made this trip with Lewis to Iceland and to my favorite essay-chapter: Greece and the Vatopaidi. It is the second time I read it. First I bought the kindle and maybe a year or more later bought the hardcover. The story of the Vatopaidian monks makes the reader smile every now and then. After the book, you will put it back to the your personal library shelf slightly a diferente person. That’s what good writers are for. Hope that Lewis keep writing as new developments in European Union and the Américas unfold. Thanks Lewis, for exchanging the “trade floor” for your “writing room”. Hope I helped other Amazon customers.Lewis demonstrates with great panache that one book can be funny, brilliant and dead wrong, all at the same time. In Lewis’s case, this is aggravating. His assessments of world fiscal situations have the ring of freshness, experience, truth and wisdom, yet his assessments of people, often quite humorous, are unsteady and thus undercut whatever it is he wishes to say about the economic situation, which is a lot. He seems somewhat unaware of his own presence, so when he walks down an Icelandic street and enters a series of collisions with Icelandic men, it doesn’t seem to occur to him that he may have broken a social rule about how strangers pass on a street. Instead he belittles Icelandic society. It gets worse. He slams the Germans, for instance, for having a language and a culture built around images of filth, without noting that American culture does the same thing. Another example: he spends a lot of time harassing people from numerous countries for ridiculous and irresponsible behaviour, yet when he comes to his native California he glosses over the same irresponsible behaviour as if it weren’t even there. That’s cowardly and untrustworthy. Buy a box of salt, enjoy Lewis’s style, hold your nose when he goes off the deep end, and read this as a model, in style and form, that can lead to a truly great book in the hands of a different writer. By all means, read it, though. There’s some real smart stuff in here, in a refreshing format. Just beware. People aren’t totally his thing.

⭐Ich kann mich der Rezension des Doktors weiter unten nur anschließen. Wer die anderen Bücher von Lewis kennt, insbesondere the big Short, das wirklich brillant war, findet das Buch bestimmt eher flach. Gewiss, einige richtige und interessante Schlußfolgerungen, aber man hat doch immer wieder den Eindruck, hier reist ein Amerikaner zum ersten Mal in die Welt und staunt. Ich kann mich des Eindrucks nicht entwehren, daß nach dem letzten Buch der Erfolgsdruck hoch war und dieses Buch nur geschrieben wurde, um noch ein Buch zu schreiben. Dazu passt auch, daß das letzte Kapitel von Kalifornien handelt, wo doch Europa das Thema ist. Offenbar waren noch nicht genug Seiten zusammen gekommen…

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