The book is best read as part 2 or a sequel to the author’s “The Big Short”. You may be familiar with Michael Lewis’ “The Big Short”. It was turned into the film with the same name. The film was released in December 2015 and can now be seen in cinemas throughout the world.
“The Big Short” book tries to explain events in recent Wall Street bubbles. The main focus is the crash of the American housing market in 2007-2008. It describes how only a few people realised there was something wrong with the bubble, but were simply ignored.
The few who realised what was happening were able to make serious money when the bubble finally burst. Michael Lewis’ “The Big Short” is a must-read for anybody who was affected by the financial crash of 2007-2008.
However, it is no easy read. It occasionally goes into economic and mathematical details and theories. It tries to explain what say credit default swaps, collateralized debt obligations and similar things are and how rewrapping toxic stuff, hedging, and insuring on financial markets works.
“Boomerang” takes up the story after the bubble burst, banks went bust, countries should have gone broke. The book was published in 2011, a year after “The Big Short”. It is partly based on articles Michael Lewis wrote for Vanity Fair Magazine.
The book is far more readable than “The Big Short”, but lacks its thriller-like pace. On the other hand, it is more entertaining and at times downright hilarious.
Michael Lewis travels to Europe and California to talk to people who were involved in or caused the bubble as well as people who have landed the job of mopping up after it. Those who have read “The Big Short” will come across a few familiar names and people like Meredith Whitney.
The book starts with a short recap of events, which means it can be read as a stand-alone or independent story. The first chapter focuses on Iceland. Like other countries Lewis visits in this book, it belongs to the club which should have been declared bankrupt in 2008.
Lewis ends up in a hotel owned by the wife of one of Iceland’s bankrupt bankers. The hotel is of course nearly empty, though somehow Lewis manages to land a room next to a honeymooning couple. As in the following chapters, Lewis interviews an ex-prime minister, professors, ordinary people.
Lewis may be right that more women on boards and in senior positions may ensure a better future for Iceland. On the other hand: there is the former captain of a fishing vessel who became a banker without any previous training or experience. He is fishing again but still seems to dream of being an investment banker.
The next chapter deals with Greece. This chapter is even more hilarious than the previous one. Lewis has various examples of how things worked in pre-2007 Greece and does not even mention the pensions “earned” by the dead. Interesting: Lewis already pinpoints the cause for the next Greek crisis: the total unwillingness of most of the Greek population to change things.
The visit to Greece is followed by time in Ireland and Germany. Many may have forgotten it: Germany’s banking sector also had problems. Some in Düsseldorf, but also elsewhere. Where the Irish chapter is saddening, the most shocking read of the whole book is the chapter on California.
“Boomerang” certainly makes clear people should never be left in a dark room with heaps of money. It also shows that too many who caused the problems were never convicted, or got off lightly. It remains shocking to read how stupid, corrupt, greedy, totally immoral and worse people can be.
Where “The Big Short” should still be read as a case-study, or as a must-read enabling one to understand the 2007-2008 crisis, “Boomerang” is dated. For example: everybody is familiar with the problems Greece caused after 2008; especially from 2014 onwards. Updates or recaps on events from 2011 onwards would have been nice.
This is unlikely, for Michael Lewis has moved on and has published works after “Boomerang”. The financial and economic problems the EU faced and faces are totally overshadowed by the refugee crisis, terrorist attacks, the Panama Papers, and other challenges and scandals.
Michael Burry, known from “The Big Short” is predicting another financial crisis … only for Noah Smith to state on Bloomberg that this time, Burry gets it wrong in January. In the meantime, less than 24 hours ago, the IMF warned about global stagnation according to Bloomberg. According to the UK Guardian, another financial crisis is looming.
“The Big Short, inside the Doomsday machine”, Michael Lewis, hardback 320 pp, W.W. Norton & Company, 2010. The book has been translated in many languages.
“Boomerang, Travels in the New Third World”, Michael Lewis, hardback 224 pp, W.W. Norton & Company, 2011. The book is available in several translations.
YouTube trailer “The Big Short”