Michael Lewis can write about almost anything, from Icelandic fishing practices to life in a Greek monastery, in a style that is not just clear, not just colourful, but also an absolute pleasure to read. Best of all, he can write in this way about finance.
In his newest book, Lewis – the best-selling author of Liar’s Poker (about his four years at the now-defunct Wall Street firm Salomon Brothers), The New New Thing (about Silicon Valley), and Moneyball (about American baseball, now a movie starring Brad Pitt) – heads to Europe and the United States for a financial travelogue. Wielding his trademark innocent-abroad approach, he explains the economic crises in Iceland, Greece, Ireland and California, plus Germany’s role as unacknowledged enabler and unwilling saviour.
As always, Lewis nails the essence of the problem with straight talk and dry humour.
“A handful of guys in Iceland who had no experience in finance were taking out tens of billions of dollars in short-term loans from abroad,” he writes, “They were then relending this money to themselves and their friends to buy assets – banks, soccer teams, etc. Since the entire world’s assets were rising – thanks in part to people like these Icelandic lunatics paying crazy prices for them – they appeared to be making money.”
Of Greece, Lewis says its people wanted to “turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it ... tax collectors on the take, public school teachers who don’t really teach, well-paid employees of bankrupt state railroads whose trains never run on time, state hospital workers bribed to buy overpriced supplies”.
“Left alone in a dark room with a pile of money”, he writes of the Irish, “[they] decided what they really wanted to do with it was buy Ireland from each other ... Their property boom had the flavour of a family lie: it was sustainable so long as it went unquestioned and it went unquestioned so long as it appeared sustainable. After all, once the value of Irish property came untethered from rents, there was no value for it that couldn’t be justified.”
Of Germany, Lewis states that “in their financial affairs they’d ticked all the little boxes to ensure that the contents of the bigger box were not rotten, and yet ignored the overpowering stench wafting from the big box.”
Finally, he describes California organising itself “not accidentally, into highly partisan legislative districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or meddle with big spending decisions. On the off chance that they found some common ground, it could be pulled out from under them by voters through the initiative process. Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them.”
To understand each country or state’s personality, Lewis seeks out ordinary sites (the short-term car park at Dublin airport) as well as extraordinary tourist attractions (mud wrestling in Hamburg, Germany).
In Iceland’s politics, he finds a deeper explanation of the macho culture: “That a nation of 300,000 people, all of whom are related by blood, needs four major political parties suggests either a talent for disagreement or an unwillingness to listen to one another.”
While driving around Germany, Lewis marvels that bombed-out banks and town centres have been rebuilt to look exactly as they did before the Nazi era, so that “it will one day appear as if nothing terrible had ever happened in Germany, when everything terrible happened in it.”
For insights into finance and government, Lewis likes to find one or two wise men per governing area whose warnings were long ignored, such as the Danish banking analyst who tried to alert Iceland, or the economics professor at University College Dublin who specialised in the Little Ice Age but who also had pierced the Irish property bubble.