Michael Lewis: Boomerang

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 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.
Two Greek tax collectors, separately and anonymously, explain the convoluted machinations – including bribery, phoney receipts, legal delays and lack of a national land registry for tracing all cash property deals – by which that nation's taxes are actually not collected. (Both men had been demoted for whistle-blowing on corrupt colleagues.)
Then, for the viewpoint from the top, Lewis interviews some high-level officials, such as the prime ministers of Iceland and Ireland, the Greek minister of finance, the deputy finance minister of Germany, and Arnold Schwarzenegger, the former governor of California.
The scope of the malfeasance, corruption, greed and blind stupidity that Lewis delineates is simply astounding. Between 1994 and 2006, the average price for a house in Dublin skyrocketed by more than 500 per cent as a property frenzy sent the Irish people bidding for any square metre of national dirt. Greeks protesting a government austerity bill blocked cruise-ship passengers from disembarking at the port of Piraeus, thus depriving the country of desperately needed tourist spending.
Of course, the book has its flaws.
The California section is far too simplistic and too admiring of Schwarzenegger (or maybe too proud of the author's ability to keep up with the ex-bodybuilder as they cycle through Los Angeles). In Lewis's analysis, apparently the only villain in the state's sorry saga is the public-sector unions. What about the political system with its impossible structure and the voters who he just accused of blocking any bipartisanship? What about the business lobbies? What about the politicians who agreed to the union contracts without considering the long-term implications?
The biggest problem, however, is a lack of context. The five chapters in this book are slightly altered reprints of articles that Lewis published or soon will publish in the US magazine Vanity Fair, and it shows.
Each chapter, covering one country or state apiece, stands nicely on its own, as a magazine article should. They all do a great job on their individual jurisdictions.
But as a book, Boomerang needs an introductory or concluding chapter to tie things together. What do all these cute stories tell us about global finance and human frailty? Are there overarching patterns or trends? Possibly even solutions?
The book includes a few attempts to organise its chaos of details. There are occasional nation-to-nation comparisons, which are interesting enough but narrow. For instance, both Icelandic and Irish males are "the sort of men who ignore their wives' suggestions that maybe they should stop and ask for directions".
Sprinkled throughout is the recurring metaphor of being left alone in a dark room with a pile of money, and what each population did with the opportunity. The Greeks, for instance, merrily threw it at each other. The Irish used it to buy their own land. While it's a nice touch, it still doesn't use these cultural comparisons to draw a conclusion.
The very last paragraph may be making a weak attempt to tie things together – or it may only be talking about the town of Vallejo in northern California – but in either case, it is just a short paragraph. Even worse, it is abruptly and weirdly more hopeful than the rest of Boomerang. Lewis writes: "As idiotic as optimism can sometimes seem, it has a weird habit of paying off."
Still, country by country by state, this is one of the best pieces of analysis a person could read, and no doubt the most enjoyable. And after all, could anyone make sense of the global financial mess?
Fran Hawthorne is an award-winning US-based author and journalist who has covered finance for more than 20 years.