Will Byrnes's Reviews > Boomerang: Travels in the New Third World
Boomerang: Travels in the New Third World
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Checking in with the whiz kids who predicted the Wall Street crash that he wrote about in The Big Short, his excellent look at the latest Wall Street meltdown, Michael Lewis finds that the next big bust will be on the nation-state scale. His construct for analyzing how nations deal with the economic environment of the 21st century is to imagine each of these countries in a dark room in which piles of money were dumped, the easy credit available in the first chunk of the 21st century. What would the different countries do, based on presumed national characteristics?
Michael Lewis - image from The Guardian - photo by Cody Perkins
The answer, obviously, varies from nation to nation. In the case of Ireland they used the money to buy up property, Irish property, and sold it to each other for increasing prices, generating a nifty real estate bubble that eventually burst. In Greece they used their largesse to continue what, in Lewis’s description, seems a corrupt, kleptocratic society in which the national cookie jar needed a much larger mouth to accommodate all the hands that were yanking out the koulourakia. Lewis looks at Iceland, Germany and the USA as well, each offering its own response to the sudden availability of great gobs of cash. His national portraits are very interesting, and at times amusing. It does seem a simplistic way to judge the behavior of entire nations though. Particularly when the problems that resulted were created, for the most part, not by working men and women, but financial high fliers, gambling with other people’s money. Perhaps a view of that smaller group might have been more illuminating.
OK, so suspend disbelief for a bit and go along for the ride. What Lewis finds is disturbing. It is only a matter of time before nations begin defaulting on their national debts. The likely result of such a failure would be a ratcheting up of interest rates in the defaulting nation, which would impair the nation’s ability to pay off the initial debt as investment would grind to a halt, reducing the government’s ability to cover its costs, thus increasing its need for debt, and so on in a lovely death spiral. In the USA there is a very specific way in which the debt crisis will find its way into your life and mine. That was, for me, the most interesting piece of the book. That Lewis got to hang with Ah-nold makes for a fun read, but his analysis is where the real beefcake is.
How did all this come to be? There are several reasons for this international debacle, but much of it comes down to simple greed. It may be comforting to know that the USA still exports something, even if it is a form of corruption. For example, that bastion of righteousness, Goldman-Sachs, or as Matt Taibbi prefers to call it, the Vampire Squid, did the Greek government the favor, for a stunning fee, of offering advice on how to lie to the European Community about the state of their economic affairs.
In a larger view, Wall Street monetization of assets, toxic and otherwise, took the western world by storm. Perfect. Not only are American companies drowning in lie-based securities, now investors and nations across the world are able to go glug-glug in the same waters. And in most cases, financial institutions (think AIG and Wall Street investment houses), and banks, private, public, or some combination, manage to externalize their debt, their greed and stupidity onto the national taxpayer and somehow keep themselves afloat. Thus working people in Ireland are being soaked to pay back loans made by German banks, among others, caught up in the mindless feeding frenzy. Why should the taxpayers of Ireland be stuck with that bill? American taxpayers have been hit with hundreds of billions of dollars in cost to prop up corrupt financial predators, while the hyenas continue to treat themselves to astounding salaries, bonuses, and stock options. Similar externalizations of cost have become standard operating practice, as governments step in to keep afloat too-big-to-fail corporate entities, often under the guise of keeping nations above water.
A significant point is made here about the fuzzing of the line between public and private indebtedness. As governments trend towards privatizing public assets they are increasingly on the hook for private debt, by guaranteeing private loans, or buying toxic assets. One result is a gross understatement of how much debt governments are truly responsible for, since not all the indebtedness shows up on the public ledgers. The numbers are staggering, and frightening. Big changes are needed, but all Lewis offers at the end is a feeble optimism that we (in the USA) will figure something out.
Boomerang is a fascinating read, rich with information, range and insight. It could have used a bit more analysis, and seems to refer to, without naming, a significant current trend, namely that governments are becoming little more than mechanisms through which private corporations can shift their indebtedness and failure onto the backs of taxpayers while keeping their profits nicely private. There is plenty of personal responsibility to go around. Yes, there are people who have taken on more debt than they can manage, bought more house than they could afford, but as often as not, they were misled when applying for their mortgages. (A subject that seems outside the purview of this book is that in the face of skyrocketing prices for medical care, housing, and energy, among other things, millions of people have taken on more and more debt, not to live large, but merely to be able to pay their bills) But the major culprits here are not middle class people trying to achieve or sustain a decent standard of living. Lewis, on the other hand, sees much greater responsibility lying with middle class folks, in tandem with big speculators.
