The Book of the Week is “Boomerang, Travels in the New Third World” by Michael Lewis, published in 2011. As the effects of the early 2000’s financial shenanigans began to be felt around the world, the author traveled to newly impoverished countries (Iceland, Greece, Ireland, Germany and the United States) to try to understand their situations, economically, politically and culturally. Human nature is such that very few people see the big picture before it’s too late. Besides that, it takes a long time for the victims to learn who really instigated and funded insidious propaganda campaigns or nefarious activities, if they ever do learn.
Kyle Bass, investment banker from Dallas, raised the alarm prior to the 2008 subprime mortgage crisis, but was shouted down by greedy alpha males with hubris syndrome. So he bet against the sheep and made a killing. But he believed the lowest-risk alternative to the securities market was physical gold, and nickels.
Iceland saw the U.S. in the 1980’s enjoying its material wealth, and wanted a piece of that. Iceland’s prime minister David Oddsson ushered in tax cuts and privatization, and greased the wheels of trade. In this way, the government was enticed into the vortex of excessive-deregulation-induced capitalistic greed. Around 2000, fishing industry regulations produced a maximally efficient, maximally profitable oligopoly that prompted Icelanders who weren’t in the fishing industry, to engage in aluminum smelting, and other economically rewarding careers.
The internet has facilitated the forming of relationships between hegemonic financial entities and overseas suckers. Beginning in 2003, young adults in Iceland found that speculative trading in stocks and currency was much more lucrative than fishing.
Ironically, Iceland– whose economy was based on fishing– was ready to take the bait, and become the fish. The former fishermen thought they’d succeed in the financial-services industry because fishing and money-management both involve risk-taking. However, the former requires specific physical and survival skills; the latter, knowledge and experience in the securities markets, business, economics and politics. Icelanders had none of the latter.
Unsurprisingly, when the money started rolling in, the newly rich started to buy houses and cars they couldn’t afford. Human nature is also such that, when people move numbers around on a screen, they don’t feel like they’re moving real money. The bankers and traders in Iceland were borrowing tens of billions from foreigners in the short term, “…then re-lending the money to themselves and their friends to…” overpay for a large financial stake in other banks, sports teams, and other assets. Astute sellers saw the writing on the wall, and left Iceland holding the bag.
European regulators were asleep at the switch. If U.S. financial institutions had been the targets, or had been engaging in such activity, there would have been more early awareness and safeguards in place, in fending off hostile takeovers.
The Americans have their lawyers, directors and officers, and consultants as the first line of defense. Their financial institutions didn’t play the fool the same way major banks in Iceland did. They were largely the lenders and sellers, not the borrowers. But they still got in trouble (!), and also needed adult supervision going forward to bail themselves out.
Incidentally, the SPAC affiliated with former U.S. president Donald Trump needs to continue to find foreign entities (like those that Iceland’s became) with whom he shares the same ethics (or lack thereof), to establish his new media empire. Here’s a little ditty about the situation thus far:
FUN, FUN, FUN
sung to the tune of “Fun, Fun, Fun” with apologies to the Beach Boys.
Well, he’s got his base’s-money
and he’s cruising to his next train WRECK now.
Seems like he forgot all-about
the REAsons he was banned from Big TECH now.
And with the hate-speech blasting
with over-whelming noise full of DRECK now.
And he’ll have fun, fun, fun
till the hackers take his network away.
(Fun, fun, fun till the hackers take his network away.)
Well, the Dems can’t stand him
’cause he’s STILL hogging media space now.
(He’s still hogging space now, he’s still hogging space.)
He gives American politics
a persistent Nix-onian face now.
(He’s still hogging space now, he’s still hogging space.)
A lotta critics try to nail him
but he spins a propaganda chase now.
(He’s still hogging space now, he’s still hogging space.)
And he’ll have fun, fun, fun
till the hackers take his network away.
(Fun, fun, fun till the hackers take his network away.)
Well, he knew all along
that his foes were getting wise to HIM now.
(He needs a new crew now, he needs a new crew.)
And since his stunts are getting old,
they’ve been wishing that his fun is all through now.
(He needs a new crew now, he needs a new crew.)
And things are coming to a head
and his lawyers got a lot to do now.
(He needs a new crew now, he needs a new crew.)
And he’ll have fun, fun, fun
till the hackers take his network away.
(Fun, fun, fun till the hackers take his network away.)
And he’ll have fun, fun, fun
till the hackers take his network away.
(Fun, fun, fun till the hackers take his network away.)
wo wo wo wo woo woo
(Fun, fun, fun till the hackers take his network away.)
(Fun, fun, fun till the hackers take his network away.)
(Fun, fun, fun till the hackers take his network away.)
(Fun, fun, fun till the hackers take his network away.)
(Fun, fun, fun till the hackers take his network away.)
(Fun, fun, fun till the hackers take his network away.)
Anyway, in October 2008, the party was over for Iceland. Lots of fire insurance was bought, and lots of Range Rovers were set on fire. Finally, in February 2009, the aforementioned Oddsson was ousted as head of the central bank.
The story in Greece was that the government was corrupt, overpaid and overstaffed. No tax collection took place because 2009 was an election year. Corporate employees only (not the self-employed) were the only workers who paid income taxes. All three hundred Parliament members evaded real-property taxes through dishonesty. Cash transactions with no paper trail facilitated the evasion of sales taxes throughout the country. There was wilful ignorance (unbelievably sloppy accounting) that masked just how serious the financial crisis was.
Read the book to learn much more about other aspects of the crisis– the alarm-raisers in Iceland, Ireland and the United States, the one protestor in Ireland, the German mentality, and the responses of a few local American politicians.