By Leah Spiro
| | Boomerang, Travels in the New Third World By Michael Lewis W.W. Norton & Co. $25.95 |
Michael Lewis is making a career out of shadowing hedge fund managers. In his 2010 bestseller, The Big Short, Lewis told the story of FrontPoint Partners’ Steven Eisman and why he shorted the mortgage market. This proved to be a highly entertaining way to illustrate the causes of the financial crisis.
Now Lewis has done it again. While writing The Big Short in 2008, he met Kyle Bass of the Dallas hedge fund firm Hayman Capital Management. Bass was just starting to short entire countries in anticipation of what we now know as the sovereign debt crisis. He was convinced that the countries most hobbled by debt would default and was especially fascinated by Iceland, Greece and a few others.
Lewis set about visiting these doomed countries as a shameless financial disaster reporter. His topic: the fraying social fabric produced by excess debt. In Iceland, Greece and Ireland, he speaks with a mix of political leaders, financial types and ordinary citizens to see what financial Armageddon looks like. Lewis is essentially following the money, the “cheap and indiscriminate lending between 2002 and 2008,” to see what kind of impact it had on each country. Part travel writer, part financial sleuth, part psychologist, Lewis explores how each country binged on debt in its own special way.
One of the best chapters is on Greece, which is now dragging down all of Europe with its profligacy. Lewis slipped into a Greek monastery to show how two clever monks quietly built a commercial real estate empire on the Greek treasury’s dime. This produced a huge scandal, cost a prime minister his job and demonstrated the breakdown of Greek society, since the monks saw fleecing public funds as their God-given right. Lewis says the real problem is that Greece has lost the civic spirit that unites its people as a country. “It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good,” he writes.
Lewis portrays the Icelanders as frustrated fishermen who wanted to be white-collar financiers. Icelanders used the deluge of foreign money to buy “trophy companies in Britain, chunks of Scandinavia” and then after their banks crashed, returned to being very good cod fishermen.
The Irish melted down differently: “Left in a dark room with a pile of money, [they] decided what they really wanted to do with it was buy Ireland. From each other.”
The Germans are outliers. They are constitutionally unable to spend promiscuously, which Lewis attributes to their historic experience with inflation and their anal national character. He has a field day tracking down all the German idioms for excrement.
Finally, Lewis gets around to maligning the good old U.S. of A. He interviews Arnold Schwarzenegger, the former California governor who failed to rein in his state’s out-of-control spending. Lewis ends with a conscientious firefighter in the bankrupted California city of Vallejo, who explains how funding cutbacks have hurt his ability to do his job.
Through the miracle of good writing, Lewis transforms his dark subject matter into a highly enjoyable read, drawing laughs by poking fun at his hapless European characters. He is also a genius at cutting through financial complexity to explain what is really going on.
Don’t be put off by all five chapters having already appeared as articles in Vanity Fair magazine. They are just as much fun to read a second time, and they work well together as a book. Lewis proves once again that if you are looking for a Cassandra to show you the future, you should avoid the economists and fortune-tellers and talk to a good hedge fund manager.
Leah Spiro is president of Riverside Creative Management, a literary agency.
