Book Review: Boomerang
Lewis, Michael. Boomerang : travels in the new Third World. W.W. Norton & Co., 2011.
Underlying the amusing new book Boomerang is the sad truth that the global economic crisis is far from over. In the US, the federal government took over the sub-prime loans made by Wall Street banks. And in Europe, massive private debt was also absorbed by their sovereign governments. Because people borrowed far more than they could pay, the amount of worldwide debt has more than doubled since 2002. In Europe, there are at least six nations that are unlikely to pay off their debts. What then?
Sounds depressing, but in the hands of an expert writer like Michael Lewis, this story becomes a fascinating combination of economics lesson and cultural analysis. Lewis traveled throughout Europe to explain how the national character of each country played a different role in how the crisis evolved. In Iceland, young fishermen with little training but with a high tolerance for risk became private bankers who leveraged capital by trading assets among themselves at inflated values. In the end, Icelanders amassed debts amounting to 850% of GDP.
In Greece, Lewis found an astounding level of waste, theft and bribery. Greek banks loaned 30 billion euros to the Greek government where they were stolen and wasted. Raising revenues has been impossible due to massive tax fraud and Greeks have taken to the streets to resist making changes. By contrast in Ireland, real estate developers used leveraged capital to go on a building boom that bankrupted the country, yet Irish people were resigned to covering the losses.
In Germany, bankers who made conservative investments at home were too trusting of the games played on Wall Street. They lost giant sums in the risky American subprime and in Greek government bond markets. Lewis claims that this is in keeping with a German obsession with orderliness, and their fascination with excrement.
At the end of the book, Lewis traveled to California, where his evaluation of Americans was even harsher. As long term interests were sacrificed for short term rewards, cities were bankrupted. Americans took cheap money to buy homes far larger than they could afford and allowed the strong to exploit the weak. Strongly recommended.
This title is also available as an audiobook.
© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
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Tags: Financial Crisis