The answer to so much of this is simple and clear. More fairness in our tax structure and regulation of our financial system that takes account of the street’s ability to go out of its way to create unregulated products and corporate entities.
In the United States the wealthy began kicking up the rate at which they were looting the nation in 1980. It has only gotten worse in the years since. How about we start by returning, more or less, to the tax rates extant before the Reaganauts took power? Even if we forget about trying to get back the money the rich stole from the rest of us since then, the increased fairness of the tax burden would make a huge difference in government’s ability to cover costs, including the cost of interest on the national debt that the looters incurred, and saddled us with, in order to feed their greed. How about the long-hairs at the top taking a haircut instead of them continually trying to trim the newly-bald middle class and making the lives of the poor even more intolerable.
A whole new financial economy has come into existence in the last few decades. And those making big bucks from it have paid off our legislators to keep those areas away from government regulation. It is the absence of such regulation that has allowed the madness to go on. Clearly there are more than just banks involved in the world of finance these days, and the regulators (and also the legislators that provide the laws that regulators enforce, or somehow manage not to) need to get serious about keeping up with the latest attempts to evade scrutiny. It might be nice if the financial regulatory agencies were run by people other than former Wall Street CEOs or their fellow travelers. And it is beyond ironic, into the level of evil, that those who push laws limiting government’s ability to raise revenue, and who rail against the horrors of regulation, are the very ones who gripe about the ineffectiveness of the governments they choose to starve.
Lewis doesn’t venture into such territory, but he does successfully give us a big-picture inkling of what lies ahead. As with civilization, the Greeks led the way. Will the rest of the world, the Western world anyway, follow in their steps?
==============================EXTRA STUFF
I would heartily recommend for any who have not yet read it, Naomi Klein’s great book, The Shock Doctrine. What is happening in Europe will make much more sense after you read that.
Confessions of an Economic Hit Man , by John Perkins, details how international debt is consciously used as a way of virtually enslaving entire countries.
Another outstanding analytical book is Matt Taibbi’s Griftopia , which looks closely at more domestic economic abominations
Gary Rivlin’s Broke USA shows how predatory lending practices affect our lives here at home.
November 9, 2011 - New York Times article: Crisis in Italy Deepens, as Bond Yields Hit Record Highs
January 18, 2012 - a Nation of Change article that looks into banks hoarding cheap public subsidy money while governments face increasing costs as a result of supporting private financial entities - Bailouts + Downgrades = Austerity and Pain
January 24, 2012 - Krugman on what is happening in Greece vis a vis German push for reducing the public sphere - Rooted in Politics, Austerity Worsens the Greek Tragedy
February 18, 2012 - a NY Times article offering a harbinger of things to come -
Budget Woes Prompt Erosion of Public Jobs, With a Heavy Toll in Silicon Valley
April 19, 2012 - TARP on steroids for the EEU furthers the demise of democracy - The European Stabilization Mechanism, Or How the Goldman Vampire Squid Just Captured Europe
May 17, 2012 - Relating to how Lewis sees local government as a major point at which austerity-driven service cutbacks and worse will be inflicted on regular folks, here is a Barbara Ehrenreich article on how local governments and the private sector are squeezing the poor. Dickens would find 21st Century America far too familiar.
June 18, 2012 - Joe Nocera's NY Times column on how ALEC-based programs are gutting democracy in Rhode Island
July 18, 2012 - What a Republican America looks like
July 28, 2013 - Tana French piece in the NY Times re actions and consquences in Ireland The Psychology of an Irish Meltdown
![description](https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/hostedimages/1611893196i/30776000._SX540_.jpg)
Michael Lewis - image from The Guardian - photo by Cody Perkins
The answer, obviously, varies from nation to nation. In the case of Ireland they used the money to buy up property, Irish property, and sold it to each other for increasing prices, generating a nifty real estate bubble that eventually burst. In Greece they used their largesse to continue what, in Lewis’s description, seems a corrupt, kleptocratic society in which the national cookie jar needed a much larger mouth to accommodate all the hands that were yanking out the koulourakia. Lewis looks at Iceland, Germany and the USA as well, each offering its own response to the sudden availability of great gobs of cash. His national portraits are very interesting, and at times amusing. It does seem a simplistic way to judge the behavior of entire nations though. Particularly when the problems that resulted were created, for the most part, not by working men and women, but financial high fliers, gambling with other people’s money. Perhaps a view of that smaller group might have been more illuminating.
