**spoiler alert** For readers who aren't already aware, I've spent much of the last five years of my life in and around finance. About two thirds of t**spoiler alert** For readers who aren't already aware, I've spent much of the last five years of my life in and around finance. About two thirds of that time, I've been working IT for a very niche subset of the industry: high frequency trading (the other third was spent in a market data vendor).
In spite of the implications certain people have attempted to instill, computerized trading had absolutely nothing to do with the financial crisis of 2008. The products behind that disaster were entirely over the counter---there's no trading floor for mortgage backed securities or credit default swaps. Even today, four years later, you still have a tough time getting an electronic quote for some of these products, and it's not unreasonable to say that trading a lot of these products still requires you pick up a phone and call someone.
While HFT's non-involvement in the crisis may be a boon to my own reputation, it also means that I don't have any special knowledge about what led to the meltdown and where things are now---in spite of what family and friends outside the financial industry may assume.
For that, I'm forced to turn to fellow outsiders who (unlike myself) have actually looked into the situation, and the only ones who seem to have done any research at all are Matt Taibbi and Michael Lewis.
That said, Lewis' Boomerang is not so much about the crisis itself as the consequences of the solutions which governments came up with. Specifically, the consequences to Iceland, Greece, and Ireland.
In the case of Iceland, Lewis focuses on the absolute implosion of the Icelandic financial system, particularly how the entire banking industry collapsed and was bailed out by the Icelandic government. Of course, the bailout of a bank is, essentially, the bailout of it's creditors and depositors, who in the case of Iceland were overwhelmingly foreigners.
What that means, in real terms, is that the Icelandic taxpayer were forced to pick up the tab for non-Icelanders who invested money in Icelandic banks. Unfortunately, a discussion of the causes of this is where Lewis comes off the rails a bit, blaming Icelandic men, their macho culture, and a widespread belief in faeries for the collapse.
I can't disagree that I would be skeptical of investing money in a country where construction companies have to verify there are no "little people" living on the land, but the actions of the engineers of the Icelandic financial system was the primary reason for it's collapse. But to say that the men who joined the banking system later on were at fault is to give the men who's job it was to keep their subordinates in check a pass. Blaming cultural factors is equally fatuous, no matter how rudely the guy who body-checked Lewis on the plane behaved.
From there, Lewis flies on to Greece, to explore the second-largest threat to the global economy. In the case of Greece, it appears as though the proximate cause of the collapse---and the danger to the Euro, and therefore the world economy---is predicated on the arrival of an honest man. Specifically, the rampant corruption, tax cheating, and simple lack of accounting by the government is brought to light when the new government takes over in 2009.
Unfortunately Lewis continues to try and divine some hidden cultural factor responsible for the collapse of the Greek economy, rather than the specific incidents. To put it another way, there are actual individuals responsible for the state of the Greek economy. It wasn't (just) a few corrupt priests and blackmailed officials. It wasn't a "cultural thing." There are people, with names, who put the Greek IRS on leave during election years. There are others who fire agents who prosecute tax cheats. There are still more who understated the Greek budget deficit by a factor of five.
From there, it's on to the Irish, who Lewis concludes were only truly interested in buying as much stuff from other Irishpersons as possible, eventually driven to third-world status by the staggering public incompetence of their banking regulators and politicians. Then it's on to the Germans, where a supposed cultural obsession with feces is responsible for the desire to remain publicly "clean" of the bond insanity which swept the world in the 2000s while secretly "getting dirty" by enabling the rest of the world to make all of these loans.
Finally, the book comes back to the U.S., where it reviews the places in America which have become "the new third-world", particularly towns in California forced to shut down due to (in Lewis' view) the unreasonable pension funds of their government employees.
Ultimately, this modern morality tale attempts to weave a common narrative, by describing the early 2000s as the time "when nations were let into the dark room with all the money." National character, in Lewis' view, is what defines their actions.
While the book is entertaining and a light read---just enough to comfortably knock out during the flight from Chicago (futures) to New York (equities)---it didn't really go deep enough into why things are the way they are. More importantly, it's structure glosses the most obvious failing behind the financial crisis even while condemning it: the idea that if we're all to blame, nobody is....more
This was the first "Feynman book" I've read, and I've got to be honest: while it was very entertaining (if a bit too much on the self-justification),This was the first "Feynman book" I've read, and I've got to be honest: while it was very entertaining (if a bit too much on the self-justification), the most interesting bits were those related to the Challenger accident report....more