Customer Reviews

I.O.U.: Why Everyone Owes Everyone and No One Can Pay

5 star:		(28)
4 star:		(6)
3 star:		(4)
2 star:		(1)
1 star:		(1)

 

 

John Lanchester's explanation of the economic meltdown of 2008-2009 gets my 5-star rating for a number of reasons:

* it's short, but comprehensive - in just over 200 pages, he tells you not just what happened, but how and why
* it's brilliantly written - Lanchester, a novelist and regular contributor to "The New Yorker" and "London Review of Books", hits the ideal combination of explanation and analysis. When he started his research from the book, he did so as a smart, intelligent outsider, with the curiosity and bulls**t-detecting skills of a keen reporter, all of which makes him an ideal guide.
* the author's ability to explain complicated technical material in a way that is succinct, but crystal clear
* even though some of the book's implications are pretty depressing, Lanchester is authoritative, clear-sighted, and extremely funny
* his ability to place events in the relevant historical and cultural perspective is impressive

Before reading "I.O.U.", the only other work by Lanchester that I had read was his debut novel "The Debt to Pleasure" (which won the Whitbread award, among other prizes). That book had a certain appeal, but was also quite disturbing. This latest book is a terrific accomplishment, and I have no reservations about giving it my highest rating.

One of Lanchester's concluding metaphors is borrowed from climate scientist James Lovelock, who observed, about 20 years ago, that what the planet needed was the equivalent of a small heart attack. Such an episode, in an individual's life, is often beneficial, because it forces the person to fact unpleasant facts and to adopt a healthier lifestyle. In Lanchester's view, the recent economic crisis, is the equivalent of laissez-faire capitalism's small heart attack. We have the chance to insist that our governments change the rules to make sure that it truly can never happen again, because even if there is only the ghost of a chance that it can, it will; that's the nature of modern markets. Failure to make the needed changes at this point is the equivalent of celebrating our release from hospital with a carton of Rothmans, a bottle of tequila, and a supersized Big Mac with jumbo fries.

In other words, it's time to abandon the hedonic treadmill and hop on a real one.

This should be required reading for every politician in the world and everyone who ever plans to vote. Lanchester is absolutely right that the world of finance is too much of a mystery to almost everyone. This is a remarkably accessible guide to that world, the people who live in it, and its mystifying laws and practices. A great read. Buy it -- read it -- send it to your friends.

BTW, I read the Kindle edition, which unlike some Kindle books is PROPERLY PROOFREAD. What a relief.

What you will learn:

* A reasonably clear and understandable explanation of financial
derivatives and instruments.
* A short history of the latest boom and bust, how it happened in the
U.K. and the U.S., and some of the devastating effects in Detroit and
Baltimore.
* Why and how we (humans) can't judge risk and shouldn't be trusted with
our own money. Also, why risk analysis models and programs help us to
take on even more risk than we should have and to make even worse
decisions than we would have.
* How things that were wrong were not detected by the people that should
have and why.
* A short history of financial deregulation and of regulatory failure in
both the U.K. and the U.S.

What's wrong:

* The values, both theirs and ours. After all, many of us were the ones
who maxed our credit cards and took on the mortgages we couldn't repay
and consolidated our loans so we could borrow more and ...
* The system -- It's not just a few bad people in the system (though we
had enough of those, too), it's the people that make up the system and
the power that they have and way the system responds to those people.
* The influence -- Our government responds to pressure (a democracy
should); but increasingly our government, in the U.S. responds to
pressure from those that have money or power or both. We are,
according to Lanchester, like a banana republic, 3rd world country in
that respect.
* The incentives - The pay and financial rewords for executives and for
those working in the financial industry are misaligned. Specifically,
the financial sector gave huge rewords to those who took extreme
risks, and it did not punish or give dis-incentives when those risks
went wrong.

What to do about it -- Saying that we all should become better people does
not seem very helpful. Voting the rascals out is likely to produce another
set of rascals. And, better regulation, which we are unlikely to get, only
works when you have better people to do the regulating, and vice versa. We
can hope that the next crash will be bad enough to cause a change, though
we'd really be foolish to wish for a next time. Perhaps "next time really
will be different".

You'll get all this and more from Lanchester's book.

This book makes understandable in a lay language what is going on in our financial system. Most economist should learn to write about this topic with this level of clarity. It should be read in schools (mostly in overrated MBA programs that contributed to creat the big financial mess). AJJ

like an idiot, then this book will is a rude lesson on what you might mistake your wealth to be - its actually what is in your pocket at this minute. If your life saving are in a house, stocks, bonds, annuities, or even the neighborhood bank, its just an illusion. The recent financial crisis made that painfully clear to many, all over the world. The author, the son of a banker, and has followed the industry all his life and combines childhood memories and professional reminiscences of the ungodly world of finance. It purveys a humorous (if you have a sense of humor left), yet insightful accounting (no pun intended) to the shenanigans that is allowed to exist in the most vital industry in the world, MONEY.