OK, so suspend disbelief for a bit and go along for the ride. What Lewis finds is disturbing. It is only a matter of time before nations begin defaulting on their national debts. The likely result of such a failure would be a ratcheting up of interest rates in the defaulting nation, which would impair the nation’s ability to pay off the initial debt as investment would grind to a halt, reducing the government’s ability to cover its costs, thus increasing its need for debt, and so on in a lovely death spiral. In the USA there is a very specific way in which the debt crisis will find its way into your life and mine. That was, for me, the most interesting piece of the book. That Lewis got to hang with Ah-nold makes for a fun read, but his analysis is where the real beefcake is.
How did all this come to be? There are several reasons for this international debacle, but much of it comes down to simple greed. It may be comforting to know that the USA still exports something, even if it is a form of corruption. For example, that bastion of righteousness, Goldman-Sachs, or as Matt Taibbi prefers to call it, the Vampire Squid, did the Greek government the favor, for a stunning fee, of offering advice on how to lie to the European Community about the state of their economic affairs.
In a larger view, Wall Street monetization of assets, toxic and otherwise, took the western world by storm. Perfect. Not only are American companies drowning in lie-based securities, now investors and nations across the world are able to go glug-glug in the same waters. And in most cases, financial institutions (think AIG and Wall Street investment houses), and banks, private, public, or some combination, manage to externalize their debt, their greed and stupidity onto the national taxpayer and somehow keep themselves afloat. Thus working people in Ireland are being soaked to pay back loans made by German banks, among others, caught up in the mindless feeding frenzy. Why should the taxpayers of Ireland be stuck with that bill? American taxpayers have been hit with hundreds of billions of dollars in cost to prop up corrupt financial predators, while the hyenas continue to treat themselves to astounding salaries, bonuses, and stock options. Similar externalizations of cost have become standard operating practice, as governments step in to keep afloat too-big-to-fail corporate entities, often under the guise of keeping nations above water.
A significant point is made here about the fuzzing of the line between public and private indebtedness. As governments trend towards privatizing public assets they are increasingly on the hook for private debt, by guaranteeing private loans, or buying toxic assets. One result is a gross understatement of how much debt governments are truly responsible for, since not all the indebtedness shows up on the public ledgers. The numbers are staggering, and frightening. Big changes are needed, but all Lewis offers at the end is a feeble optimism that we (in the USA) will figure something out.
Boomerang is a fascinating read, rich with information, range and insight. It could have used a bit more analysis, and seems to refer to, without naming, a significant current trend, namely that governments are becoming little more than mechanisms through which private corporations can shift their indebtedness and failure onto the backs of taxpayers while keeping their profits nicely private. There is plenty of personal responsibility to go around. Yes, there are people who have taken on more debt than they can manage, bought more house than they could afford, but as often as not, they were misled when applying for their mortgages. (A subject that seems outside the purview of this book is that in the face of skyrocketing prices for medical care, housing, and energy, among other things, millions of people have taken on more and more debt, not to live large, but merely to be able to pay their bills) But the major culprits here are not middle class people trying to achieve or sustain a decent standard of living. Lewis, on the other hand, sees much greater responsibility lying with middle class folks, in tandem with big speculators.
The answer to so much of this is simple and clear. More fairness in our tax structure and regulation of our financial system that takes account of the street’s ability to go out of its way to create unregulated products and corporate entities.
In the United States the wealthy began kicking up the rate at which they were looting the nation in 1980. It has only gotten worse in the years since. How about we start by returning, more or less, to the tax rates extant before the Reaganauts took power? Even if we forget about trying to get back the money the rich stole from the rest of us since then, the increased fairness of the tax burden would make a huge difference in government’s ability to cover costs, including the cost of interest on the national debt that the looters incurred, and saddled us with, in order to feed their greed. How about the long-hairs at the top taking a haircut instead of them continually trying to trim the newly-bald middle class and making the lives of the poor even more intolerable.
A whole new financial economy has come into existence in the last few decades. And those making big bucks from it have paid off our legislators to keep those areas away from government regulation. It is the absence of such regulation that has allowed the madness to go on. Clearly there are more than just banks involved in the world of finance these days, and the regulators (and also the legislators that provide the laws that regulators enforce, or somehow manage not to) need to get serious about keeping up with the latest attempts to evade scrutiny. It might be nice if the financial regulatory agencies were run by people other than former Wall Street CEOs or their fellow travelers. And it is beyond ironic, into the level of evil, that those who push laws limiting government’s ability to raise revenue, and who rail against the horrors of regulation, are the very ones who gripe about the ineffectiveness of the governments they choose to starve.
Lewis doesn’t venture into such territory, but he does successfully give us a big-picture inkling of what lies ahead. As with civilization, the Greeks led the way. Will the rest of the world, the Western world anyway, follow in their steps?
