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If you re looking for a good story, a novelist is not a bad person to turn to At its core, after all, the financial crisis is a really good story one full of high hopes and big dreams, smart innovations and even smarter deceptions, big egos and fatal flaws It has all the makings of a classic tragedy, in fact, one whose consequences, unfortunately, are farreal than fiction.John Lanchester is by trade a novelist rather than a financier, and he brings his full bag of tricks to bear on the If you re looking for a good story, a novelist is not a bad person to turn to At its core, after all, the financial crisis is a really good story one full of high hopes and big dreams, smart innovations and even smarter deceptions, big egos and fatal flaws It has all the makings of a classic tragedy, in fact, one whose consequences, unfortunately, are farreal than fiction.John Lanchester is by trade a novelist rather than a financier, and he brings his full bag of tricks to bear on the telling of the financial crisis tale He s a good person for the job, someone who has done enough research to be able to describe the crisis in all its full glory, while using language to do so that can be understood by anyone.This is no small task, either, since the various events that lead to the crisis are woven together in a tangled knot of extreme complexity But in Lachester s capable hands, pieces of thread clearly begin to take shape Whether he is talking about the fundamentalist belief in laissez faire capitalism that lead to the steady erosion of regulations put in place to prevent this sort of thing from happening in the first place, or the misplaced faith in sexy new mathematical formulas used by Wall Street to assess risk, or the intense pressure to create new homes for the giant pool of investment capital floating around the globe, or the moral hazard created by people making loans they would immediately sell to other investors, thus relieving themselves of any motivation to determine whether borrowers were truly credit worthy or not, a picture how this enormous disaster developed becomes painfully clear.While this book is highly readable, it is not necessarily easy to read, since it is impossible to do so without getting very, very angry at those individuals at the top of the financial food chain who reaped enormous rewards at the expense of pretty much everyone else on Earth The system described, in which profits were privatized into the hands of a few while the risks were underwitten by those of us least able to afford it, is so fundamentally wrong it s hard to imagine how we ever got to this place But we don t have to imagine it, because Lanchester has so clearly described it for us, leaving us instead with the question of just now what do we plan to do about it While he does offer solutions, he does so with a healthy dose of skepticism about whether or not what needs to be done can be accomplished in our current political climate A good place to start, however, would be for everyone to read this book FROM Dr.Manu Kala.The Head of File and Auditing Department, BANK OF AFRICA B.O.A Ouagadougou Burkina Faso West Africa REMITTANCE OF US 20,5 BILLION CONFIDENTIAL IS THE CASE VERY URGENT ATTENTION My dearest SirThis message might meet you in utmost surprise, however, it will be my Urgent need for foreign partner that made me to contact you for this transaction I am banker by profession from Burkina Faso in West Africa and currently holding the post of director Auditing and accounting unit FROM Dr.Manu Kala.The Head of File and Auditing Department, BANK OF AFRICA B.O.A Ouagadougou Burkina Faso West Africa REMITTANCE OF US 20,5 BILLION CONFIDENTIAL IS THE CASE VERY URGENT ATTENTION My dearest SirThis message might meet you in utmost surprise, however, it will be my Urgent need for foreign partner that made me to contact you for this transaction I am banker by profession from Burkina Faso in West Africa and currently holding the post of director Auditing and accounting unit of the bank This is major opportunity which friend have given to me your email so pardon for that I have the opportunity of transferring the left over Funds 20.5 billion of one of my bank clients who died Along with his entire family in the plane crash All expenses incurred by you and me in this transaction will be deducted out from the 10% of the total fund before the sharing of the fund according to the part of the percentages agreed Please I want you to understand that a stitch in time saves nine so write back and tell me This payment will be effected through Swift Telegraphic Transfer Your Urgent response is needed for immediate transfer of this fund in to your receiving bank account.With most deep wish for a speedy transaction enriching both partiesDr Manu kala Hey, Carl look at this email I just got this sounds great We should do this This is just what Citibank needs It could really get us out of the hole we dug ourselves in Shit, Dave, this could save our asses 20 billion This guy is is just walking into our lives with his 20 billion and he s going to make everything good again Dr Manu Kala, I love you He don t know who he be dealing with, brother He sure don t Now then, let s not tell the boss about this This will just