My brother is a certified financial planner. He says this requires more education than does an MBA, which he also has. He does not understand the current economic problems. After reading the book, I believe my brother is overwhelmed with data-overload. This book would clear up alot for him, but he is not about to read it because he thinks he already understands, but by his 'drunkard walk' advise on how to get out, he does not.

The first chapter introduces a factor I have seen discussed no where else--the end of the cold war.
"And then the good guys won, the beauty contest came to an end, and the decades of Western progress in relation to equality and individual rights came to an end" Lanchester not only explains what has happened economically, but also why Cheney and the Justice Department saw a new practicality in torture.

Lanchester notes the cultural fears of fifty years ago that there was a developing chasm between science communication and art communication. He thinks that has been bridged, in large part by the information age where even Art History Majors must learn to use computer technology. But he sees now a gap between the money managers and everybody else--the gap particulary noted and scary among national politicians.

Lanchester shows a route around that gap.

I have a finance background and have read extensively about the financial mess that are currently living through. This book is an excellent overview for someone that doesn't have a background in finance and even for those that do it is a great summary of what occurred and who was involved. It explained technical terms in detail and it was light hearted in just the right spots. Highly recommended.

I am no brain trust. I would consider my self a little above the mean but not in the world of finance. This book should be purchased in bulk and handed out to the people you care about as a warning of the standard of living they and especially their children are facing. Before reading I.O.U., I read "Fool's Gold & Lords of Finance" (read them after this one) but I didn't have a good enough grasp of the world of finance to understand the "Money Speak" used and the explanations of animals like "Credit Default Swaps". John Lanchester explains it as clearly as anything I have read. If it hadn't have been an overused title word a good title for this book would have been "Greed for Dummies". Greed is an ugly God that can blind even the smartest of humans. I had read enough warnings (and there were many) to get out of debt and the market before the bubble got pricked. My father lived during the great depression and was hurt enough to teach me about the down side of "Excessive Exuberance" and he was no Greenspan. I hope I am wrong but this country may be done for as far as being the global leader. China and India are just waiting in the wings. If this is true it's because we shot ourselves in the foot with the greed bullet and not from any outside threat. Nothing is forever or we would all be Romans. Turn the TV off, read and get the money out of all political campaigns with public financing.

Opening with the line from Spinal Tap, "It's such a fine line between stupid and clever," novelist John Lanchester explains what happened with the derivatives, credit swaps, subprime mortgages, all of it. It's important stuff, but if you are interested at all, you've already read the newspaper and magazine accounts and you have a general, if not specific, idea of what happened and why. As a professional storyteller, Lanchester makes a confusing and infuriating tale clearer, but sadly no less infuriating.

In addition to making exotic financial instruments somewhat more understandable, Lanchester has some intriguing theories. For instance, he thinks that the fall of communism allowed capitalism to spiral out of control. Before 1989, we in the West were so concerned with showing how superior and desirable capitalism was compared to socialism, that we allowed our governments to rein in capitalism so that there were not too many outrageously rich people and not too many desperately poor people. Once communism was no longer a serious threat, we were free to take the restraints off capitalism, resulting in the outrageous disparity of super-rich and working poor.

Lanchester also thinks that the same theory applies to why the West is no longer condemning torture or assassination. It's not as if we hadn't been using torture and assassination all along, but at least we were careful to feign outrage when we were caught at it and we made a show of signing international treaties condemning it. Now we waterboard openly and admit that we have a list of assassination targets. "Kill or capture" is our way of "bringing the enemy to justice" and it's not by chance that "kill" is always stated as the first option.

It had seemed to me that the moment when nations started ditching any pretensions to human rights could be dated to when George W. Bush said "You're with us or you're with the enemy," but Lanchester's theory makes more sense.

Lanchester also adds his voice to those advocating for children to learn about economics in school. This seems obvious, especially in countries where we tell ourselves that capitalism and democracy go hand in hand. Shouldn't our children learn more about it and about economics in general, considering how important it is in our everyday lives, our politics, our future?

Lanchester, having explained and discussed the credit crunch and how it came about, leaves us with little hope that it won't happen again. He compares it to a non-lethal heart attack, which we can learn from and take steps to reduce our risk of having another. But it seems more likely that we'll celebrate our near miss with a bottle of whiskey, a big steak, and a couple of cigars. What could go wrong?

A superb analysis of the causes and players responsible for the
financial meltdown. Lanchester is a wonderful writer and he makes
complicated financial issues very readable for the layman. Highly
recommended.