==============================EXTRA STUFF
I would heartily recommend for any who have not yet read it, Naomi Klein’s great book, The Shock Doctrine. What is happening in Europe will make much more sense after you read that.
Confessions of an Economic Hit Man , by John Perkins, details how international debt is consciously used as a way of virtually enslaving entire countries.
Another outstanding analytical book is Matt Taibbi’s Griftopia , which looks closely at more domestic economic abominations
Gary Rivlin’s Broke USA shows how predatory lending practices affect our lives here at home.
November 9, 2011 - New York Times article: Crisis in Italy Deepens, as Bond Yields Hit Record Highs
January 18, 2012 - a Nation of Change article that looks into banks hoarding cheap public subsidy money while governments face increasing costs as a result of supporting private financial entities - Bailouts + Downgrades = Austerity and Pain
January 24, 2012 - Krugman on what is happening in Greece vis a vis German push for reducing the public sphere - Rooted in Politics, Austerity Worsens the Greek Tragedy
February 18, 2012 - a NY Times article offering a harbinger of things to come -
Budget Woes Prompt Erosion of Public Jobs, With a Heavy Toll in Silicon Valley
April 19, 2012 - TARP on steroids for the EEU furthers the demise of democracy - The European Stabilization Mechanism, Or How the Goldman Vampire Squid Just Captured Europe
May 17, 2012 - Relating to how Lewis sees local government as a major point at which austerity-driven service cutbacks and worse will be inflicted on regular folks, here is a Barbara Ehrenreich article on how local governments and the private sector are squeezing the poor. Dickens would find 21st Century America far too familiar.
June 18, 2012 - Joe Nocera's NY Times column on how ALEC-based programs are gutting democracy in Rhode Island
July 18, 2012 - What a Republican America looks like
July 28, 2013 - Tana French piece in the NY Times re actions and consquences in Ireland The Psychology of an Irish Meltdown
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Reading Progress
October 12, 2011
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Started Reading
October 12, 2011
– Shelved
October 15, 2011
–
Finished Reading
November 8, 2011
– Shelved as:
economics
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Will
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rated it 4 stars
Nov 09, 2011 07:50AM
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
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It is also futile to call upon the regulators to apply more robust scrutiny in future on their errant flock. The truth is, they simply can’t. Each economic crisis is unique: whilst we are busy shoring up against repeating yesteryear’s mistakes, a curveball comes in from left field which we never anticipated. Nassim Taleb illustrates this point beautifully in ‘The Black Swan’. The credit crunch was a liquidity crisis: banks hadn’t stress-tested for this eventuality because no one even remotely anticipated such an event happening.
We could, however, resurrect the Glass Steagall Act. True, tax payers then wouldn’t be required to foot the bill on dying financial institutions, but! The lending prowess of banks would diminish even further. If banks aren’t lending enough now, it would be much worse after. Leading to contraction in the economy, etc. Etc. If only one had a magic wand ......
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
As for the ratings agencies, either they are corrupt or incompetent. It is already a given that there is a conflict of interest in the fact that the ratings agencies get income from the bond packagers to rate their products. If they told, say Goldman, the truth about their merde, Goldman would take its rating business elsewhere. In addition, and this is pure supposition on my part, I expect that one problem here might mirror that of government regulating business in other areas. How can one expect a mine regulator to really clamp down on safety concerns if he/she knows that at the end of a few years of government service there was a nicely paid gig to be had with the miner? If, as I suspect, the flow of personnel is from raters to ratees and not the other way around, folks at Moody's and other raters would have an interest in making and keeping friends by rating products as the client wanted them rated.
Of course if they are incompetent and really did not know what they were doing, that creates a whole other level of concern. If they did not know what they were doing here, then how can we feel comfortable trusting that they know what they are doing elsewhere? In which case, what point is there in having rating agencies at all?
Choose your poison, but there is serious trouble in how financial products are rated.
It is also futile to call upon the regulators to apply more robust scrutiny in future on their errant flock. The truth is, they simply can’t. Each economic crisis is unique.I do not accept this. One does not have to be a Marxist to recognize that it is in the nature of capitalism to have booms and busts. It is only through regulatory control that the natural and ultimately destructive tendencies of market forces can be reined in so that their productive results outweigh the bad. Clinton was no better than the feral crew that followed him in this regard, allowing the Wall Street crowd to explicitly exclude derivatives from regulation. For shame.