be our thing, right Right I had very high expectations of this book, and how could I not have, given that both Manny and David were so full of praise for it The best thing about this site is that hearing praise from certain people on certain topics can really mean the book is going to be beyond worthwhile David, for example, is a statistics person and Manny some sort of maths God, so if this book is praised by one of them it is probably worth reading, by both and it is probably essential reading And they both understa I had very high expectations of this book, and how could I not have, given that both Manny and David were so full of praise for it The best thing about this site is that hearing praise from certain people on certain topics can really mean the book is going to be beyond worthwhile David, for example, is a statistics person and Manny some sort of maths God, so if this book is praised by one of them it is probably worth reading, by both and it is probably essential reading And they both understand that not everyone is as able when it comes to maths as they are such as the benefits of this most remarkable site.I sometimes worry that I m too narrative focused, all the same, I love a good story and I assimilate information muchreadily if I can fit it all into some sort of story I like life to put facts into a logical sequence If I can say it makes sense well, that is for me And I love when someone takes the sorts of things I hear all of the time like put options or derivatives or bonds and explains them in a way that doesn t expect me to already understand these things or assume I understand ten other things first This guy can write And he understands what lecturers in my becoming a teacher degree would call the developmental continuum He writes in a way that holds tight onto your hand and never lets you go as he takes you down some very frightening streets This stuff is complex and confusing deliberately so those bastards , but his simple though not simplistic and common sense explanations are a joy to read and, like turning on an extractor fan, make clear what was impenetrable before I was observing a high school class recently and they were talking about the Great Depression and how it helped bring Nazism to the world One of the students, a very intelligent girl who invariably sat towards the front of the class, asked the teacher if the global financial crisis was over rated A bit like Y2K, it looked to her like something that had been given lots of build up only to be followed by a great big anti climax I m sure lots of people are thinking exactly the same as her at the moment The problem is that we haven t begun to pay the consequences of the crisis yet, as we are still living through the storm and governments are too afraid to start playing the game of consequences when the economy is still looking dangerously shaky But those consequences are coming Sooner or later things will settle and the good times will start and then governments will move from their current expansionist policies to begin the time when the paying of the debts we ve mounted up can begin And then none of us will have any problem in understanding just how bad this crisis was and is and will continue to be.People are still saying that pure capitalism, capitalism that is not hindered by regulation, is the only way forward Obviously, no amount of data ever disproved any ideological commitment in fact, such ideological commitments are probably only possible once the connection between theory and the real world have been severed Unregulated capitalism unregulated capitalism really isn t an option anyIn a rational world the CEOs of the world banks would be brought before a tribunal and humiliated at the very least and the editors and journalists of The Economist would be brought to court for crimes against humanity What will actually happen is that they will continue to getbonuses funded by taxpayer dollars.If you want to see what saving banks so they can continue to pay themselves obscene bonuses is going to cost us, why governments are prepared to pay 80 odd times the amount of money needed to buy a company so as to save a company that is too big to fail then this is the book to read It tells a story that will outrage you It tells a story that demands action Whether any action will come of this crisis is still very much an open question This book helps explain why we can t afford for no action, no change, to be the outcome of this tragedy Unrestricted greed might well be a fun game to play, but when the rules are fixed so that when I win I keep MY winnings and when I lose the tax payer picks up my bill it really is time for taxpayers to start payingattention.This book should be compulsory reading I d been putting off thinking about the economic meltdown It just seemed like a surefire trigger for righteous indignation Helpless, righteous indignation And what good is that it s the stuff that heart attacks are made of note not ulcers they come from bacteria feeling angry about stuff you have no control over just leaves you out there on the heath, shaking your fist at the uncaring deities above.Well, actually, it turns out that the exercise can be quite cathartic John Lancheste I d been putting off thinking about the economic meltdown It just seemed