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Whoops!: Why everyone owes everyone and no…

Whoops!: Why everyone owes everyone and no one can pay (original 2010; edition 2010)

by John Lanchester

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5042129,386 (4.04)27
Title:Whoops!: Why everyone owes everyone and no one can pay
Authors:John Lanchester
Info:Allen Lane (2010), Hardcover, 240 pages
Collections:Your library

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I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester (2010)


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Showing 1-5 of 20 (next | show all)
This is simply one of the most frightening books I have ever read. Lanchester sets out the causes of the current economic recession following the 'credit crunch' with a power and clarity that is superb - he manages to explain the culture of finance, the novel financial products and the relationships between the financial institutions and governments in a way which is understandable and memorable. The dominance of 'city culture', the drive for ever increasing profits, the belief in economic models that defied any sort of common sense or historical reality, a wider culture which both de-regulated the banking sector and allowed it to ignore the regulations still in place. All terrifying, but not nearly so much as the implication that we, as a society, haven't learnt our lesson.

Lanchester states while an industry makes products which, hopefully, makes money (shoes, movies, books, whatever) for the last thirty years we have increasingly moved into a world where the bottom line is everything, where making increasing profits is the primary goal of all sectors of the western economies - even such things as health care and education. He briefly makes the aside that some countries (Canada, for example) did not buy into the laissez faire free-for-all, but as we move into a century in which economic power moves from America and Europe to China and India, I fear that they have learnt the positive lessons from us but none of the negative ones. ( )
  Pezski | Jun 8, 2017 |
Lanchester writes regularly for the London Review of Books: a magazine that can be very left of centre in its approach and so it is no surprise that in his history of the 2008 credit crunch Lanchester is clear in his views that it was the fault of the bankers; aided and abetted by the insane right wing governments of Thatcher in the UK and Reagan in the US. Thatcher and Reagan were both history when the crash happened, but unfortunately the Americans had George W Bush and England had Chancellor Brown (Blair was probably on his welcome home hero tour after the glorious Iraqi war). When the “too big to fail” banks actually failed, neither government would consider nationalisation although both the US and the UK had to partially take control of the most desperate cases by becoming major shareholders. The result was taxpayers money being pumped into the banks (and their inflated bonuses) as a rescue package and the tax paying public are still footing the bill.

Lanchester’s book has the clearest explanation that I have read as to what actually went wrong. He starts off by reminding people about the mysteries of double entry bookkeeping and how this is the basis of much of the banks business; he goes on to explain about derivatives and how this led to CDS’s, CDO’s and the subprime loan market in the US. The bigger the risk the better the profit and if you can sell off the risk to other people then you really have touched the philosophers stone. He spices his explanation with actual events and some witty asides from the calamitous crash year. I have read other histories of the events in 2008, but Lanchester has simplified it enough for me to understand. It made me no less angry.

Lanchester has other strings to his bow; he ties up the crash within the context of events in the late 20th century, surmising that the fall of communism had left capitalism as the only viable working system and an increasing belief in the power of market forces. He also spends some time thinking about the psychology of the finance men (I am presuming that they were mostly men) who worked in the banks and the financial industry and who really believed that they were “Masters of the Universe”. They could not or would not believe that they were doing anything wrong. He also talks about the difference between an industry and a business: people who make things generally see themselves as an industry and people who make money are in business. Capitalism needs both to work, but government support has tipped the balance too far over to the business side and the banks are big, big business.

It all seems pretty simple now; a consistent policy in the US and the UK of deregulating the banks gave the green light for industry insiders to make lots of money. When the gravy train really picked up speed nobody wanted it to stop; too many people in the industry were getting very rich and they all believed that the money making spiral could go on forever. There were warnings, there were plenty of voices in the wilderness, but nobody wanted to listen. It seems obvious that if you are basing your business on extremely risky loans in the form of mortgages to people who are likely to default (the sub prime market in the US) then something has got to give. It beggars belief that regulatory bodies and government watchdogs went along for the ride. They must have realised it was not a question of if but when the crash would occur, although they might not have realised how big it was going to be.

This is a fascinating piece of recent history, but like most historical events it is one we are reluctant to heed in the future. My own view is that while culture in the Western world (and particularly the UK and The US) are based around greed then the credit crunch will certainly occur again. Nobody was held responsible within the banking industry (at the time I would have been happy to see some of them strung up) now I think that a more fitting punishment would have been to put them in specially built prisons (funded by their bonuses) with a sentence that stipulated that they must play roulette on a giant roulette wheel every day until they lost all their money (it would make great television). Shame and blame is the order of the day for me.