As for every bubble being unique, I doubt it. Bubbles are bubbles are bubbles. Yes, the details matter, but the essence seems more similar than not. Paul Krugman was calling this outcome long before the event, and was largely ignored.
Yes there was indeed plenty of ignorance, but for every economic rube there was a corresponding con-man taking advantage. And when regulators come from and will be returning to the businesses they regulate the result is lagely predetermined. It might make sense to put some serious locks on regulatory revolving doors.
The credit crunch was a liquidity crisis: banks hadn’t stress tested for this eventuality because no one even remotely anticipated such an event happening.How stupid could these guys really have been? Surely they had to know that when they were holding only one dollar for every sixty or eighty or whetever ridiculous multiplier, they were at serious risk. Yes, it was a liquidity crisis, because when they tried to do their overnight repos their collateral was finally seen as the worthless poo-pile it was, so they could not borrow against that. Perhaps it was arrogance more than stupidity. And yet again, government has to step in to fix this insane market. I am apoplectic that the canyons of Wall street are not red with the blood of these people. If stealing hundreds of billions of dollars is not world-class crime I do not know what is.
We could, however, resurrect the Glass Steagall Act. True, tax payers then wouldn’t be required to foot the bill on dying financial institutions, but! The lending prowess of banks would diminish even further. If banks aren’t lending enough now, it would be much worse after.ht make sense to put some serious locks on regulatory revolving doors.They are hardly lending as it is. How much worse might it be? The problem right now is largely one of demand. Whether market or government generated, demand needs to begin before things will pick up and so far the market does not seem to be doing much in that area.
And yes we should definitely separate banking from the OTB that Wall Street (and I am sure, the City of London) has become. I hope it would not take a magic wand, but a political system that is not so tilted by huge sums being distributed by the comfortable to the legislators and executives of our governments. Of course, in the world today, you might be right. It might take a bit of magic. I suppose I might be naive in wondering if I see a bit of elfin glow emanating from the sundry Occupy movements.
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
The Greece sovereign debt crisis really exposes the weakness of the Euro (vs. the multiple currencies of earlier) and the E.U. in general: the..."
You are exactly right. Krugman recently wrote a column addressing that very issue.
![Steve](https://images.gr-assets.com/users/1291695844p1/236411.jpg)
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
Excellent review, Will. THanks for taking the time to write it.
![Richard Derus](https://images.gr-assets.com/users/1624978086p1/3920693.jpg)
I just noticed this line about the Ehrenreich article, and it made me guffaw while sobbing.
Dickens would find 21st Century America far too familiar.
I just wish Dickens were enjoying the same revival that Ayn Rand is (thanks to Glenn Beck and others.)
I just wish Dickens were enjoying the same revival that Ayn Rand is (thanks to Glenn Beck and others.)
![Richard Derus](https://images.gr-assets.com/users/1624978086p1/3920693.jpg)
The *idea* of wishing more people would have to read the wooden, leaden, deadly boring "stories" that Chuckles pumped out like a sump pump draining a cess pit...!
![Richard Derus](https://images.gr-assets.com/users/1624978086p1/3920693.jpg)
Many, many years ago I was forced into reading three works, and I hated them, and I hated him. Years passed. Another round of coercion. I hated it, and I hated him.
Third time's the charm, right? If by "charm" one means "confirming the bone-rattling loathing of Dickens," yep.
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
I imagine there is a right time and wrong time for exposure to authors. I had the same reaction as you to Ivanhoe in 8th Grade. I wonder if I would hate it quite so much now. Coercion, in the form of course requirements, can be applied usefully to expose young minds to work they might not otherwise experience, but clearly those who tried that with you must have used a teaching manual from Torquemada.
In any case, there is such a mass of material out there that one need never revisit work one despised long ago, then despised again. There is so much new work that merits our wrath.
and
Thanks, Kathy.
![Richard Derus](https://images.gr-assets.com/users/1624978086p1/3920693.jpg)
There is so much new work that merits our wrath."
Heh. In a manner of speaking, yes.
Waxing wroth over bad work is really just a function of disappointment. One starts out so hopeful, invests time and effort, and then....
![Will Byrnes](https://images.gr-assets.com/users/1291462190p1/1526851.jpg)
Waxing wroth sounds painful. And how does Wroth feel about that?
![Ted](https://images.gr-assets.com/users/1553101210p1/7213075.jpg)
http://www.thenation.com/article/1680...#
![Richard Derus](https://images.gr-assets.com/users/1624978086p1/3920693.jpg)
![Fergus](https://s.gr-assets.com/assets/nophoto/user/u_25x33-ccd24e68f4773d33a41ce08c3a34892e.png)
Thanks,