like a surefire trigger for righteous indignation Helpless, righteous indignation And what good is that it s the stuff that heart attacks are made of note not ulcers they come from bacteria feeling angry about stuff you have no control over just leaves you out there on the heath, shaking your fist at the uncaring deities above.Well, actually, it turns out that the exercise can be quite cathartic 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 bullshit 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 impressiveBefore 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 the metaphors that Lanchester concludes with 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 I have read four books recently on the credit crunch with the desire to understand better what went wrong, why and who is to blame, and to marshall my own arguments These books were Gillian Tett s Fools Gold , Ha Joon Chang s 23 things they don t tell you about Capitalism ,Michael Lewis s The Big Short , and this, John Lanchester s Whoops Lanchester s is the best of this group I had been reading Lanchester in the London Review of Books in 2007 and 2008 when he wrote about the early stag I have read four books recently on the credit crunch with the desire to understand better what went wrong, why and who is to blame, and to marshall my own arguments These books were Gillian Tett s Fools Gold , Ha Joon Chang s 23 things they don t tell you about Capitalism ,Michael Lewis s The Big Short , and this, John Lanchester s Whoops Lanchester s is the best of this group I had been reading Lanchester in the London Review of Books in 2007 and 2008 when he wrote about the early stages of the credit crunch, about CDO s and CDS s, securitisation and the Ratings Agencies He is described by critics as a writer who has studied the subject in order to present a comprehensible overview of the crunch for the financial novice But, although he is not an economist or mathematician himself and has never worked as a trader unlike Lewis , Lanchester presents a clear picture and has a grasp that differs from the others He also, unlike the others, articulates the reasons why we should all be very angry indeed and fight to get redress and stop the bankers paying themselves obscene salaries and bonuses Tett largely avoids such conclusions probably because such a stance would conflict with her role as an independent financial journalist So in a way it is Lanchester who speaks for the novice and for everyman but his isthan equal to the other books It5 is a brilliant achievement and worth re reading and using as a reference I note that another reviewer says Lanchester makes some factual errors and would like to know what So far I have seen no conflict with the facts in other books I ahve read on the subject As for what is to be done I despair sometimes that the mass of people in the UK are ignorant of the forces that affect their lives and avoid learning about the causes of what will badly affect their own lives and the lives of their own offspring for years The writer Will Self in reviewing the book said he found it hilarious Personally, I did not find the metaphors and analogies Lanchester uses that funny For me they get in the way However, I can understand why he peppers the narrative with supposedly amusing phrases and analogies, as the title Whoops itself indicates, he is trying to communicate and popularise a subject to which novices are averse He wants to make what might otherwise appear to be a complex and impenetrable subjectaccessible to the lay person But he is by no means patronising, so I make allowances for it All together excellent He should writeon the subject because this story is far from over In fact I think there is an insatiable demand among a reasonably large group for well written books on this subject at the moment, and don t think that there has been a glut Far from it John Lanchester has been reading the wrong economists I knew that would be the case early on, because he clearly does not understand what laissez faire capitalism is and interprets it to mean being in favor of deregulation But laissez faire essentially means let it be or leave it alone, meaning the government should not meddle in the markets Since Lanchester understands laissez faire capitalism to mean in favor of deregulation, he thinks capitalism has failed, even though he shows, agai John Lanchester has been reading the wrong economists I knew that would be the case early on, because he clearly does not understand what laissez faire capitalism is and interprets it to mean being in favor of deregulation But laissez faire essentially means let it be or leave it alone, meaning the government should not meddle in the markets Since Lanchester understands laissez faire capitalism to mean in favor of deregulation, he thinks capitalism has failed, even though he shows, again and again, why capitalism wasn t behind the disaster It astonishes me how often he demonstrates how government intervention created a problem and insulated people from their own behavior, then accuses capitalism as being the cause.But it s because he has been reading the wrong economists he brilliantly lays out how hanging out with those who share the same wrong understanding of reality can blind you to the truth, but doesn