[Why Everyone Owes Everyone and No One Can Pay]

By John Lanchester.

A very interesting book that  sheds light on our current economic woes. I had no idea that the investment banks worked the way they do, and that they are basically casinos creating a plethora of risk products to sell on to investors. Some of the products and risks associated are absolutely ridiculous – there is so much abstraction involved.

The book does what it sets out to do in an intelligent, understandable and entertaining way. I had no problem with the content and it was easy to read. So, what were the underpinning causes of the 2008 (and continuing) recession? There were a few – lack of regulation, irresponsible attitudes to and understanding of risk, problematic mathematical formulas, Alan Greenspan and his cult of personality, the culture of owning your own home and its promotion by governments, and the culture of To Big To Fail in the financial sector where there was no cost to failure. I may have missed something out… Of course, the free-marketeers will say consumers taking on untenable levels of debt is a major cause. True, but it was more a symptom of some of the above primary causes. If people are encouraged by professionals and governments to get into debt then they will. Not every consumer has the benefit of a good education and can critically appraise their financial risk objectively. If the banks couldn’t assess their risk properly – how could consumers?

So, much food for thought in this book. Part of the reason for the crisis was lack of understanding of what banks and their mathematicians were doing. This analysis demystifies their obscurantism, rituals and acronyms.

Soundtrack: Bailterspace – Robot World.

Post to Twitter