A lot has been written about the credit crises and the behavior of the banks and CDOs and CDSs so another full book about it should make you yawn. However, not this one. "I.O.U: Why Everyone Owes Everyone and No One Can Pay
" is a fascinating story. John Lanchester is not a financial reporter and has no background in economics. This makes him an almost perfect writer for this subject. He puts forward some of the clearest ideas about the crises and provides an excellent explanation for what really happened. For someone who is new to the subject - he gets his mechanics exactly right. He eventually gets preachy and the book loses some of its value but only a tiny bit. This is one of the few works of entertainment that actually do not fall in my claim that everything is about 20% more than it needs to be. If anything, it could probably have used some more pages as it ends rather abruptly.
Lanchester's philosophical explanation of the crises is the fall of the Berlin wall and the West's winning the 'beauty contest' as he calls it. This, he goes on to say, is the primary reason why there never was a real check to anything 'capitalist' from that point onwards. LTCM, Enron, and every other scandal since the fall of the wall is basically due to blatant rejection of risk and more importantly of oversight. It seemed to the powers that be, that just because communism had been defeated, capitalism was flawless!
In probably the most promising part of the book, Mr. Lanchester opines that
" is a fascinating story. John Lanchester is not a financial reporter and has no background in economics. This makes him an almost perfect writer for this subject. He puts forward some of the clearest ideas about the crises and provides an excellent explanation for what really happened. For someone who is new to the subject - he gets his mechanics exactly right. He eventually gets preachy and the book loses some of its value but only a tiny bit. This is one of the few works of entertainment that actually do not fall in my claim that everything is about 20% more than it needs to be. If anything, it could probably have used some more pages as it ends rather abruptly.Lanchester's philosophical explanation of the crises is the fall of the Berlin wall and the West's winning the 'beauty contest' as he calls it. This, he goes on to say, is the primary reason why there never was a real check to anything 'capitalist' from that point onwards. LTCM, Enron, and every other scandal since the fall of the wall is basically due to blatant rejection of risk and more importantly of oversight. It seemed to the powers that be, that just because communism had been defeated, capitalism was flawless!
In probably the most promising part of the book, Mr. Lanchester opines that
The Jet engine of capitalism was harnessed to the oxcart of social justice...with the effect that the Western liberal democracies became the [not perfect but] most admirable societies that he world has ever seen...then the wall came down and the governments of the West began to abandon the social justice aspect. The Jet engine was unhooked from the oxcart and allowed to roar off at its own speed. The result was an unprecedented boom, which had two big things wrong with it: it wasn't fair and it wasn't sustainable.Anyone and probably just about everyone should read this book.