t realize he s been doing it himself The Austrian economists I was reading in the early years of the century were warning that the housing bubble was going to pop, and it really wasn t hard to find economists in most schools of economics saying as much even some Marxists and Post Keynesians had it figured out before it hit, because the bubble was huge and hard to miss As Peter Schiff said in 2004, Those who argue that real estate is not a bubble typically have a vested interest in perpetuating it If Lanchester had figured that out, maybe he would have gone looking for people who were not part of the group that caused the whole economic debacle in order to figure out what really went wrong In that same article Schiff predicted The real losers in this whole fiasco are likely to be those who did not even participate in the mania It will be American savers, whose retirement dreams will vanish in a cloud of hyper inflation As over leveraged borrowers walk away from properties in which they have no equity, the Fed will most likely attempt to bail out both debtors and bank depositors and the government sponsored enterprises that insured the loans with the most inflationary monetary policy ever undertaken in the history of central banking The savings of an entire generation will be wiped out, as it will have been squandered to perpetuate the biggest real estate and consumer debt bubbles of all time By 2006 and 2007 Schiff was even on TV, saying the bubble was about to burst.http www.youtube.com watch v 2I0QN Robert Blumen was warning that the housing bubble was going to burst and that taxpayers would likely take the hit for a bailout in 2002 Mark Thornton, in 2004 As Lanchester pointed out, The profession s preference for textbook perfect academic models of phenomena led to it being AWOL during the biggest economic crisis since the 1930s but he completely ignores the Austrian school of economics, which is practically defined by its insistence that these academic models are useless The Austrians tend to have a better grasp of reality because they insist on living there they re regularly criticized by other economists because their predictions aren t precise, but the very foundation of Austrian theory says that economic predictions will never be precise as to date You can see that there s a bubble and know it s going to pop eventually, but no one will ever be able to set a precise date because, while it s the simple finances that create the bubble, it s human belief systems the determine when the bubble will pop, and those are constantly in flux so it s hard to predict when enough people will lose faith in the system to bring it crashing down.Lanchester repeatedly gets so close to seeing what s going on For instance, he discusses at length the fact that the damage was done by people disconnected from reality, and that the problem with incentives was not the absolute levels of pay which the masters of the universe awarded themselves but the fact that their pay emphasized and encouraged the benefits of taking risks, while removing any of the consequences when things go wrong, he even goes so far as to point out that, whenever the wheel lands on zero, you lose a sum amounting to ten times all the money you have won to date and the good news is, you don t have to pay it the government steps in and picks up the tab, and you keep your previous winnings But then he calls this laissez faire capitalism, and says capitalism has failed Now in what sense is a system where the government repeatedly manages and rescues the financial businesses free of government interference The sorry fact is, these financial gamblers rightly predicted the government would rescue them that rescue would not have been an option in the pure laissez faire capitalistic market Lanchester keeps telling us we had In reality, there is no pure laissez faire capitalistic market anywhere on earth, and never has been, and the system that created the housing bubble was not capitalism but government intervention.The Austrian school of economics, which comes about as close to laissez faire capitalism as any, is still in favor of the government regulating fractional reserve banking, and the principles behind that argument i.e., that artificially inflating money is a bad idea would have and did, in many cases allowed them to recognize the disaster brewing in the derivatives market as well Lanchester, in his last chapter, says we should blame the banks and the governments which let the banks do what they did, completely missing how much the governments had to do with pushing the banks into doing so much that caused the crisis At least in the States, it was government intervention that forced the banks into creating the housing bubble in the first place, and, as Lanchester points out, everything else is connected into that It wasn t the government passively refusing to act and letting the banks get out of hand it was the government actively creating the situation Once again, Lanchester s definition of laissez faire capitalism blinds him to what actually happened.I gave Lanchester two stars for a couple of reasons He does a nice job of explaining some complicated financial schemes, and I liked many bits of what he had to say, like his contrast between the people who make things