An insight into money madness
In his book, Boomerang: The Meltdown Tour, Michael Lewis becomes a disaster tourist, exploring how different people reacted to the boom and the bust.
It is often the fate of books exploring fast-moving political or economic events that they quickly become out of date. Boomerang: The Meltdown Tour, written by Michael Lewis, is not one of them. For, although the sovereign debt crisis has been unfolding for some time now, the issues remain unresolved and the main characters are still around to shine a light into some of the darker corners of the main events.
The book is part travelogue, part economic history and part satire. It provides a layman’s overview of the sovereign debt crisis through portraits of five countries that have played a central role in the development of the crisis: Iceland (because it all started there); Greece (financial Ground Zero), Germany, Ireland, and California (the US version of Greece).
Lewis starts with an interview with Kyle Bass, a Texan hedge fund manager who managed to figure out Europe’s fate by scribbling figures on the back of an envelope, without any knowledge of the region or any experience of having travelled there. Somehow, this gun-toting, cigar-chomping, all-American loud-mouth has laser vision when it comes to finance; a vision for which the Europeans should have bartered all their much-vaunted sophistication, given the problems they face.
The book throws up numerous imponderables. How did the Germans, usually so fiscally correct, end up being the ones who bought all the toxic debt? As Lewis says, incredulous: “When Morgan Stanley devised extremely complicated credit default swaps so they were all but certain to fail, so that their own proprietary traders could bet against them, the buyer was German.
When Goldman Sachs helped the New York hedge fund manager John Paulson design a bond to bet against – a bond that Paulson hoped would fail – the buyer on the other side was a German bank.”
The strength, and also the weakness, of this book lies in the portraits he paints of crisis-hit countries and its people. They are deftly written, well-observed and witty, but are necessarily impressionistic and so are vulnerable to accusations of stereotyping.
Lewis’s attempt to explain the German anomaly by reference to their alleged national character somehow strays into their apparent obsession with faeces. As an explanation, it doesn’t work. Still dealing in stereotypes, he could have suggested that German traders took the debt instruments ‘at face value’, so to speak, on the assumption of ‘alles in ordnung’, although admittedly this dull explanation won’t sell books.