I really enjoyed getting angry again with John Lanchester. A Four star read ( )
6 vote baswood | Jun 4, 2016 |
I read this because of Lanchester's essays in the LRB, which were well written, funny and clear-headed; the book's the same. I think I may actually now know what a collateralized debt obligation is. It's particularly useful for big-picture stuff. He traces and explains the financial instruments, and the mathematical research behind them, that reduced/massively increased the instability of the financial system; he traces the attitudes to home-ownership that increased demand for home loans while said financial instruments tremendously increased the demand for borrowers; he somewhat gently traces the growth of the laissez-faire mindset. His solution to all this is a world-wide rejection of the growth-above-all mindset. That would be nice, but how exactly would we pull it off?

Two problems with the book: the last two chapters a repetitive and dull. More importantly though, I worry that some of his translations (from professional/mathematical models to everyday language) might be a bit wonky. Particularly odd is the way he frames 'cognitive illusions'. Say a test for a disease is 95% accurate, and the disease affects on person in a thousand. You test positive. What's probability you have the disease? Lanchester says 2%: "if you test 1000 people, the test will give 50 positives, whereas only one of the population actually has the illness." It's been a long time since I did any statistics. But surely the test won't give 50 positives, but rather, 50 incorrect diagnoses for every 1000 people tested? There's nothing in Lanchester's presentation to say that those incorrect diagnoses *must* be false positives; they might be false negatives. I imagine the actual example is framed to exclude this possibility. On the other hand, maybe my maths is so rusty that I've messed this up. Very readable book in any case. ( )
1 vote stillatim | Dec 29, 2013 |
primer on the financial crisis; skimpy on the details and mostly a ramble of one man's perceptions
  FKarr | Apr 3, 2013 |
Fairly light trot through the recent financial crisis. Clear and explanatory with some good jibes and personal touches here and there, along the "Would you credit it?" lines. Makes clear how the thing got out of control because of the abandonment of personal interaction and the consequent collapse of trust. A striking part is the mathematisation of finance and the unreality it led to, eg the leading financier describing the collapse as a something-sigma event, meaning a i in umpteen trillion chance where the trillions are more than the seconds in the history of the universe, whereas the guy had in fact seen half a dozen fairly major financial fold-ups in his own lifetime. I found this especially interesting after Cox's "e = mc2", where the largeness and smallness of the working parts of the universe are indeed factual but unimaginable. ( )
  vguy | Mar 5, 2013 |
Showing 1-5 of 20 (next | show all)
Wall Street has been so smitten with itself that it lost sight of the purpose—to provide credit and capital to the rest of us, remember?—that society entrusted to it. Lanchester, a British novelist and a banker’s son, excels at recalling, in comprehensible terms, this original—and betrayed—purpose. If his penchant for metaphor occasionally leads him off the rails, more often he spots latent truths that conventional banking reporters miss.
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"When the capital development of a country becomes the by-product of a casino, the job is likely to be ill-done." -John Manard Keynes, THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY
" It's such a fine line between stupid and clever." -David St. Hubbins, This Is Spinal Tap
For Miranda and Finn and Jesse
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As a child, I was frightened by ATM's.
You’re worse off relying on misleading information than on not having any information at all. If you give a pilot an altimeter that is sometimes defective he will crash the plane. Give him nothing and he will look out the window. Technology is only safe when it is flawless. Nassim Taleb, qted on p 155.
There is a profound anthropological and cultural difference between an industry and a business. An industry is an entity which as its primary purpose makes or does something and makes money as a by-product. The car industry makes cars, the television industry makes TV programs the publishing industry makes books, and with a bit of luck they all make money too, but for the most part the people engaged in them don’t regard money as the ultimate purpose and justification of what they do. Money is a by-product of the business, rather than its fundamental raison d’etre. Who goes to work in the morning thinking that the most important thing he’s going to do that day is to maximize shareholder value? Ideologists of capital sometimes seem to think that that’s what w should be doing – which only goes to show how out of touch they are. Most human enterprises, especially the most worthwhile and meaningful ones, are in that sense industries, focused primarily on doing what they do; health care and education are both, from this anthropological perspective, industries.
At least that’s what they are from the point of view of the people who work in them. But many of these enterprises are increasingly owned by people who view them not as industries but as businesses: and the purpose of a business is, purely and simply, to make money. pp 197-198
And the level of our individual response is just as important. On that level, we have to start thinking about when we have sufficient – sufficient money, sufficient stuff – and whether we really need the things we thing we do, beyond what we already have. In a world running out of resources, the most important ethical, political, and ecological idea can be summed up in one simple word: ‘enough.’ p 232
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Has been published under two different titles:

"Whoops! : why everyone owes everyone and no one can pay" and "I.O.U. : why everyone owes everyone and no one can pay".
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John Lanchester travels with a cast of characters - including reckless banksters, snoozing regulators, complacent politicians, predatory lenders, credit-drunk spendthrifts, and innocent bystanders to understand deeply and genuinely what is happening with the credit crunch and why we feel the way we do.… (more)

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