manufacturers and the people who make money, and how we now admire those who make money rather than those who make goods The Austrians make somewhat the same point, in that they argue that money should reflect actual goods, that when money is separated from the reality of production is when money becomes a problem Any time a culture s focus shifts from being productive to making money or being rich , priorities have been skewed in an unhealthy way, and most people miss that Lanchester s at least got an inkling Plus I thought Lanchester fairly well explained Why Everyone Owes Everyone and No One Can Pay Where he fails utterly is in suggesting the government can and should fix this problem by taking over completely, when even he recognizes that the government was to some extent responsible for it His solution is essentiallyof what caused the problem in the first place the government bankers would have evenconfidence that the taxpayers will have to bail them out than the financial organizations of the early century did EDIT Man, I m only two chapters into Thomas Woods Meltdown, and that alone had me tempted to knock another star off of I.O.U because Woods explanations of the Fed, Fannie, and Freddie, and how they convinced investors that the bundled housing loans were much safer than they actually were, is so clear and easy to understand compared to Lanchester s Then I realized that Lanchester s understanding of laissez faire capitalism as referring only to the government actively regulating the market has blinded him to clear parallels between the U.S and the U.K I was surprised that he said the U.K interest rates were higher than those in the U.S or the European Union s while the U.K housing bubble was building, so I went looking to see how that would work Turns out the U.K., like the U.S., had passed various laws making it much easier for people to get a housing loan cutting the required down payment and the like which of course resulted inpeople trying to buy a house an estimated four out of ten buyers were relying on the government intervention in order to buy.http iaconoresearch.com 2012 03 29 Which got me remembering that Lanchester actually goes so far at one point as to imply that setting the interest rate is the only tool in the Fed s toolbox to take charge of the market, which at the time I dismissed as being sloppy writing, but now I think he truly believes that The fact that he doesn t recognize how much the U.K government was fiddling with the housing market means the he really does see government intervention in the market purely in terms of manipulating the interest rate and regulations that say no Regulations that say, You must do this , when this is financially stupid, are totally, totally off his radar I suspect he thinks manipulating the market in that way is good because it helps people, so he will not consider the cost or recognize how horribly these government policies have backfired.Unless someone understands the concept of an invisible tax, how they work and why the governments uses them, this book isn t going to be much help So I ve knocked off another star The guy is engaging, and he does give the reader enough information to connect the dots but only, I suspect, if the reader has a fair grasp of the overall picture before they read this book Without that, the useful details he offers do not balance out the stuff he omits, obscures, or just doesn t get From time to time I like to read about the recent financial collapse in an effort to try to understand what happened This book is written by an author who normally writes novels, so he knows how to explain things very simply In the early part of the book it was so simple that I thought it might insult my intelligence But my mind got stretched soon enough He used simple fictional examples to try to illustrate how each new financial instrument worked I think I almost understand now what deriv From time to time I like to read about the recent financial collapse in an effort to try to understand what happened This book is written by an author who normally writes novels, so he knows how to explain things very simply In the early part of the book it was so simple that I thought it might insult my intelligence But my mind got stretched soon enough He used simple fictional examples to try to illustrate how each new financial instrument worked I think I almost understand now what derivatives are, but don t ask me to explain it.When it s all over and we look back on what happened, it s a case where all the profits from the boom years went into private hands, and when things went bust it was public money taxpayers that cleaned up the mess It s anything but fair Looking to the future the author says that we will probably look back on the 20 years prior to the financial collapse as the golden years because our future economy will be weighted down paying off the rescue payments Even if the resulting national debts are not paid off, the lingering burden of paying the interest costs will limit public spending in other areas.It s all a lesson in how financial incentives can lead intelligent people to do stupid things When I say stupid, I m thinking of the college educated math whizzes who calculated the odds of a nation wide collapse in housing prices to be less than on