I have been a big fan of Michael Lewis, having read many of his books including the related one “The Big Shorts” and others like The Blind Side, Home Game, and Coach. This one is especially enjoyable as the book is broken down into small parts for how each of the countries or regions inflicted the financial disasters on its own: Iceland, Greece, Ireland, Germany and California Cities (San Jose and Vallejo). If you have ever wondered why Iceland, Greece, and Ireland managed to get themselves into the financial disaster in 2003 to 2008, you should read this book. And if you have ever wondered why Germans got suckered into the European Union to bail out those “New Third World” countries, you should read this book. As a California resident and one living near San Jose, I came to realize how California cities got into this financial mess from this book. As the “boomerang” title implied, those countries/region basically boomeranged back to being the Third World countries after risen up many decades ago. Michael Lewis’ story telling skill is humorously entertaining and penetrating without any excess. I utterly enjoyed this book and you will too.
Iceland: too much in-breeding (“One Big Family” – homogeneous) and group thinking without too much financial intelligence. No one or poorly-trained people (Philosophy-degreed financial minister) was watching. Due to their risk-taking nature as fishermen, they took out loans from abroad and started buying companies/assets and paying crazy prices for them and traded “fake capitals” among themselves. It’s amazing that Iceland practically “privatized” fishing by assigning quota to each one. The great fisherman could then trade his quota (% of total haul) for money, giving the person to borrow money against this quota (securitized). Lewis also touched on the tension between the men and women in Iceland. What an interesting Iceland culture!
Greece: All Greeks cheat on their taxes. The government (a “pinata stuffed with fantastic sums and give as many citizens a possible whack at it) has no financial control and couldn’t keep their books right. Bribing the government officials (except the financiers) are a standard practice. Tax codes are not enforced. How the Vatopaidi monastery got themselves a huge enterprise was incredible (trading an ancient useless lake for valuable commercial lake front properties, thanks to “forgiving” certain high-level officials and the rich and famous). The culture of Greece is such that “it behaves as a collection of atomized particles, each of which has accustomed to pursuing its own interest at the expense of the common good.”
Ireland: The Irish used borrowed money to buy Ireland real estates from each other. Thanks to foreign money keeps pouring in, Irish discovered optimism. And the central bank regulator wasn’t watching. The big differences between the American banks and the Irish ones are that the Irish big shots went down with the banks from the “Ponzi” schemes they themselves believed in. The incredible decision by the Ireland government to assume all 3 large banks’ liability may have plunged the Ireland back to the Third World country status. The story of the rotten-egg thrower at the CEO of the AIB was an interesting touch.
German: Germans, based on their culture, seem to be fascinated with “shit,” “dirt,” “ass,” and etc. They enjoy playing in the “dirt” without getting dirty – obsessed with cleanliness. They are seen as naive as they expect everyone to follow rules to the letter include driving in traffic. AAA-rated bonds (thanks to re-packaged sub-prime loans) are supposed to be risk free! They lost a bundle of money. And the funny thing is it’s a taboo to express “patriotism” hence you can hardly see a German flag.
California, San Jose and City of Vallejo: The title of this chapter in the book is “Too Fat to Fly.” The people of the California, despite its famous governator, Arnold Schwarzenegger, still could not govern themselves. The public workers, through their unions, voted themselves fat raises and ended up bankrupting the government (e.g. Vallejo). The theory is that when living in abundance, somehow we lose our ability to self regulate because of our core lizard brain. Two possible end games: destruction (like the parable of pheasant – too fat to fly and ended up being eaten by a fox) or hit bottom and face the pain – the best scenario.