Boomerang by Michael Lewis [Book Thoughts]

Boomerang is a light but horrific look into how investment banking and its religion of debt can destroy economies.


Boomerang By Michael Lewis

Michael Lewis is a snarky American whose writing tone suggests he knows everything. But to his credit: he knows a lot. He spent his early years as a bond trader on Wall Street and then his later years writing about Wall Street. His most famous book is The Big Short, an insider’s look into the 2008 financial crisis. Boomerang is an almost-sequel to The Big Short and is another tale of how greed led to stupidity and then to financial collapse in the aftermath of the 2008 financial crisis; this time overseas.

Boomerang is a neat piece of financial disaster tourism: 5 chapters and 5 countries in 200 pages.

Let’s start with Iceland. Iceland bankers though they were clever: they were borrowing buckets of money cheaply through the Yen to buy expensive assets, like airline companies. The Icelandic were making fortunes selling these assets, and kept loaning more money… until they realized that they were selling these assets to other Icelanders borrowing from the same foreigners. Boom.

Onto Greece. According to Lewis, they were manipulating their inflation figures and hiding enormous losses off the books so that they would be allowed to adopt the Euro as a currency. Until someone realized that the numbers didn’t make any sense. Boom.

Next up Ireland. The Irish banks were making fortunes loaning money to people to buy houses then loaning money to construction companies to build more houses, all at stupidly low rates. Until it got to the point where there were more houses in Ireland than people. Boom.

And Germany? Well as one of the only solvent countries in Europe, Germany had to try and save everyone else. But it turns out they were meddling in these cheap loans too.

And lastly the US municipalities, some of which currently only have two employees in an effort to cut costs since corruption has led to paying some people higher salaries in retirement than when they were actually working.

I’ve over-simplifying, but you get the gist. It’s a collection of five stories of how a banking system can bring a country to its knees. And there’s a pernicious undercurrent about human nature: people who’ve impoverished nations saying it wasn’t their fault, greed blinding the over-educated from the obvious, groupthink and people getting ostracised when they try to warn of impending collapse. Boomerang may be frivolous in tone, but the subject matter of blind avarice and investment banking’s religion of debt is depressing.

On the writing side, there’s little to say. It’s light-reading and Lewis does have an ability to simplify (and perhaps oversimplify) massive financial complexity to be understandable to a layman. He’s also a storyteller with an eye for interesting places and characters but one does get the sense that he sees non-Americans as wacky foreigners easily explainable by some quirky anecdote. At least his facts are well organised.

Boomerang is a simple (and perhaps over-simple) but horrific look into how investment banking and its religion of debt can destroy economies.

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