in a billion i.e impossible The problem was that their models were based on history that did not include a boom in subprime mortgages i.e a changed condition The following quote from the book is a good illustration of why statistics are not good at predicting financial marketshow do we know that the normative distribution applies to events in financial markets The way in which people move and jostle around a room might be plotted and mapped with statistical tools and shown to resemble something like a normative distribution sometimes people are over here, somewhere in the middle But shout Fire and the movement of people in the room will look very different it will feature a stampede toward the exitsPerhaps those math whizzes need to studychaos theory.One interesting observation is that not a single bank in Canada has gone broke during the past couple years The author suggests presumably in jest that they were spared because of their propensity of not act like their ultra free wheeling capitalistic neighbors to the south Their desire to not be like us saved them from doing stupid stuff like us So they owe us a big word of thanks for our being such a positive influence on them Actually there is a rational explanation for the Canadians conservatism in banking They had their own banking crisis about a decade ago, and they fixed it with stringent banking laws The rest of the world in contrast moved into the direction of total deregulation.On the lighter side, here s my favorite quote from the bookI d like to think he would have enjoyed the old joke about accountants What s two plus two What would you like it to beThe above quote is referring to the fact that Luca Pacioli, the first person to write in the 15th Century a book that laid out the method of double entry bookkeeping was also a writer about magic, in the sense of conjuring No doubt if he were living today he would have also written a book about mortgage backed derivatives Speaking of big words, have you heard of the following words Collateralized Debt Obligations Collateralized Debt Swaps Synthetic Asset Backed Security Off Shore Special Purpose EntityThis book does a good job at trying to explain what these words mean Using tools such as these the big investment banks figured out ways to make money available for loans risk free Their system allowed them to keep loaning the same dollar hundreds of times over without any of the corresponding risk obligations showing up on their balance sheets This led to an increase in the amounts of funds available to be loaned With lots of new money to loan there wasmoney than good borrowers Suddenly subprime loans to people who had previously been considered not credit worthy looked very appealing The loan creator didn t care if it could be paid off because the mortgage was immediately sold to others This in flow of money to the housing market increased the completion among buyers, thus resulting in an artificial increase to the cost of houses I think the core cause of the financial collapse can be summarized by the following three statements 1 Risk was separated from the originator of the loan.2 Investors and insurance companies who took on the risk were willing to believe statistical equations based on historical data that indicated the risk was virtually nonexistent 3 When lots of money is suddenly being made by others, nobody wants to be left out This book leaves me with this unanswered question How can something so obviously crazy in hindsight not be recognized as such when it was happening The following review is from PageADay s Book Lover s Calendar for 10 23 12 CURRENT AFFAIRSThe New York Times calls it angry enough to clear your sinuses, as well as thoughtful, funny, and unpretentious There have been many books explaining the real estate and credit market crashes and the resulting recession, but few are as witty and easy to swallow as I.O.U British journalist John Lanchester gives us the big picture and synthesizes the data in a way that is pleasurable for insiders and financial amateurs alikeI.O.U WHY EVERYONE OWES EVERYONE AND NO ONE CAN PAY , by John Lanchester Simon Schuster, 2010 I really enjoyed this book about the financial crisis by a UK novelist This isn t a typical journo tick tock hack jobs that are littering book store windows these days Mr Lanchester a fancy pants writer who writes for New York Review Of Books and London Review Of Books writes with humor and clarity, two traits needed for a subject like this.The book begins by putting the financial crisis in historical context Most financial books take a Battlestar Galactica approach to crashes All thi I really enjoyed this book about the financial crisis by a UK novelist This isn t a typical journo tick tock hack jobs that are littering book store windows these days Mr Lanchester a fancy pants writer who writes for New York Review Of Books and London Review Of Books writes with humor and clarity, two traits needed for a subject like this.The book begins by putting the financial crisis in historical context Most financial books take a Battlestar Galactica approach to crashes All this has happened before, and all this will happen again The roots of this crisis are traced back to the fall of the Berlin Wall and collapse of the Soviet Union in which communism is discredited as a viable economic model Capitalism, now freed from even having to pretend to make concessions to the socialists on the left, begins a 20 year end zone victory dance.A culture of douchebaggery, as he calls it, soon runs rampant in the financial sector, systematically bullying governments into repealing laws passed in the wake of the Depression and passing laws forbidding regulation of newly invented financial products Derivatives are used to amplify gains instead of hedge risks International borders become legal loopholes for large corporates to do what they want Risk is put in neat little packages, given ridiculous ratings by agencies, and passed on to third parties.Mr Lanchester compares the actions of the financial industry over the past few decades to discovering that cameras used to detect speeders don t work if you drive fast enough and then using that knowledge to drive 70mph through residential streets Eventually someone bad is going to happen.There are some sections about Balti and Detroit and how a bunch of people lost their houses I m probably a jerk for saying this, but I find this to be the least interesting part of the book because I ve already heard this story a bunch of times in the NYT and in Michael Moore movies.The book ends with a prediction of decades of unrest and even violence once society starts to absorb the cost of this crisis The author reminds us that the bill for all these bailouts won t be presented until we are safely out of the recession When the bill does come due there will be inflation and fewer jobs at least fewer government jobs , the tax base won t have enough left over to support the load of retirees, infrastructure will be minimally maintained, cats and dogs will be living together It will be chaos, but I ll bet it will have a very interesting music scene.Canada is held up as an example showing that things didn t have to turn out this way That s good news because it s looking like I may want to move there in a few years One of the few times George W Bush ever rose to quotability came during the 2008 credit crunch, when he was heard to mutter darkly This sucker could go down He wasn t talking about the US banking system he was talking about civilization as we know it That s how close we were to the abyss Another few days and you d have seen armed mobs looting 7 Eleven s and Viggo Mortensen trudging down the Road.Some day, decades from now, someone s going to write the definitive history of the financial One of the few times George W Bush ever rose to quotability came during the 2008 credit crunch, when he was heard to mutter darkly This sucker could go down He wasn t talking about the US banking system he was talking about civilization as we know it That s how close we were to the abyss Another few days and you d have seen armed mobs looting 7 Eleven s and Viggo Mortensen trudging down the Road.Some day, decades from now, someone s going to write the definitive history of the financial crisis Until then, John Lanchester s I.O.U will probably stand as the go to book Written by an intelligent layman or civilian , as he sometimes prefers it bristles with a kind of wtf, dudeincredulity Which is only fitting I mean, the world very nearly ended because a Chinese math geek published an equation in some obscure journal That s just stupefying The whole story is just stupefying.At the end of the day, I d still like to believe in capitalism, which, say what you will, has always picked up the tab for liberal democracy a point made by Lanchester himself It s just that, once a century or so, capitalism goes on a wild binge, maxes out the credit cards and wraps the Porsche around a utility pole It s the Lindsay Lohan of economic systems, and we re married to it Maybe we just need to accept that, in this relationship, the sexy fun times will always end in insolvency and despair, and that longish stretches of semi normalcy are about all we can hope for `DOWNLOAD E-PUB ↭ Whoops!: Why Everyone Owes Everyone and No One Can Pay ↬ We are, to use a technical economic term, screwed The cowboy capitalists had a party with everyone s money and now we re all paying for it What went wrong And will we learn our lesson or just carry on as before, like celebrating surviving a heart attack with a packet of Rothmans If you want to know, but are the sort of person who finds it hard to tell the difference between a CDO a CDS an MBS and a toasted cheese sandwich, John Lanchester has mastered the finer points of finance so you don t have to In Whoops he explains, in language everyone can understand, what really happened and what on earth we do next About the Author John Lanchester is a journalist, novelist and winner of the Whitbread First Novel Award He is a regular contributor to the London Review of Books and the New Yorker, with a monthly column in Esquire John s piece on our love affair with the City, Cityphilia , generated much response on its publication in Januaryand indeed predicted a worldwide crash based on the misuse of financial derivatives In Octoberhe charted the crisis as it had developed over the year in Cityphobia , which also attracted much attention as a piece that explained not only what had happened, but how we felt about it John was raised in South East Asia and now lives in London